FEDERAL MARITIME COMMISSION

DOCKET NO 82 30

CONTRACT MARINE CARRIERS INC

ORDER

July 6 1984

This proceeding is before the Commission upon a Motion to Dismiss

filed by respondent Contract Marine Carriers Inc CMC CMC was granted

leave to file its motion by the Commission in an order also suspending

consideration of this proceeding The Commission s Bureau of Hearing

Counsel Hearing Counsel has filed a response in accordance with that

order

BACKGROUND

This proceeding was initiated by order served June 2 982 to determine

whether CMC s practice of undertaking contract carriage at different rates

than those published in its tariffs for the same trade and commodities

violates sections 8 b 3 6 Second 7 and 14 Fourth of the Shipping

Act 19 6 916 Act 46 V S C 817 b 3 815 Second 816 and 8 2

Fourth By stipulation the matter was submitted for consideration by Ad

ministrative Law Judge William Beasley Harris Presiding Officer on a

written record The Presiding Officer issued an Initial Decision finding

that the Commission had jurisdiction over the contract practices of CMC

and that CMC had engaged in practices violative of the 9 6 Act Excep

tions to the Initia Decision were filed by CMC Replies to these Exceptions

were filed by Hearing Counsel

On March 6 984 CMC requested that the Commission suspend consider

ation of the proceeding to permit it time to file a motion to dismiss

based on the imminent passage of the Shipping Act of 1984 984 Act

46 V S C app 1701 et seq

l The Commission granted the request

and in so doing directed CMC to address the following specific issues

in any motion filed I

whether the 984 Act rendered this proceeding

moot 2 whether the rights of third parties will be affected by dismissal

and 3 whether section 20 of the 1984 Act 46 VS c app 1719

is relevant to a final disposition of this case Hearing Counsel was also

instructed to address these matters

I The Shipping Act of 1984 was signed into law by the President on March 20 1984 and by its terms

became effective on June 18 1984

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DISCUSSION

CMC argues that this proceeding should be discontinued as moot and

because no regulatory purpose will be served by a disposition ofthe merits

It alleges that the inclusion of service contracts within the Commission s

jurisdiction under the 1984 Act supports its position that they were not

within the scope of the 1916 Act Regulation of CMC s service contracts

pursuant to this proceeding would allegedly be premature and contrary

to the congressional intent underlying those provisions in the 1984 Act

which address service contracts

CMC acknowledges the Commission s

jurisdiction over its contract prac

tices under the 1984 Act and states its intention to meet the publication

requirements of that Act CMC argues that although conduct engaged in

prior to the effective date of the 1984 Act is subject to the 1916 Act

the assessment of civil penalties is not an issue in this proceeding and

there is no evidence that any third parties would be prejudiced or disadvan

taged by a discontinuance of the proceeding

Hearing Counsel opposes dismissal of this proceeding arguing that a

regulatory purpose would be served by a decision on the jurisdictional

issue presented in this case i e whether the Commission has jurisdiction

over contract carriage services provided by common carriers Hearing

Counsel also contend that the rights of any unknown third parties would

be effectively eliminated by a dismissal ofthis case

For reasons stated below the Commission will grant CMC s Motion

to Dismiss It should be pointed out here however that this dismissal

is without prejudice to the rights of any third party interest that may

have been injured by CMC s past conduct to seek redress for such injuries

before the Commission The discontinuance of this proceeding is in no

way to be interpreted as a disposition on the merits of any issues presented

in this proceeding or to otherwise limit the right of third parties to file

complaints with the Commission based on the conduct at issue in the

proceeding

There is no doubt that certain aspects of this proceeding are moot

i e any prospective proscription of specific conduct by CMC with regards

to violations of the 1916 Act The statutory provisions which the Presiding

Officer concluded that CMC had violated sections 18b 3 16 Second

17 and 14 Fourth of the 1916 Act have been superseded by section

IOb 14 6 of the 1984 Act 46 U S C app 1709 b 1 3 6 2

Although the provisions of section 1 Ob 14 6 generally correspond

to those of sections 18b 3 16 Second 17 and 14 Fourth of the 1916

Act there are some important differences Section 1Ob 1 3 which carries

forward the prohibitions of section 18b 3 of the 1916 Act specifically

S ctlon 20a of the 1984 Act repeals section 18b of the Shipping Act 1916 section 2O b2 of the

1984 Act makes sections 14 and 16 applicabl only to common c l n by wal in int ntat comm rc

s ction 20b 8 of th 1984 Act strik s s ctlon 17 fint paragraph from the Shipping Act 1916

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CON1RACT MARINE CARRIERS INC 3

refers to service contracts thereby recognizing that a carrier may have

both tariff rates and service contract rates Section 1Ob 6 which is a

substantial revision of section 14 Fourth expressly exempts service contracts

from the prohibition against unfair or unjustly discriminatory practices

A finding that CMC did not comply with the 1916 Act would clearly

be oflittle value in interpreting the requirements ofthe 1984 Act

Nor would any regulatory purpose be served by rendering an opinion

on the legality of CMC s past conduct First the assessment of civil pen

alties is not at issue in this proceeding Second the record does not disclose

any third parties adversely affected by CMC s conduct Although it is

possible that civil penalties could be assessed and that an injured third

party come forward at this time these matters could not be addressed

in this proceeding unless it is essentially reconstituted 3 Such theoretical

contingencies do not appear to justify continued litigation in this case

4

There does not appear to be any dispute that contractual arrangements

entered into by CMC after March 20 1984 are subject to public disclosure

under the requirements of the 1984 Act 5 However it is not at all clear

that the Commission could require CMC to file its present contracts entered

into prior to March 20 1984 6 Requiring CMC to undertake alternative

3

See National Steel Shipbuilding Co v Director Workers Compo Pro 616 F 2d 420 9th eir 1980

see also FirstNot Bank ofBelaire v Camp of Currency 697 F 2d 683 5their 1983

4CMC alleges that section 20 e 2 of the 1984 Act applies to complaints filed with the Commission and

allows aone year period within which complaints alleging aviolation of the 1916 Act may be filed after

theeffective date of the 1984 ActSection 20 e 2 provides

2 This Act and the amendments made by it shall not affect any suit

A filed before the date of enactment of this Act or

8 with respect to claims arising out of conduct engaged in before the date of enactment of

this Act filed within one year after the date of enactment of this Act

While afull discussion of the legal effects of section 20e 2 is unnecessary for aproper disposition of

CMC s Motion to Dismiss it is our opinion that section 20 e 2 was intended only to preserve court antitrust

actions and has no application to cases pending before the Commission H R Rep No 53 98th Cong 1st

Sess 39 1983

5CMC submits that its service contracts will eventually be subject to the service contract provisions of

the 1984 Act section 8 c 46 U S C app 1707 which provides

c Service Contracts An ocean common carrier orconference may enter into aservice contract

with a

shipper or shippers association subject to the requirements of this Act Except for service

contracts dealing withbulk cargo forest products recycled metal scrap waste paper orpaper waste

each contract entered into under this subsection shall be filed confidentially with the Commission

and at the same time aconcise statement of its essential terms shall be filed with the Commission

and made available to the general public intariff format and those essential terms shall be available

to all shippers similarly situated The essential terms shall include

1 the origin and destination port ranges in the case of port toport movements and the origin and

destination geographic areas inthe case of through intennodal movements

2 the commodity orcommodities involved

3 the minimum volume

4 the linehaul rate

5 the duration

6 service commitments and

7 the liquidated damages for nonperformance if any

The exclusive remedy for abreach of contract entered into under this subsection shall be an action

in an appropriate court unless the parties otherwise agree

Section 20e1 of the 1984 ACl 46 U S c app 1719 provides

Continued

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4 FEDERAL MARITIME COMMISSION

remedial actions to preclude the possibility of continuing adverse effects

from its past practices would be of limited value and would not appear

to serve a

regulatory purpose

The only matter of continuing significance raised in this proceeding

is the issue of the Commission s

jurisdiction over the contract practices

now other than those involving service contracts of carriers which are

also operating as common carriers with tariffs on file Although CMC

has asserted that it will file its service contracts with the Commission

in accordance with the 1984 Act Hearing Counsel is correct in asserting

that the 1984 Act does not clearly put to rest all the underlying jurisdictional

uncertainties that essentially gave rise to this proceeding However as is

the case with CMC s alleged violations of the substantive provisions of

the 1916 Act a jurisdictional decision in this case based on circumstances

and the law existing prior to June 18 1984 would be of little value

in administering the 1984 Act The Commission is of the opinion that

a

rulemaking proceeding wherein all interested and affected parties may

contribute their views would be a better vehicle to address this remaining

issue It is our intention therefore to initiate such a proceeding by separate

order

TIIEREFORE IT IS ORDERED That the Motion to Dismiss filed by

Contract Marine Carriers Inc is granted and

IT IS FURTIIER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

Each service contract entered into by a shipper and an ocean common camer orconference before

the date of enactment of this Act may remain in full force and effect and need not comply with

the requirements of section 8c of this Act until 15 months after the date of enactment of this

Act

CMl cites the following paasage of the legislative history of the 1984 Act as explanatory of the Congres

sional intent underlying section 20 e 1

The Committee s intention in this as well as other sections of the act is to institute changes in

liner shipping reaulations and practices without undue oruMecessary economic disruption S Rep

No 3 98th

Cong

1st Sess 42 1983

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FEDERAL MARITIME COMMISSION

DOCKET NO 82 49

REEFER EXPRESS LINES PTY LTD

v

UlTERWYK COLD STORAGE CORPORATION ELLER AND

COMPANY INC AND TAMPA PORT AUTHORITY

ORDER OF REMAND

JULY 27 1984

This proceeding was initiated by the filing of a complaint by Reefer

Express Lines Pty Ltd REL against Uiterwyk Cold Storage Corporation

Uiterwyk Eller and Company Eller and the Tampa Port Authority Port

Authority alleging that I

a charge for warehouse checking is a charge

for a service not actually performed and therefore is an unreasonable

and unjust practice in violation of section 17 of the Shipping Act 1916

46 US C 816 2 the charge is not reflected in the Uiterwyk and

Harborside tariffs but is based on cross referencing in those tariffs to

the Port Authority s tariff in violation of section 17 and 3 the Port

Authority s tariff represents an agreement among terminal operators which

is not approved by the Commission in violation of section 15 1 Complainant

asks the Commission to disapprove the charge for warehouse checking

and to direct Respondents to cease and desist from attempting to collect

such charges

A prehearing conference was held in February 1983 and evidentiary

hearings were held in June 1983 for the purpose of receiving written

direct testimony and live cross examination of three witnesses one each

for REL and Respondents Eller and the Port Authority 2 Simultaneous open

ing and reply briefs were filed by all parties

Administrative Law Judge Charles E Morgan Presiding Officer issued

an Initial Decision finding that the physical activity of warehouse checking

has been performed on cargo carried by REL which service is of at

least some benefit to the ocean carrier The Presiding Officer also found

that the charges for warehouse checking were not shown to be unjust

and unreasonable in violation of section 17 the practice of Uiterwyk and

I REL also charged that the Port Authoritys tariff had not been filed with the Commission but admitted

at the prehearing conference that this allegation was in error

2No appearance was made by Uiterwyk Its interest in the cold storage facility was purchased by

Harborside Refrigerated Services Inc Harborside Uiterwyk is now in bankruptcy proceedings Prehearing

Conference Transcript 67

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6 FEDERAL MARITIME COMMISSION

Eller of incorporating by reference in their tariffs the warehouse checking

charge of the Port Authority was not an unjust or unreasonable practice

and that the Port Authority s tariff was not an unapproved agreement among

terminal operators

BACKGROUND

REL is a common carrier by water in the U S foreign commerce which

serves the export trade from the Port of Tampa Port with refrigerated

vessels Uiterwyk was the operator of a cold storage terminal facility at

the Port Eller through its wholly owned subsidiary Harborside was the

successor to Uiterwyk s operation at the Port The Port Authority is a

public body established by statute to prescribe rules regulations and rates

for the Port ofTampa See Exhibit 6B Appendix A

The disputed charge is for warehouse checking defined in the Port

Authority s TariffFMC No 8 Item 285 as

The employment of warehouse clerks and checkers as differen

tiated from shipside clerks and checkers in delivery of inbound

cargo upon commencement of discharge of cargo and the end

of the Free Time allowance or in receipt of outbound cargo

from the beginning of the Free Time allowance until completion

of the loading aboard vessel of the cargo Warehouse Checking

is assessed against the carrying vessel based on total inbound

and outbound cargo manifest weight 3

The complaint charged that no service describable as warehouse check

ing had been requested by REL or performed by Uiterwyk or Eller

The complaint further alleged that the charge was an arbitrary charge

imposed for no service

The Presiding Officer found that warehouse checking is an actual service

performed by terminal personnel which consists of tallying cargo on receipt

by the terminal from an overland carrier and upon discharge from the

cold storage facility to the vessel and includes preparation of dock receipts

and loading lists as well as acting as the interface of productcargo informa

tion between the terminal and vessel s stevedore so that the cargo can

be delivered to the vessel for loading in an efficient and reasonable manner

1 0 46

Warehouse checking was described by Eller s witness Francis S

Cunningham General Manager of Harborside on cross examination as

3

At REL s urging after the complaint herein was filed the Port Authority s tariff was amended effective

October I 1982 to shift respoosibility for the warehouse checking charge from the vessel in aU cases to

the party responsible for stevedoring charges and to add language permitting the party responsible for

payment to request that warehouse checking not be performed However in the latter instance the amended

tariff provides that the tenninal operators will not be responsible for any overages andlorshortages Port

of Tampa Tariff FMC No 8 Item 285 Since October 1982 REL has requested that warehouse checking

not be performed

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ELLER CO INC TAMPA PORT AUTHORITY

tallying upon receipt from trucks or railcars of cargo by mark

or lot number by count at times by weight and condition before

placement into the warehouse to tallying the checking of

condition marks lot numbers upon presentation of that cargo

to a stevedore for loading on board a vessel Transcript 69

REL s Director of Terminal Operations admitted in both his written direct

testimony and at the hearing that he had seen warehouse employees other

than forklift operators checking and tallying export cargo both upon arrival

at the refrigerated terminal facility Direct Testimony 2 Transcript 13

and discharge from the warehouse to the vessel Transcript 16

The Presiding Officer concluded that warehouse checking is of some

benefit to the vessel insofar as the terminal arranges to check out and

deliver the cargoes by ports of discharge by consignees quantities lots

and weights which enables a smooth flow of cargo from the terminal

to the ship ID 8

REL contends that its tariff provides for tackle to tackle service which

renders it inappropriate to charge the vessel for services rendered to the

cargo before it reaches the place of rest beneath ship s tackle citing Termi

nal Rate Structures Pacific Northwest Ports 5 FMB 53 1956 4

REL s

argument that the warehouse checking service charge would fall upon the

shipper under its tackle to tackle tariff was offset in the Presiding Offi

cers view by the charge s coverage of other services of benefit to the

ship such as listing the cargo by lot and by various shippers and consignees

for segregated delivery by separate consignees ports of discharges and

alongside different hatches of the vessel ID 8 Therefore the Presiding

Officer concluded that the charge for warehouse checking levied against

the vessel or the party responsible for stevedoring was not an unjust and

unreasonable practice in violation of section 17

The Presiding Officer further concluded that no evidence having been

offered as to the level of the charges the actual charges for warehouse

checking had not been shown to be unjust and unreasonable Noting that

Agreement No T 2291 among the terminal operators of the Port ofTampa

provides that such operators will conform to the tariff of the Port Authority

except to the extent that the Port Authority s tariff is silent or inapplicable

the Presiding Officer found that incorporation by reference of the Port

Authority s warehouse checking charges in the Uiterwyk and Eller tariffs

was not an unjust or unreasonable practice

Finally the Presiding Officer concluded that the Port Authority s tariff

had not been shown to be an agreement among the Port Authority and

terminal operators in violation of section 15

4

REL s Tariff FMC No 4 contains the foJJowing Rule 2A

Except as otherwise provided rates named herein are applicable from end of ships tackle

at loading port and include only the on shore cost oron lighter cost of hooking sling load to ships

gear Quoted in Complainant s Brief 8

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DISCUSSION

Exceptions to the Initial Decision were filed by REL Eller and the

Port Authority replied to the Exceptions REVs Exceptions generally reargue

contentions advanced in its initial brief These include the arguments that

otherwise permissible terminal charges for checking do not fall on the

vessel under a tackle to tackletariff such as its own that the checking

function is petformed as part of the general obligation of a terminal as

bailee of the cargo for its own convenience and protection and may

not be separately charged for that the cross references in the Uiterwyk

and Harborside tariffs are misleading confusing and unlawful and that

the Port Authority s tariff constitutes an unapproved section IS agreement

among the terminal operators and the Port Authority REL further excepts

to the reasoning of the Initial Decision in that it permits assessment of

the entire charge for checking against the vessel on the basis of incidental

benefits without explicitly rejecting REL s contentions regarding its tackle

to tackle tariff

Respondents argue on exceptions that REL has failed to meet its burden

of proof and that its arguments on issues such as its tackle to tackle tariff

and allocation ofthe charges were not encompassed by its complaint which

alleged only that no physical service which could be identified as ware

house checking had beenpetformed 6

Most ofREL s Exceptions concern issues correctly decided by the Presid

ing Officer Other issues raised however require further investigation These

include the question of who benefits from and should bear the charge

for the warehouse checking function and what effect REL s tackle to

tackle tariff provision may have on the assessment of terminal charges 7

The Commission s cases indicate two separate bases for terminal charges

assessed against a vessel services petformed for or benefits conferred upon

the vessel as distinct from those petformed for cargo interests and petform

ance by the terminal of a function wnich the carrier is obliged to petform

as part ofthe transportation function

In holding that the charge for warehouse checking may be assessed

solely against the vessel the Presiding Officer characterizes the function

as being of some benefit to the vessel apparently recognizing that

REL araum nt with pecllO the obllsatiOl1l of a lnal beln anaIo ous 10 theM of a common

carrier cit the Commi ion c concemina the eneral ponsibllltles of a common csrrler for provi

ion of terminal services for af ipt 8Ild delivery of CIllO Thls nt 11ftOI OS the cIIfference between

a common ClIIrier by wat r 8Ild a terminal oporator which underll he Commis ion terminal c the

terminal operalOt perfonn services fo1o more than mast r 8Ild ia thereforeobli ed to char etlh propor

tionat ly for the ervices performed orthe benefit conferred

BlI r how v r in it brief below characterized REL complalntas bei Imer Gila that the char

for warehou e checkins was an arbitrary charS imposed for no actual service andlor no actual phy ical

rvice of any benefit to REL EII r Openlns Bri f 2 Thi oom to be afair reodlns of the i ues

raised by REL complaint without overreliance on trict rules of pl odln Such a reodln also indicat

that theiasoe of who benefllfrom the terminal service was understood to be raed by lhecomplalnt

REL tariff was not Introduced In evidence but was identified 8Ild quoted in REL openlns brief The

Pre idlnS Officer 8Ild the Commis ion may take judicial nOllce of any tariff on m

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ELLER CO INC TAMPA PORT AUTHORITY

there may be other beneficiaries of the service He does not however

address the issue of whether the charges should be split among such bene

ficiaries While the record supports the Presiding Officer s

findings with

respect to benefits conferred upon the vessel i e that warehouse checking

enables the terminal to marshal the cargo in a particular manner under

orders from the vessel to promote the greatest efficiency of vessel time

in port it also indicates that warehouse checking is of benefit to the

shipper Warehouse checking enables the terminal to aggregate cargo arriv

ing at different times for shipment to a

variety of consignees and for

a variety of vessels and to facilitate changes in ownership which frequently

occur while the cargo is in the terminal facility See Transcript 9095

In addition we note REL s argument that the warehouse checking function

is performed for the terminal s own benefit and protection while the cargo

is in its custody 8

The Initial Decision makes no attempt to allocate the warehouse checking

charges between the cargo interests and vessel interests or the terminal

itself based upon benefits conferred As REL notes in its Exceptions

the issue under section 17 is whether the charge reflects a fair allocation

of terminal costs based on the comparative benefits derived by the charged

party s actual use of the terminal facilities Pacific Northwest Tidewater

Elevators Assoc 11 EM C 369 1968 Baton Rouge Marine Contractors

Inc v Cargill 521 F 2d 281 D C Cir 1975 See also Volkswagenwerk

A G v FMC 390 U S 261 282 1968 Although as indicated above

the record alludes to benefits conferred upon the cargo the issue was

not directly addressed in testimony on brief or in the Initial Decision

The record does not disclose the practice at other terminals whether the

charge for checking is usually a charge against the cargo or the vessel

particularly where the carrier has an explicit tackle to tackle provision in

its tariff

The Presiding Officer disposed of REL s argument regarding its tackle

to tackle tariff by noting that warehouse checking covers other services

of benefit to the ship such as listing the cargo by lot and by various

shippers and consignees for segregated delivery by separate consignees

ports of discharge and alongside different hatches of the vessel 10

8 This reasoning justifies the assessment ofpart ofthe charge for warehouse

checking against the vessel on grounds that the vessel as well as the

cargo benefits REL argues however that under a tackle to tackle tariff

the charge should not be assessed against the vessel because warehouse

checking is not a service which the terminal performs as agent for the

carrier in performance of the carrier s obligation to provide facilities for

the safe receipt and delivery of cargo

8REL also contends that such benefits are separately charged by the terminal against the cargo under the

tariff item defined as through put and the shipper might thus be charged twice for the lame services jf

warehouse checking is charged to the shipper on the basis of these benefits The Presiding Officer may wish

to consider this argument within the context of the issues remanded herein

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We believe that these arguments raise two issues which remain unresolved

by the Initial Decision These are I

whether the function of warehouse

checking i e checking the cargo for amount and condition as it arrives

at the terminal issuing receipts therefore and keeping track of its destina

tion ownership and location in the terminal facility is so closely associated

with its receipt by the terminal for the carrier that it is appropriately

to be considered part of the transportation service for which the carrier

recovers in its rates and 2 if the function is not performed by the

terminal operator as part of the carrier s

transportation obligation whether

the service benefits the vessel the shipper or owner of the cargo or

the terminal operator or all or some of them and should be assessed

by the terminal against each in proportion to the benefits conferred The

Commission has not expressly addressed these precise issues in previous

cases cited by the parties

In Boston Shipping Association Inc v Port of Boston 10 F M C 409

1967 the Commission held that the carrier s obligation to tender for

delivery includes the provision of adequate terminal facilities including

free time and that charges for strike demurrage for cargo which was

in free time at the beginning of the strike were properly assessed against

the vessel The case did not deal with the specific function of checking

or with its relationship to the carrier s

transportation obligation and involved

general cargo rates which were not tackle totackle rates It thus offers

little guidance for the case at bar

In Terminal Rate Increases Puget Sound Ports supra the Commission

indicated that a carrier who publishes tackle to tackle rates may not be

liable for terminal charges for services rendered beyond the end of ship s

tackle

The carrier must furnish a convenient and safe place at which

to receive cargo from the shipper and to deliver cargo to the

consignee If this can be done at end of ship s tackle then it

can be so stated and the contracts of carriage may be limited

to such service Id at 23

However the Commission also noted that the carrier s obligations also

include the receiving of cargo from shipper and the giving of a

receipt

therefore together with the handling of the necessary papers Id

at 24 9Thus while this case indicates that a tackle to tackle tariff may

limit the liability of a vessel for some terminal services rendered to cargo

it also raises the possibility that the receipt of cargo with which warehouse

checking is closely associated may not be among these

The Commission in Far East Conference Amended Tariff Rule 20 F M C

772 1978 held that the conference could not lawfully amend its tariff

9Here REL contends that it fulfills this obligation itself by issuing a stevedore s

receipt for the cargo

to tho torminal operator at tho ond of ship s tacklo and that any functions performed by tho torminal prior

to that point are fortho honefit of tho cargo alone

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to pass through to shippers terminal charges for wharfage and handling

holding that these charges had traditionally been absorbed by the FEe

and were already reflected in the level of their tackle to tackle rates The

case turned however not on the relationship between the terminal charges

and tackle to tackle rates but on the relationship between section 15 and

section 205 of the Merchant Marine Act of 1936 46 V S C 1115 The

Commission specifically noted that an individual carrier might do that which

the conference could not establish tackle to tackle rates and separately

assess accessorial or terminal charges resulting in different rates at adjoining

ports Id 1776 The case is thus not dispositive ofthe issue here

The closest case in point is Terminal Rate Structure Pacific Northwest

Ports 3 USMC 21 1948 which specifically involved a terminal service

charge of which the greatest proportion of cost was for checking of cargo

on receipt d 5 F M B at 55 The Commission held that where the

contract ofaffreightment involves a tackle to tackle rate handling and serv

ice charges incurred between point of rest and ship s hook outbound and

between ship s hook and point of rest inbound are incurred for the benefit

of the shipper or consignee and such charges must be assessed against

the shipper or consignee Id on reconsid 5 F M B 326 1957 The

Commission recognized specifically that a terminal may not assess charges

for checking not performed for the carrier and that under tackle to

tackle rates a carrier s duty to receive cargo does not arise until delivery

to a point within reach of ship s tackle whether the actual delivery to

that point is performed in whole or in part by the terminal or by the

shipper himself Id 58 The Commission there characterized its holding

in Intercoastal Steamship Freight Assoc v N W Marine Terminal Assoc

4 EM B 387 1953 specifically involving tackle to tackle rates on lumber

as being that under tackle to tackle rates the carrier did not assume the

duty to provide these services related to the checking receiving and han

dling of cargo and that such services were instead performed for the

convenience of the shipper Id at 58 These cases did not however

indicate that the checking function involved the sorting of cargo on ship s

instructions for loading which the Presiding Officer found to benefit the

vessel here

The record in this case is somewhat unclear as to the actual operation

of REL s tackle to tackle rates at Tampa REL s tariff includes Rule 2A

which states that its rates are tackle to tackle REL argued on exception

that Rule 2A is fully operative in respect to its Tampa service There

was however some discussion at the prehearing conference which suggests

that some of REL s service at Tampa may be contract rather than common

carriage but this did not indicate whether any contract carriage by REL

is done on tackle to tackle or other terms There may thus be some question

as to whether REL s port calls at Tampa on which the charges for ware

house checking which are in dispute here were assessed were performed

on tackle to tackle terms This question may have to be resolved if the

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Presiding Officer determines on remand that the vessel may not be charged

for warehouse checking under a tackle to tackle tariff

Under the Port Authority s amended tariff the party to be charged for

warehouse checking is the party responsible for stevedoring charges 10

The record includes scant evidence as to REL s practice with regard to

stevedoring charges In its opening brief REL states that under a tackle

to tackle tariff the party responsible for stevedoring charges would

be the shipper to and from shipside and the carrier in and out of

the ship Complainant s opening brief 10 Complainant s Exceptions 10

However REL also indicates that it hires the stevedores Brigante Testi

mony 2 3 6 and that its rates take into consideration the carrier s

expense for stevedoring Complainant s opening brief II and Complain

ant s Exceptions 11

In view of the above noted unresolved relevant issues regarding the oper

ation of Complainant s tackle to tackle rates at Tampa the Commission

will remand the case to the Presiding Officer for determination as necessary

of factual questions regarding the operation and effect of REL s tackle

to tackle tariff on the allocation of terminal charges for warehouse checking

as well as the legal issues previously discussed

REL also alleged that the Port Authority s amended item for warehouse

checking was unlawful in that it constituted an exculpatory clause which

would protect the terminal operators from the consequences of their own

negligence Reply Brief 7 The charge was not dealt with in the Initial

Decision and was not specifically pressed by REL on exception Exceptions

14 n 5 The remand ordered here should also address this issue

The Presiding Officer properly disposed of the remaining issues raised

by REL REL contends that the Port Authority and terminal tariffs contain

duplicative overlapping and confusing terms and cross references The Pre

siding Officer found that the cross referencing is consistent with a Commis

sion approved agreement among the terminal operators which requires them

to conform to the Port Authority s tariff except with respect to certain

items As additional grounds for the same result we note that RELs

arguments regarding confusing cross references between the Uiterwyk and

Eller tariffs and the Port Authority tariff concern items other than the

warehouse checking charge which is the basis of this dispute REL is

not the party charged under these other items and its arguments as to

any resulting confusion of shippers may be regarded as arguments made

on behalf of others who have not themselves complained The cross ref

erences to the warehouse checking charge in the Port Authority tariff appear

to be clear unambiguous and not unlawful

REL contends that the Port Authority s tariff constitutes an unapproved

agreement among the terminal operators and Port Authority The Presiding

IOSee note 3 supra

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Officer found that there is no agreement We agree with the Presiding

Officer that there is no evidence of such an agreement

TIIEREFORE IT IS ORDERED That Docket No 82 49 is remanded

to Presiding Officer for the purpose ofdetermining whether

1 any of the charges for warehouse checking in the Port Authority s

tariff may lawfully be charged for the account of the vessel in light of

REL s tariff provision for tackle to tackle rates and the Commission s prior

decisions

2 if such charges may be assessed against the vessel whether the

charges should be allocated among the vessel and the shipper consignee

in proportion to the benefits conferred on each by the service and whether

any proportion of the costs should be borne by the terminal operator

and

3 whether the amended Port Authority tariff definition of warehouse

checking unlawfully exculpates the terminal operators from possible liability

for their own negligence and

IT IS FURTIIER ORDERED That the Initial Decision is adopted to

the extent not inconsistent with this order

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 49

REEFER EXPRESS LINES PTY LTO

v

UITERWYK COLD STORAGE CORPORATION ELLER COMPANY

INC AND TAMPA PORT AUTHORITY

Warehouse checking charge at the Port of Tampa found not shown to be an arbitrary charge

for no physical service and the said charge found not shown to be unjust and unreason

able practice of terminal operators Uiterwyk and Eller of Incorporating by reference

in their tariffs the warehouse checking charge of the Port of Tampa found not shown

to be unjust and unreasonable and Port of Tampa s tariff found not shown to be

an agreement among terminal operators not approved by the Commission Complaint

dismissed

Joseph A Klausner Josiah K Adams and Leslie S Gallmeyer for complainant Reefer

Express Lines Ply Ltd

David F Pope for respondent Eller Company Inc

HE Welch for respondents Tampa Port Authority

INITIAL DECISION 1 OF CHARLES E MORGAN ADMINISTRATIVE

LAW JUDGE

Partially Adopted July 27 1984

By complaint filed October 22 1982 and served October 26 1982

the complainant Reefer Express Lines Pty Ltd Reefer Express alleges

that the charges for warehouse checking at the Port of Tampa Florida

the Port made by Uiterwyk Cold Storage Corporation Uiterwyk and

by Uiterwyk s successor Eller Company Inc Eller both Uiterwyk

and Eller having been or being in the business of furnishing cold storage

terminal facilities at the Port were arbitrary charges for no physical service

and that exacting charges for warehouse checking is an unreasonable and

unjust practice in violation of section 17 of the Shipping Act of 1916

as amended the Act

The complainant also alleges that the warehouse checking charge is pub

lished in the Port s tariff that the Port acted as an agent for the terminal

operators in the Port and that the failure of Uiterwyk and Eller to incor

porate the charge for warehouse checking in their own tariffs while instead

making cross reference of the Port s tariff is an unreasonable and unjust

practice in violation of section 17 of the Act

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

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

ILl C rr
REEFER EXP LINES V U1TERWYK COLD STORAGE CORP 15

ELLER CO INC TAMPA PORT AUTHORITY

The complainant further alleges that the Port s tariff represented an agree

ment among terminal operators not approved by the Federal Maritime Com

mission in violation of section 15 ofthe Act

The complainant also alleged in its complaint that the Port of Tampa s

tariff was not filed with the Commission but at the prehearing conference

complainant admitted that it was in error in this respect and that the

Port had duly filed its tariff

The complainant has not paid the charges on certain past shipments

here in issue Thus the complainant asks the Commission to disapprove

the charge for warehouse checking and to direct all respondents to strike

it from their tariffs and to cease and desist from collecting or attempting

to collect such charge

Effective October 1 1982 item 285 of the Port s tariff changed the

definition of warehouse checking in part by the addition of the following

provision

Warehouse Checking will be performed on all inbound and out

bound cargo and charges assessed as provided above except in

cases of direct discharge or direct load cargo and container cargo

not stuffed or unstuffed in port as described in Item 330 and

when party responsible for payment specifically requests in writ

ing that Warehouse Checking be not performed When Warehouse

Checking is requested not to be performed terminal operators

will not be responsible for any overages andor shortages

The complainant has requested that warehouse checking be not performed

on its present and future shipments Thus only the warehouse checking

charges on past shipments remain in issue

Prior to the above change effective October 1 1982 of the Port s

definition of warehouse checking the Port Authority held a public hearing

at which counsel for the complainant agreed that complainant Reefer Express

would accept responsibility for any cargo loss when the service of ware

house checking was requested by Reefer Express not to be performed

The original definition in the Port s tariffs of warehouse checking was

The employment of warehouse clerks and checkers as differen

tiated from shipside clerks and checkers in delivery of inbound

cargo upon commencement of discharge of cargo and the end

of the Free Time allowance or in receipt of outbound cargo

from the beginning of the Free Time allowance until completion

of the loading aboard vessel of the cargo Warehouse Checking

is assessed against the carrying vessel based on total inbound

and outbound cargo manifest weight

Effective October I 1982 the definition of warehouse checking was

changed to provide that instead of being assessed against the carrying

vessel it is assessed against the party responsible for stevedoring charges

based on inbound or outbound cargo manifest weight

t 1 II
I

j

16 FEDERAL MARITIME COMMISSION

Also as seen above the 1982 definition provided that when the party

responsible for payment of warehouse checking specifically requests in

writing that warehouse checking be not performed then the terminal opera

tors will not be responsible for any overages andlor shortages

Generally the ocean carrier is the party responsible for stevedoring

charges

WAREHOUSE CHECKING

Warehouse checking is a service performed by terminal personnel of

Uiterwyk or El1er using tal1y clerks and checkers to

1 Tally by count lot supplier andlor mark the productcargo into

the cold storage terminal facility and record where in the cold storage

terminal facility the various lots marks or shipper s productcargo is stored

2 Tal1y and withdraw from the cold storage terminal facility by count

lot mark andlor shipper the productcargo to the vessel s side or the

overland carrier s equipment to insure correct count and delivery by lot

mark or shipper of the overall productcargo furnished to the vessel or

overland carrier and

3 Act as the interface of product cargo information both as to count

and lotmarkshipper information between the cold storage terminal facility

and the contract stevedore for the vessel so that the vessel can be loaded

and the productcargo delivered to the vessel s side for loading in an

efficient and reasonable manner

While warehouse checking may relate to either export or import cargo

the refrigerated cargo in issue herein and the warehouse checking charges

sought to be col1ected relate only to export cargoes shipped on the vessels

ofthe complainant Reefer Express

Such export cargo arrives by train or truck at the overland loading

and unloading dock of the Uiterwyk El1er cold storage terminal on its

landward side The terminal on its water side is alongside a waterway

which runs north and south

A clerk terminal employee appears and checks the cargo to be delivered

by the overland carrier to the terminal The clerk issues a dock receipt

which states what the cargo is for whom intended by what shipper and

the total number ofcartons and weights

The dock receipt is prepared by an office employee of the terminal

The truck driver or trainman presents the dock receipt to the terminal s

clerk who in turn designates the place for unloading the truck or rail

car

Two employees are assigned by the terminal to receive the cargo from

the overland carrier They are a checker and a fork lift operator The

fork lift operator moves the cargo out of the overland carrier to an area

of the terminal adjacent to but outside of the freezer or cold storage

area of the terminal on the premises and the property of the terminal

17F M r
REEFER EXP LINES V UITERWYK COLD STORAGE CORP 17

ELLER CO INC TAMPA PORT AUTHORITY

The checker ascertains that the cargo unloaded from the overland carrier

is as stated on the dock receipt The cargo is not necessarily weighed

because the weight of a carton is stamped usually on the box or on

the dock receipt or on the delivery bill of lading from the rail carrier

or truck

Next a second movement of the cargo occurs Another fork lift driver

transports the cargo from the initial discharge area into the freezer cold

storage area of the terminal At times the same fork lift operator performs

both movements but they are separate movements and the cargo does

not move directly from the overland carrier into the freezer cold storage

area The cargo always is put down first and by a second move taken

into the freezer cold storage area ofthe terminal

The cargo remains in the freezer cold storage area until an ocean vessel

arrives and then the cargo is taken out of the freezer cold storage area

through the back doors water side doors of the terminal and the cargo

is put on the wharf for acceptance by the stevedore assigned to deliver

the cargo to the vessel The stevedore employs longshoremen who move

the cargo under the ship s hook or loading gear for eventual loading aboard

the vessel

The complainant s witness Brigante admitted on cross examination that

he had seen certain checking performed by warehouse Uiterwyk Eller termi

nal personnel on this export cargo Such personnel checked as far as

this lot goes to the ship this one doesn t

A lot is a commercial unit or block of cargo assigned to a specific

consignee or shipper

Reefer Express issues directions to the terminal as to how the cargo

is to be delivered to a Reefer Express ship These directions may include

segregation of the cargo by port of discharge by shipper or consignee

by quantity of cargo and by weight

It is normal to have several shipments for a given discharge port and

three or four consignees for a particular discharge port with each consignee

having separate lots or blocks of cargo to be delivered

The ocean carrier such as Reefer Express generally gives a telex or

telephone notice to the terminal of the impending arrival of its ship The

terminal also is advised about the number of longshoremen s gangs which

will be on hand and how much cargo from the terminal should be brought

out

A terminal warehouse employee prepares a loading list of the ship s

cargo or a summary of the dock receipts for all of the cargo designated

to be exported on a particular ship This loading list shows the quantity

of cargo nature be it frozen chilled or otherwise weights shippers and

consignees as well as the breakdown by discharge ports

Quite often while the vessel is working or being loaded other cargo

is received at the terminal or the terminal may have other cargo not

originally destined for this particular ship which other cargo now has

27 F M C
1I

18 FEDERAL MARITIME COMMISSION

been released to go on this ship In other words the loading list may

be updated from time to time or it is supplemented by other cargo and

events which occur while the vessel is being loaded This updating may

be done verbally or by the vessel s port captain or an other designated

agent of the vessel

In general the warehouse checking including the preparation of a load

list is a procedure designed to provide for a smooth flow of cargo to

the ship from the terminal on export movements

When the stevedore gets the cargo from the terminal the stevedore

makes its own check as to the consist of the cargo Also the ship s mate

makes a check on receiving the cargo from the stevedore Delivery to

the stevedore is considered by the terminal as delivery to the vessel since

the stevedore is employed by the vessel

The terminal for its protection receives a mate s

receipt or other receipt

that it has delivered the cargo to the vessel

The complainant stresses that the warehouse checking done by the termi

nal s personnel is not a service to the ship inasmuch as the ship owner

performs its own tally and count of cargoes received on its ship Also

the complainant believes that warehouse checking is for the protection

ofthe warehouseman and the shipper

This reasoning overlooks that warehouse checking also benefits the ship

insofar as the terminal arranges to checkout and deliver the cargoes by

ports of discharge by consignees quantities lots and weights that without

warehouse checking there could be either overages or shortages in delivery

of cargoes to the ship and more importantly that warehouse checking

enables a smooth flow ofcargo from the terminal to the ship

As seen warehouse checking is an actual physical service of some benefit

to the ship ocean carrier such as Reefer Express

Under Reefer Express tariff the complainant argues that the charges

to the shippers and consignees provide that the the cargo is booked free

alongside ship fa s and therefore the cargo has to be put alongside

the ship by the shipper The complainant also argues that the shipper

pays the terminal to take the cargo from the overland carrier place it

into freezer or cold storage remove it from same and place it alongside

the ship This argument conveniently overlooks that the warehouse checking

performed by the terminal covers other services of benefit to the ship

such as listing the cargo by lot and by various shippers and consignees

for segregated delivery by separate consignees ports of discharge and

alongside different hatches of the vessel

It is concluded and found that warehouse checking at least in part

benefits the ocean carrier as well as benefits the shipper consignee and

the terminal It is further concluded and found that warehouse hecking

is an actual physical service performed by terminal warehouse personnel

Therefore it is concluded and found that the practice of levying a charge

for warehouse checking on the ocean carrying vessel or on the party

27 F M C
REEFER EXP LINES V UITERWYK COLD STORAGE CORP 19

ELLER CO INC TAMPA PORT AUTHORITY

responsible for stevedoring charges as provided respectively in the past

and present by the Port s tariffs is not shown to be an unjust and unreason

able practice in violation of section 17 of the Act

No evidence was introduced as to the reasonableness of the measure

in dollars and cents of the charges for warehouse checking and accordingly

it is concluded and found that the actual charges for warehouse checking

are not shown to be unjust and unreasonable in violation of section 17

TARIFF INCORPORATION BY REFERENCE

The Uiterwyk Cold Storage Corp tariff F M C No 12 effective No

vember 15 1980 provided Item 76Warehouse Checking

Charge to be billed for the account of the vessel Tampa Port

Authority Item 290

The Harborside Refrigerated Services Inc 2tariff EM C No 14 effec

tive November 15 1982 provided Item 76Warehouse Checking

Tampa Port Tariff

The terminal operators in the Port of Tampa have a Commission approved

Agreement No T 2291 This agreement provides among other things that

the parties such as respondent Eller will conform to the tariff of the

Port Authority but also allows the right of independent action in publishing

tariffs to the extent that the Port s tariff is silent or inapplicable The

cross referencing above to the Port s tariff is not only lawful but also

is consistent with the approved section 15 agreement

It is concluded and found that the practice of the terminal operators

Uiterwyk and Eller of incorporation by reference in their tariffs the ware

house checking charge of the Port is not shown to be unjust and unreason

able

PORT OF TAMPA S TARIFF

The Tampa Port Authority is not a party to the section 15 agreement

of the terminal operators The Port publishes its rules regulations and

rates in the Port s tariffs under authority of Chapter 23338 of the laws

of the State of Florida There is no agreement between the Port Authority

and the terminal operators whereby rates rules and regulations are estab

lished

It is concluded and found that the Port s tariff has not been shown

to be an agreement among terminal operators and therefore no violation

of section 15 has been shown

2 Harborside is awholly owned subsidiary of Eller

27 F M C
20 FEDERAL MARITIME COMMISSION

ULTIMATE CONCLUSION

It ultimately is concluded and found that the warehouse checking charges

on certain past shipments of Reefer Express are lawful and the complaint

is dismissed

S CHARLES E MORGAN

Administrative Law Judge

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 72 35

PACIFIC WESTBOUND CONFERENCE INVESTIGATION OF RATES

RULES AND PRACTICES PERTAINING TO THE MOVEMENT OF

WASTEPAPER AND WOODPULP FROM UNITED STATES WEST

COAST PORTS TO PORTS IN JAPAN THE PHILIPPINES TAIWAN

KOREA SOUTH VIETNAM AND THAILAND

ORDER DISCONTINUING PROCEEDING

August 8 J 984

This proceeding was instituted to determine whether the rate making

activities of the Pacific Westbound Conference PWC member lines with

regard to their carriage of wastepaper and woodpulp violated sections 15

16 17 or l8 b 5 of the Shipping Act 1916 1916 Act On August

15 1977 Administrative Law Judge Seymor Glanzer Presiding Officer

issued an Initial Decision which found that certain PWC rates on wastepaper

should be disapproved under section 18b 5 and that the Conference s

ratemaking practices had violated section 15 In light of those findings

the Presiding Officer concluded that no useful regulatory purpose would

be served by determining whether the wastepaper rates were umeasonably

preferential or unjustly discriminatory under sections 16 or 17

On March 9 1979 the Commission reversed the Initial Decision and

found PWC s rates to be lawful under sections 15 and l8b 5

1 We

also held de novo that no violation of sections 16 and 17 of the 1916

Act had been proven under established Commission precedent 2

The National Association ofRecycling Industries NARI a trade associa

tion of wastepaper shippers appealed the Commission s order to the United

States Court of Appeals for the District of Columbia Circuit On December

24 1980 the court issued a decision finding that the Commission had

misinterpreted the standard of section 18 b 5 National Association of

Recycling Industries Inc v FMC 658 F 2d 816 1980 NARI v FMC

The court held that the PWC wastepaper rates under review may not

be approved on the basis of the existing administrative record id at

829 although t he Commission is free to engage in any further adminis

trative proceedings in this case not inconsistent with this opinion id

The court specifically excluded sections 15 16 and 17 of the 1916 Act

from the scope of its decision

I The Commission s decision is reported at 21 F M C 834

2dat 837 39

27 F M C 21
1

j

i

22 FEDERAL MARITIME COMMISSION

Because the pwc rates in issue before the D C Court had long since

been superseded by new rates when NARI v FMC was decided an order

from the Commission on remand regarding the superseded rates was unnec

essary

3 After more than a

year had passed without a request from NARI

for further relief from the FMC we solicited the parties views by a

notice served on January 11 1982 as to whether any further proceedings

in Docket No 72 35 were necessary NARI responded by stating that

it was preparing to file an antitrust lawsuit against PWC and its member

lines that the controversy between itself and the Conference lines regarding

wastepaper rates would be resolved through the lawsuit and that Docket

No 72 35 therefore should be terminated For its part PWC argued that

the issues raised by NARI s antitrust complaint might fall within the Com

mission s primary jurisdiction and that the question of further action in

Docket No 72 35 should be held in abeyance pending clarification of

NARl s intentions

NARI proceeded to file its antitrust complaint in United States District

Court in Los Angeles on February 23 1982 Reduced to its essentials

the complaint alleged that the wastepaper rates set by the PWC lines

from 1968 to the date of the complaint had been found to violate sections

15 and 18b 5 of the 1916 Act and that actions under a conference

agreement are not immune from the antitrust laws if they result in rates

unlawful under those provisions PWC filed a motion to dismiss the com

plaint on the ground that it failed to state a claim upon which relief

could be granted and as alternative relief to stay further proceedings

before the District Court pending referral to the Commission of NARl s

allegations concerning PWC s rates

Given the potential impact of NARI s

theory of relief on the FMC s

authority under section 15 to approve conference rate agreements the Com

mission determined to file an amicus curiae brief before the District Court

in support of PWC s motion to dismiss In the meantime on June 15

1982 we issued an order in Docket No 72 35 directing that the proceeding

remain open pending the District Court s disposition of PWC s motion

The Commission filed its amicus brief on July 7 1982 On December

3 1982 the District Court granted PWC s motion to dismiss NARl s com

plaint NARI appealed the court s order to the United States Court of

Appeals for the Ninth Circuit Because the appeal preserved the possibility

that issues under the 1916 Act might be referred to the Commission for

resolution no further order in Docket No 72 35 was issued The Commis

sion filed a second amicus brief before the Court of Appeals which on

November 14 1983 affirmed the dismissal of NARI s complaint 4

NARI

3 Under section 18 b 5 the Commission s

powers were limited to disapproving rates ineffect that it found

to be so unreasonably high or low as to be detrimental to U S foreign commerce

4National Association of Recycling Industries Inc v American Mail Line

Ltd

720 F 2d 618 9th Cir

1983

27 F M C
PWC MOVEMENT OF WASTEPAPER AND WOODPULP FROM 23

u s WEST COAST PORTS TO PORTS IN JAPAN ET AL

requested the Supreme Court to review the decision of the Court of Appeals

this request was denied on March 19 1984 5

The conclusion of NARIs antitrust lawsuit removes the possibility that

a court might request the Commission to make findings regarding PWC s

wastepaper rates based on the record developed in Docket No 72 35

There is no longer any reason to maintain this investigation as an open

proceeding It should also be noted that section 8 of the Shipping Act

of 1984 Pub L 98 237 exempts tariffs and service contracts covering

shipments of wastepaper and certain other recyclable materials from the

requirement that they be filed with the Commission and kept open to

public inspection There is therefore little resemblance between the original

statutory basis for this proceeding and the current regulation of liner carriage

of wastepaper

6

THEREFORE IT IS ORDERED That this proceeding is hereby discon

tinued

By the Commission

8 FRANCIS C HURNEY

Secretary

s

466 U s 994 1983

6By notice served on May 15 1984 49 FR 21 798 the Commission stated that determinations ofrhe appli

cability of the Shipping Act of 1984 to cases pending before the agency on June 18 1984 the effective

date of the 1984 Act would be made on a case by case basis No such determination is necessary in order

todiscontinue this proceeding

27 F M C
FEDERAL MARITIME COMMISSION

46 C F R PART 508

DOCKET NO 8345

ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO

SHIPPING IN THE UNITED STATEs REPUBLlC OF THE

PHILIPPINES TRADE

AUGUST 21 1984

Notice ofDiscontinuance

The Federal Maritime Commission discontinues this rule

making proceeding without prejudice to institute a new

rulemaking proceeding should there be indication of un

favorable conditions in this trade

DATE August 24 1984

SUPPLEMENTARY INFORMATION

By a Notice of Proposed Rulemaking Proposed Rule published on

October 7 1983 48 Fed Reg 45 80 the Commission instituted this

proceeding under section 19 of the Merchant Marine Act 1920 46 U S C

876 in response to allegations by shippers third flag carriers and others

that government enforcement of the cargo reservation laws of the Republic

of the Philippines had created unfavorable conditions in the foreign ocean

borne trade between the United States and the Philippines The Philippine

laws in question require that all government cargo be reserved for transport

by Philippine flag carriers and that 80 of non government cargo be

reserved for flag carriers of the Philippines and of the bilateral trading

partner with cross traders limited to the remaining unreserved 20 of

non government cargo

The Proposed Rule set forth two options as remedies under section

19 Option A would suspend the tariffs of Philippine carriers operating

in the United States Republic of the Philippines trade Option B would

allow Philippine carriers to avoid tariff suspension by obtaining author

ized status from the Commission The effect of the Proposed Rule would

be to adjust or meet any unfavorable trade conditions by imposing burdens

on Philippine carriers equal to those imposed on non Philippine carriers

by Philippine laws and regulations

A total of 13 comments were received in response to the Proposed

Rule Comments alleging the existence of unfavorable trade conditions or

supporting some action under section 19 were received from the following

persons Maersk Line Maersk Barber Blue Sea Lines BBSL Port of

Portland Portland Virginia Port Authority VPA The Port Authority

of New York and New Jersey New York Philadelphia Port Corporation

ACTION

SUMMARY

24 27 F M C
ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE 25

TO SHIPPING IN THE U S REP OF THE PHILIPPINES TRADE

Philadelphia Maryland Port Administration Baltimore the Council of

European Japanese National Shipowners Associations CENSA the

Chemical Manufacturers Association CMA P L Thomas Paper Co Inc

PL Thomas and the New York Chamber of Commerce and Industry

Comments challenging the allegations of unfavorable trade conditions and

opposing any action under section 19 were received from the following

persons National Galleon Shipping Corporation Galleon and the Maritime

Company of the Philippines MCP and the U S Flag Far East Discussion

Agreement Agreement No 10050

The Commission published on March 30 1984 49 Fed Reg 12 720

a Notice of Request for Further Comment Request for Further Com

ment The Request for Further Comment addressed the various legal proce

dural and policy arguments raised in the comments on the Proposed Rule

and invited additional comment limited to factual matters The Request

for Further Comment provided parties who might be adversely affected

by the Proposed Rule with an opportunity to address factual allegations

in other comments that were filed simultaneously with theirs The Request

for Further Comment also specifically invited the Executive Branch to

file comment and indicated that information concerning the amount of

cargo in the U SlPhilippines trade subject to U S cargo preference laws

would be helpful to the Commission in its deliberations

Eleven comments were received in response to the Request for Further

Comment Section 19 action continued to be supported in comments filed

by Maersk BBSL CENSA CMA and PL Thomas all of whom had

previously filed comment Additional comments supporting section 19 action

were filed for the first time by the United States Departments ofTranspor

tation State Justice and Commerce and the Office of the United States

Trade Representative Executive Branch the National Industrial Transpor

tation League League Sta Rite Industries Overseas Corporation Sta Rite

and Westinghouse Electric Corporation Westinghouse The Philippine flag

carriers Galleon and MCP and the U S flag carrier members ofAgreement

No 10050 filed further comments continuing their opposition to section

19 action

Subsequently by letter dated June 1 1984 counsel for the Philippine

flag carriers informed the Commission that the Philippine Maritime Industry

Authority MARINA had issued Memorandum Order No 5 which revoked

Memorandum Orders Nos 3 and 4

1 Memorandum Order No 3 had imple

mented E O 769 by establishing a waiver program which applied to com

I Memorandum Order No 4 which excluded transshipped cargo from the coverage of EO 769 was not

at any time in issue in this proceeding The June I 1984 letter attached a

photocopy of atelex from the

Philippine Minister of Transportation and Communications to the Philippine Embassy in Washington which

quoted in full the text of Memorandum Order No 5 The Order was signed by the Administrator of MARINA

and the Minister of Transportation and Communications Previously the Department of State in aletter dated

May 29 1984 had advised the Commission that Memorandum Order No 3 was rescinded Further commu

nications confirming this fact were received in the form of letters from the State Department dated June 6

1984 and June 28 1984

27 F M C
26 FEDERAL MARITIME COMMISSION

mercial export and import cargoes in the U SJPhilippines trades Counsel

for the Philippine carriers contends that this action by the Philippine govern

ment moots the controversy in this proceeding and requests that the proceed

ing be terminated and the rule withdrawn

In response to the Philippine flag carriers request CMA by letter of

June 15 1984 submits that it is too early to evaluate the impact of

the revocation of Memorandum Order No 3 on the Philippine waiver

program with respect to non government cargo i ecargo subject to E O

769 In addition CMA states that some of its members report that waivers

may still be required for government cargo i ecargo subject to P O

1466 CMA notes that government cargo is broadly defined under P O

1466 and that a significant amount of cargo may still be subject to anti

competitive conditions CMA therefore believes that termination of this

proceeding at this time would be premature

The principal focus of the comments submitted in this proceeding urging

action under section 19 was on the Philippine waiver program for commer

cial cargoes

2 The various allegations of burden on access to the trade

inadequate service non competitive rates and cargo diversion were for

the most part related to the enforcement of the Philippine cargo reservation

law through the waiver program The revocation of Memorandum Order

No 3 on its face removes the waiver program as it applied to commercial

cargo This action ofthe Philippine government would appear to eliminate

the principal implementing mechanism of E O 769 in the U SlPhilippines

trades

Moreover there is some confirmation from the shipper community that

the revocation of the waiver program has for the moment removed the

burden of the Philippine cargo reservation laws with regard to commercial

cargoes

3 There is also information in the record that the impact of the

waiver program has at the present time been lifted from third flag carriers

For example trade data submitted in the second round of comments would

appear to indicate that competitive conditions are returning to the trade 4

Moreover although all parties of record have been informed of the with

drawal of the waiver program only CMA has suggested that this proceeding

should be continued Although the CMA letter raises certain concerns about

Philippine cargo reservation laws it does not present factual information

that would indicate the presence of unfavorable trade conditions With

the removal of the specific gravamen of the various complaints i e the

waiver program and the apparent resumption of normal trade conditions

the Commission believes that the fundamental purpose in instituting this

2 Memorandum Order No 3 was put into effect by the Philippine government on July 22 1982 It provided

for a waiver of the requirement that non government cargo be carried on Philippine or U S flag carriers

provided that aproper application was submitted to Philippine authorities

3

By letter dated May 31 1984 Pier 1 Imports commended the Commission for its successful efforts in

this proceeding with regard toPhilippine cargo sharing regulations

4The record shows that inthe first quarter of 1984 third flag carriers appear to be regaining their histori

cal average share of the trade overthe past six years

7 M
ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE 27

TO SHIPPING IN THE U SlREP OF THE PHILIPPINES TRADE

proceeding namely removing unfair burdens on shippers and preserving

competitive access for non national flag carriers has been substantially

accomplished There does not therefore appear to be any need for further

action or the imposition of sanctions at this time The Commission therefore

shall discontinue this proceeding

In taking this action however the Commission wishes to make it clear

that it continues to be concerned about shipping conditions in this trade

The revocation of Memorandum Order No 3 withdraws only one element

albeit a critical one from the panoply of Philippine cargo reservation laws

and regulations The basic laws and decrees including E O 769 with respect

to non government cargo and P D 1466 with respect to government cargo

apparently remain in effect s

These laws reserve substantial portions of

both commercial and government cargo to Philippine flag carriers and their

enforcement could create conditions unfavorable to shipping

The Commission therefore intends to closely monitor this trade for any

indication of renewed application of a waiver program or other means

of enforcement of E O 769 or greater enforcement of P D 1466 and

to act swiftly to protect the trade if the need arises

THEREFORE IT IS ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

5

There is nothing in the record to indicate the current status of the Central Bank Memorandum which

further implemented the waiver program with respect to non government cargo

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 510

DOCKET NO 8419

LICENSING OF OCEAN FREIGHT FORWARDERS

August 24 1984

Final Rules

These rules finalize anellor revise the Commission s

ocean freight forwarder interim regulations to implement

the Shipping Act of 1984 which became effective June

18 1984 Revisions included in these final rules relate

to among others the reporting and noticing of shipper

affiliations by forwarders invoicing certification require

ments for compensation anti rebate policy declarations

accounting to principals port wide exemptions and sale

transfer of forwarder s stock The revisions are intended

to lessen the regulatory burden upon the forwarding in

dustry

DATES Final rules effective October 15 1984

SUPPLEMENTARY INFORMATION

On March 20 1984 the Shipping Act of 1984 the 1984 Act 46

U S C app 1701 1720 was enacted This legislation substantially altered

the regulatory responsibilities of the Commission and directly impacted

on the Commission s regulations pertaining to the ocean freight forwarding

industry A number of changes to the Commission s forwarder regulations

46 CFR Part 510 were required by the new legislation

On May 3 1984 the Commission published in the FEDERAL REGISTER

49 FR 16839 Interim Rules concerning the licensing and operations of

ocean freight forwarders which became effective on June 18 1984 pursuant

to section 17b of the 1984 Act 26 F M C 621 The Interim Rules

also addressed rule changes previously proposed and noticed in Docket

No 83 35 The Licensing of Independent Ocean Freight Forwarders The

Commission provided thirty days for comments on its Interim Rules Com

ments were received from the following parties The Marine Exchange

of the San Francisco Bay Region General Steamship Corporation Ltd

NAVTRANS International Freight Forwarding Inc The 8900 Lines

North Atlantic Israel Freight Conference North Atlantic Mediterranean

Freight Conference U S Atlantic and Gulf Australia New Zealand Con

ference and United States Atlantic PortsItaly France and Spain Freight

Conference collectively American President Lines Ltd Hapag Lloyd Agen

cies Kerr Steamship Company Inc Columbia River Customs Brokers

ACTION

SUMMARY

28 27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 29

Forwarders Association Inc The Pacific Merchant Shipping Association

TMX Shipping Inc J E Lowden Company Sea Land Service Inc

The National Customs Brokers Forwarders Association of America Inc

The National Council on International Trade Documentation and Trans

Freight Lines Inc

DISCUSSION OF COMMENTS

In view of the discussion in the Interim Rules of the previous comments

submitted in Docket No 83 35 we will limit our discussion to the com

ments to the Interim Rules

The vast majority of the commenting parties twelve of fifteen limited

their comments to the certification requirements for the payment of ocean

freight forwarder compensation The general view of these comments is

that the current certification requirements contained in section 510 33 of

the forwarder rules create substantial administrative expenses both on the

part of the forwarder and the carrier which could be eliminated through

use of efficient automated systems for the payment of compensation It

is pointed out that the 1984 Act specifically eliminates the language of

the Shipping Act 1916 1916 Act requiring certification prior to payment

of compensation by the carrier It is suggested that this change expresses

Congress intent to eliminate the current onerous and counterproductive

paperwork procedures

A number of these commenters recommend that forwarders be allowed

to provide the required certification to carriers in various ways It is sug

gested that the forwarder s certification be allowed to be placed on the

bill of lading the current requirement or on a summary statement or

on a forwarder s compensation invoice to a carrier or on a carrier s check

Other methods suggested included an annual written statement to a carrier

that the forwarder is entitled to compensation on all shipments handled

by it except as otherwise indicated on the bill of lading and a restrictive

endorsement on the back of the carrier s compensation check

It has been estimated by one commenter that with a revised rule as

recommended the industry could realize a saving of three million dollars

The significant saving it is suggested would result from elimination of

the need both for forwarders to submit the huge volume of certifications

to carriers and for carriers to process and retain this paperwork in order

to generate appropriate compensation checks Payment of compensation

it is believed could be better automated and less enmeshed in clerical

procedures

In view of the comments regarding the certification requirements con

tained in the forwarder regulations the Final Rules will allow forwarders

to provide the required certification on one copy of the bill of lading

or on a forwarder s summary statement or on a forwarder s invoice for

compensation or as an endorsement on the back of a carrier s compensation

check Carriers will still be required to retain a

copy of the forwarder s

27 F M C
30 FEDERAL MARITIME COMMISSION

certification Forwarders will only be required to retain their shipment files

evidence that the required services were performed on the particular ship

ments

It is our belief that this change is consistent with the language of the

1984 Act and it will afford the industry an opportunity to streamline

procedures for the payment of ocean freight forwarder compensation to

the benefit of all concerned Moreover under our Final Rule forwarders

will no longer be required to check specific services performed on each

shipment as the certification language is broad enough to cover any ship

ment Appropriate amendments to the pertinent sections of the Final Rules

have been made accordingly

The National Customs Brokers and Forwarders Association of America

Inc the Association submitted comments on a number of areas of the

Interim Rules The Association favors the shipper affiliations notice require

ment contained in section 510 31b of the Interim Rules However it

believes that it does not go far enough to protect exporters in the United

States It believes that the requirement should be extended beyond affili

ations with exporters from the United States to include exporters from

foreign countries It sees the potential for harm to U S exporters if for

warders affiliated with foreign exporters release information about their

U S principals to their foreign affiliates which the foreign affiliate could

use to attract business away from the U S exporter

We see merit in the Association s suggestion and we have adopted the

recommended language offered by the Association as part of the Final

Rules

The Association although generally supporting the changes in the

invoicing rule does not feel the notice that is to appear on each invoice

to a principal advising of potential markup of charges is necessary and

results in more regulation than the previous rule It urges that this notice

requirement be deleted Further it suggests that the prior written quotation

provisions of the previous rules be retained It seeks also to retain the

filing of fee schedules so that no further disclosure beyond the schedule

is required

The Association s comments regarding the invoicing rule are not persua

sive The intent of our Interim Rule on invoicing was and still is to

interject the forces of the marketplace in the area of forwarder billing

practices We believe this will act as a self policing mechanism compelling

forwarders to account to their principals rather than to the Commission

to the extent possible

We have amended however the language of the rule so as not to

prescribe a specific format that forwarders must follow The rule will allow

a forwarder to bill its principal for services rendered by the forwarder

in any manner the forwarder so chooses We have retained the notice

requirement with some modification which will advise a principal that

upon request the forwarder shall provide a detailed breakout of the compo

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 31

nents of charges assessed by the forwarder along with copies of any perti

nent document

The Association does not agree with the rule on requiring forwarders

to place an anti rebate policy declaration on each invoice to a principal

It believes that there is no statutory basis for the rule thus the rule should

be deleted

For the reasons stated in our notice of Interim Rules we are not disposed

to change this rule and it will be adopted in the Final Rules

Finally the Association seeks modification to the rule on accounting

to the principal for funds due the principal It believes that the forwarder

should be allowed to offset its receivables from any funds due the principal

without the principal s consent This is a matter which is best left to

the parties involved to agree upon rather through government regulation

Thus we have deleted the consent requirement in the Final Rules The

forwarder will still be required however to account to its principal for

such funds

NAVTRANS International Freight Forwarding Inc NAVTRANS gen

erally supports the Interim Rules It requests however that we reconsider

its previous comments in Docket No 83 35 Further to its previous com

ments it questions the continued need for notification of the sale transfer

of a forwarder s stock in view of the deletion of the approval requirement

NAVTRANS previous comments were considered in drafting the Interim

Rules thus we see no need to reconsider them here Further we do

not agree that we need not be notified of stock salestransfers To properly

discharge our regulatory responsibilities it is essential that we know who

are the owners of forwarders especially in instances where the question

of beneficial interest is present

The 8900 Lines et al submitted comments on a single point They

oppose deletion of section 510 36 requiring the filing of agreements under

section 15 of the 1916 Act They argue that the 1984 Act in no way

affects much less eliminates the requirement under section 15 of the

1916 Act that agreements among ocean freight forwarders be filed with

the Commission for approval They state that persons carrying on the busi

ness of forwarding are still other persons subject to the 1916 Act and

therefore are required to file agreements for approval by the Commission

pursuant to section 15 of that Act They urge that section 510 36 be

retained in the forwarder rules

The issue raised by the 8900 Lines et al will be the subject of

a separate rulemaking proceeding Therefore no further comment in the

context of the instant proceeding on the issue is necessary at this time

Having addressed the comments submitted to our Interim Rules we

turn now to two areas which we wish to further amend for clarification

purposes

Under section 510 31 e Arrangements with unauthorized persons we

have amended the last sentence by adding the word also after licensee

27 F M C
32 FEDERAL MARITIME COMMISSION

shall This change is to make it clear that when a third party is involved

in a forwarding transaction the license shall in addition to providing the

third party with an invoice provide a

copy of its invoice to the shipper

Thus the last sentence is to read in pertinent part

the licensee shall also transmit to the person paying the

forwarding charges acopy of its invoice for services rendered

Under section 51O 33 a Disclosure ofprincipal we have added language

specifying that the identity of the shipper must be shown in the shipper

identification box on the bill of lading as opposed to just on the bill

of lading as the rule currently reads

The Interim Rules deleted several sections from the rules in effect prior

to June 18 1984 prior rules For the sake ofclarity we have redesignated

a number of sections The Interim Rules deleted paragraph a of section

510 32 Forwarder and principal fees Therefore we have redesignated

the remaining paragraphs b through k as paragraphs a through j

in the Final Rules

Paragraphs a and b of section 510 35 Reports required to be filed

have been deleted and all that remains is paragraph c Thus we have

retitled section 510 35 as Anti rebate certification and deleted the paragraph

designation

The Interim Rules also deleted sections 510 12 and 510 21 from the

prior rules In view of this we have redesignated sections 510 13 through

510 20 as sections 510 12 through 510 19 in the Final Rules Similarly

sections 510 31 through 510 35 have been redesignated as sections 510 21

through 510 25 in the Final Rules Conforming amendments to cross ref

erences that appear throughout the Final Rules have been made accordingly

To correct an oversight regarding the appropriate OMB control numbers

appearing in section 510 91 we have amended that section to reflect the

correct OMB control number as 3072018 for all the sections indicated

in the table appearing in the section

Pursuant to 5 U S C 601 et seq the Chairman of the Commission

certifies that the Final Rules published herein will not have a

significant

economic impact on a substantial number of small entities The Final Rules

are intended to bring the Commission s

regulations in line with new legisla

tion Further they tend to lessen the regulatory burden upon the forwarding

industry and they should have a cost saving impact on the operations of

forwarders

List of subjects in 46 CPR 510 Exports Freight forwarders Maritime

carriers Rates Reports and record keeping requirements Surety bonds

THEREFORE pursuant to 5 U S C 553 and sections 3 8 10 11

13 15 17 and 19 of the Shipping Act of 1984 46 U S C app 1702

1707 1709 1710 1712 1714 1716 and 1718 the Commission revises

46 CPR Part 510 to read as follows

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 510

LICENSING OF OCEAN FREIGHT FORWARDERS

SUBPART A GENERAL

Sec

510 1 Scope

510 2 Definitions

510 3 License when required

510 4 License when not required

SUBPART B ELlGIBILlTY AND PROCEDURE FOR LICENSING

BOND REQUIREMENTS

510 11

510 12

510 13

510 14

510 15

510 16

510 17

510 18

510 19

Basic Requirements for licensing eligibility

Application for license

Investigation of applicants

Surety bond requirements

Denial of license

Revocation or suspension of license

Application after revocation or denial

Issuance and use of license

Changes in organization

SUBPART C DUTIES AND RESPONSIBILITIES OF FREIGHT

FORWARDERS FORWARDING CHARGES REPORTS TO

COMMISSION

General duties

Forwarder and principal fees

Forwarder and carrier compensation

Records required to be kept

Anti rebate certification

OMB control numbers assigned pursuant to the Paperwork Re

duction Act

AUTHORITY 5 U S C 553 Sees 3 8 10 11 13 15 17 and 19

Shipping Act of 1984 46 U S c app 1702 1707 1709 1710 1712

1714 1716 and 1718

510 21

510 22

510 23

510 24

510 25

510 91

17 F M C 33
34 FEDERAL MARITIME COMMISSION

SUBPART AOENERAL

510 1 Scope

a This part sets forth regulations providing for the licensing as ocean

freight forwarders of persons including individuals corporations and part

nerships who wish to carry on the business of freight forwarding This

part also prescribes the bonding requirements and the duties and responsibil

ities of ocean freight forwarders regulations concerning practices of freight

forwarders and common carriers and the grounds and procedures for revoca

tion and suspension of licenses

b Information obtained under this part is used to determine the qualifica

tions of freight forwarders and their compliance with shipping statutes

and regulations Failure to follow the provisions of this part may result

in denial revocation or suspension of a

freight forwarder license Persons

operating without the proper license may be subject to civil penalties not

to exceed 5 000 for each such violation unless the violation is willfully

and knowingly committed in which case the amount of the civil penalty

may not exceed 25 000 for each violation for other viQlations of the

provisions of this part the civil penalties range from 5 000 to 25 000

for each violation 46 U S C app 1712 Each day of a continuing violation

shall constitute a separate violation

510 2 Definitions

The terms used in this part are defined as follows

a Act means the Shipping Act of 1984 46 U S C app 1701

1720

b Beneficial interest includes a lien or interest in or right to use

enjoy profit benefit or receive any advantage either proprietary or finan

cial from the whole or any part of a shipment of cargo where such

interest arises from the financing of the shipment or by operation of law

or by agreement express or implied The term beneficial interest shall

not include any obligation in favor of a freight forwarder arising solely

by reason of the advance of out of pocket expenses incurred in dispatching

a shipment

c Branch office means any office established by or maintained by

or under the control of a licensee for the purpose of rendering freight

forwarding services which office is located at an address different from

that of the licensee s designated home office This term does not include

a separately incorporated entity

d Brokerage refers to payment by a common carrier to an ocean

freight broker for the performance of services as specified in paragraph

m of this section

e Common carrier means any person holding itself out to the general

public to provide transportation by water of passengers or cargo between

the United States and a foreign country for compensation that

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 35

1 Assumes responsibility for the transportation from the port

or point ofreceipt to the port or point of destination and

2 Utilizes for all or part of that transportation a vessel operating

on the high seas or the Great Lakes between a port in the United

States and a port in a foreign country

f Compensation means payment by a common carrier to a freight

forwarder for the performance of services as specified in 51O 23 c of

this part

g Freight forwarding fee means charges billed by a freight forwarder

to a

shipper consignee seller purchaser or any agent thereof for the

performance of freight forwarding services

h Freight forwarding services refers to the dispatching of shipments

on behalf of others in order to facilitate shipment by a common carrier

which may include but is not limited to the following

1 Ordering cargo to port

2 Preparing andor processing export declarations

3 Booking arranging for or confirming cargo space

4 Preparing or processing delivery orders or dock receipts

5 Preparing andor processing ocean bills of lading

6 Preparing or processing consular documents or arranging for their

certification

7 Arranging for warehouse storage

8 Arranging for cargo insurance

9 Clearing shipments in accordance with United States Government

export regulations

10 Preparing andor sending advance notifications of shipments or other

documents to banks shippers or consignees as required

11 Handling freight or other monies advanced by shippers or remitting

or advancing freight or other monies or credit in connection with the

dispatching of shipments

12 Coordinating the movement of shipments from origin to vessel

and

13 Giving expert advice to exporters concerning letters of credit other

documents licenses or inspections or on problems germane to the cargoes

dispatch

i From the United States means oceanbome export commerce from

the United States its Territories or possessions to foreign countries

U Licensee is any person licensed by the Federal Maritime Commis

sion as an ocean freight forwarder

k Non vessel operating common carrier lneans a common carrier

that does not operate the vessels by which the ocean transportation is

provided and is a shipper in its relationship with an ocean common carrier

1 Ocean common carrier means a vessel operating common carrier

but the term does not include one engaged in ocean transportation by

ferry boat or ocean tramp

27 F M C
1

1

j

I

36 FEDERAL MARITIME COMMISSION

m Ocean freight broker is an entity which is engaged by a carrier

to secure cargo for such carrier andor to sell or offer for sale ocean

transportation services and which holds itself out to the public as one

who negotiates between shipper or consignee and carrier for the purchase

sale conditions and terms oftransportation

n Ocean freight forwarder means a person in the United States

that

1 Dispatches shipments from the United States via common

carriers and books or otherwise arranges space for those shipments

on behalf of shippers and

2 Processes the documentation or performs related activities inci

dent to those shipments

0 Principal except as used in Surety Bond Form FMC 59 Rev

refers to the shipper consignee seller or purchaser of property and to

anyone acting on behalf of such shipper consignee seller or purchaser

of property who employs the services of a licensee to facilitate the ocean

transportation of such property

p Reduced forwarding fees means charges to a principal for forward

ing services that are below the licensee s usual charges for such services

q Shipment means all of the cargo carried under the terms of a

single bill oflading

r Shipper means an owner or person for whose account the ocean

transportation of cargo is provided or the person to whom delivery is

to be made

s Small shipment refers to a single shipment sent by one consignor

to one consignee on one bill of lading which does not exceed the underlying

common carrier s minimum charge role

t Special contract is a contract for freight forwarding services which

provides for a periodic lump sum fee

u United States includes the several States the District of Columbia

the Commonwealth of Puerto Rico the Commonwealth of the Northern

Marianas and all other United States territories and possessions

S10 3 Ucense when required

Except as otherwise provided in this part a person must hold a valid

ocean freight forwarder license in order to perform freight forwarding serv

ices and except as provided in S10 4of this part no person shall perform

or hold out to perform such services unless such person holds a valid

license issued by the Commission to engage in such business A separate

license is required for each branch office that is separately incorporated

S 104 Ucense when not required

A license is not required in the following circumstances

a Shipper Any person whose primary business is the sale of merchan

dise may without a license dispatch and perform freight forwarding services

on behalf of its own shipments or on behalf of shipments or consolidated

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 37

shipments of a parent subsidiary affiliate or associated company Such

person shall not receive compensation from the common carrier for any

services rendered in connection with such shipments

b Employee or branch office of licensed forwarder An individual em

ployee or unincorporated branch office of a licensed ocean freight forwarder

is not required to be licensed in order to act solely for such licensee

but each licensed ocean freight forwarder will be held strictly responsible

hereunder for the acts or omissions of any of its employees rendered

in connection with the conduct of the business

c Common carrier A common carrier or agent thereof may perform

ocean freight forwarding services without a license only with respect to

cargo carried under such carrier s own bill of lading Charges for such

forwarding services shall be assessed in conformance with the carrier s

published tariffs on file with the Commission

d Ocean freight brokers An ocean freight broker is not required to

be licensed to perform those services specified in 51 0 2 m

SUBPART B ELIGIBILITY AND PROCEDURE FOR LICENSING

BOND REQUIREMENTS

510 11 Basic Requirements for licensing eligibility

a Necessary qualifications To be eligible for an ocean freight for

warder s license the applicant must demonstrate to the Commission that

1 It possesses the necessary experience that is its qualifying

individual has a minimum of three 3 years experience in ocean

freight forwarding duties in the United States and the necessary

character to render forwarding services and

2 It has obtained and filed with the Commission a valid

surety bond in conformance with 510 14

b Qualifying individual The following individuals must qualify the

applicant for a license

1 Sole proprietorship The applicant sole proprietor

2 PartnershipAt least one of the active managing partners

but all partners must execute the application

3 Corporation At least one of the active corporate officers

c Affiliates of forwarders An independently qualified applicant may

be granted a separate license to carry on the business of forwarding even

though it is associated with under common control with or otherwise

related to another ocean freight forwarder through stock ownership or com

mon directors or officers if such applicant submits 1 a separate application

and fee and 2 a valid surety bond in the form and amount prescribed

under 510 14 of this part The proprietor partner or officer who is the

qualifying individual of one active licensee shall not also be designated

27 F M C
38 FEDERAL MARITIME COMMISSION

the qualifying proprietor partner or officer of an applicant for another

ocean freight forwarder license

d Common carrier A common carrier or agent thereof which meets

the requirements of this part may be licensed to dispatch shipments moving

on other than such carrier s own bill of lading subject to the provisions

of 5l0 23 g

of this part

510 12 Application for license

a Application and forms Any person who wishes to obtain a license

to carry on the business of forwarding shall submit in duplicate to the

Director of the Commission s Bureau of Tariffs a completed application

Form FMC 18 Rev Application for a License as an Ocean Freight

Forwarder and a completed anti rebate certification in the format pre

scribed under 5l0 25 of this part Copies of Form FMC 18 Rev may

be obtained from the Director Bureau of Tariffs Federal Maritime Commis

sion Washington D C 20573 or from any of the Commission s offices

at other locations Notice of filing of such application shall be published

in the Federal Register and shall state the name and address of the applicant

If the applicant is a corporation or partnership the names of the officers

or partners thereof shall be published

b Fee The application shall be accompanied by a money order certified

check or cashier s check in the amount of 350 made payable to the

Federal Maritime Commission

c Rejection Any application which appears upon its face to be incom

plete or to indicate that the applicant fails to meet the licensing requirements

of the Shipping Act of 1984 or the Commission s

regulations shall be

returned by certified U S mail to the applicant without further processing

together with an explanation of the reason s for rejection and the applica

tion fee shall be refunded in full All other applications will be assigned

an application number and each applicant will be notified of the number

assigned to its application Persons who have had their applications returned

may reapply for a license at any time thereafter by submitting a new

application together with the full application fee

d Investigation Each applicant shall be investigated in accordance with

510 13 of this part

e Changes in fact Each applicant and each licensee shall submit to

the Commission in duplicate an amended Form FMC 18 Rev advising

of any changes in the facts submitted in the original application within

thirty 30 days after such change s occur In the case of an application

for a license any unreported change may delay the processing and investiga

tion of the application and may result in rejection or denial of the applica

tion No fee is required when reporting changes to an application for

initial license under this section

510 13 Investigation of applicants

The Commission shall conduct an investigation of the applicant s quali

fications for a license Such investigations may address

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 39

a The accuracy of the information submitted in the application

b The integrity and financial responsibility ofthe applicant

c The character of the applicant and its qualifying individual and

d The length and nature of the qualifying individuals experience in

handling freight forwarding duties

510 14 Surety bond requirements

a Form and amount No license shall be issued to an applicant who

does not have a valid surety bond FMC 59 Rev on file with the Commis

sion in the amount of 30 000 The amount of such bond shall be increased

by 10 000 for each of the applicant s unincorporated branch offices Bonds

must be issued by a surety company found acceptable by the Secretary

of the Treasury Surety Bond Form FMC 59 Rev can be obtained in

the same manner as Form FMC 18 Rev under 51O 12 a of this part

b Filing of bond Upon notification by the Commission by certified

U S mail that the applicant has been approved for licensing the applicant

shall file with the Director of the Commission s Bureau of Tariffs a surety

bond in the form and amount prescribed in 51O 14a of this part No

license will be issued until the Commission is in receipt of a valid surety

bond from the applicant If more than six 6 months elapse between

issuance of the notification of qualification and receipt of the surety bond

the Commission shall at its discretion undertake a supplementary investiga

tion to determine the applicant s continued qualification The fee for such

supplementary investigation shall be 100 payable by money order certified

check or cashier s check to the Federal Maritime Commission Should

the applicant not file the requisite surety bond within two years of notifica

tion the Commission will consider the application to be invalid

c Branch offices A new surety bond or rider to the existing bond

increasing the amount of the bond in accordance with 51O 14 a of this

part shall be filed with the Commission prior to the date the licensee

commences operation by any branch office Failure to adhere to this require

ment may result in revocation ofthe license

d Termination of bond No license shall remain in effect unless a

valid surety bond is maintained on file with the Commission Upon receipt

of notice of termination of a surety bond the Commission shall notify

the concerned licensee by certified U S mail at its last known address

that the Commission shall without hearing or other proceeding revoke

the license as of the termination date of the bond unless the licensee

shall have submitted a valid replacement surety bond before such termination

date Replacement surety bonds must bear an effective date no later than

the termination date of the expiring bond

510 15 Denial of license

If the Commission determines as a result of its investigation that the

applicant

27 F M C
40 FEDERAL MARITIME COMMISSION

a Does not possess the necessary experience or character to

render forwarding services

b Has failed to respond to any lawful inquiry of the Commis

sion or

c Has made any willfully false or misleading statement to

the Commission in connection with its application

a letter of intent to deny the application shall be sent to the applicant

by certified U S mail stating the reason s why the Commission intends

to deny the application If the applicant submits a written request for

a hearing on the proposed denial within twenty 20 days after receipt

of notification such hearing shall be granted by the Commission pursuant

to its Rules of Practice and Procedure contained in Part 502 of this chapter

Otherwise denial of the application will become effective and the applicant

shall be so notified by certified U S mail Civil penalties for violations

of the Act or any Commission order rule or regulation may be assessed

in accordance with Part 505 of this chapter in any proceeding on the

proposed denial of a license or may be compromised for any such violation

when a proceeding has not been instituted

510 16 Revocation or suspension of license

a Grounds for revocation Except for the automatic revocation for termi

nation of a surety bond under 510 14 d of this part or as provided

in 510 14c of this part a license may be revoked or suspended after

notice and hearing for any of the following reasons

I Violation of any provision of the Act or any other statute

or Commission order or regulation related to carrying on the

business of forwarding

2 Failure to respond to any lawful order or inquiry by the

Commission

3 Making a willfully false or misleading statement to the

Commission in connection with an application for a license or

its continuance in effect

4 Where the Commission determines that the licensee is not

qualified to render freight forwarding services or

5 Failure to honor the licensee s financial obligations to the

Commission such as for civil penalties assessed or agreed to

in a settlement agreement under Part 505 of this chapter

b Civil penalties As provided for in Part 505 of this chapter civil

penalties for violations of the Act or any Commission order rule or regula

tion may be assessed in any proceeding to revoke or suspend a license

and may be compromised when such a proceeding has not been instituted

c Notice of Revocation The Commission shall publish in the FEDERAL

REGISTER a notice of each revocation

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 41

510 17 Application after revocation or denial

Whenever a license has been revoked or an application has been denied

because the Commission has found the licensee or applicant to be not

qualified to render forwarding services any further application within 3

years of the date of the most recent conduct on which the Commission s

notice of revocation or denial was based made by such former licensee

or applicant or by another applicant employing the same qualifying individ

ual or controlled by persons on whose conduct the Commission based

its determination for revocation or denial shall be reviewed directly by

the Commission

510 18 Issuance and use of license

a Qualification necessary for issuance The Commission will issue a

license if it determines as a result of its investigation that the applicant

possesses the necessary experience and character to render forwarding serv

ices and has filed the required surety bond

b To whom issued The Commission will issue a license only in the

name of the applicant whether the applicant be a sole proprietorship a

partnership or a corporation and the license will be issued to only one

legal entity A license issued to a sole proprietor doing business under

a trade name shall be in the name of the sole proprietor indicating the

trade name under which the licensee will be conducting business Only

one license shall be issued to any applicant regardless of the number

of names under which such applicant may be doing business

c Use limited to named licensee Except as otherwise provided in this

part such license is limited exclusively to use by the named licensee

and shall not be transferred without approval to another person

510 19 Changes in organization

a The following changes in an existing licensee s organization require

prior approval of the Commission

1 Transfer of a corporate license to another person

2 Change in ownership of an individual proprietorship

3 Addition of one or more partners to a licensed partnership

4 Change in the business structure of a licensee from or

to a sole proprietorship partnership or corporation whether or

not such change involves a change in ownership

5 Acquisition of one or more additional licensee whether

for the purposes of merger consolidation or control

6 Any change in a licensee s name or

7 Change in the identity or status of the designated qualifying

individual except as discussed in paragraphs b and c of this

section

b Operation after death of sole proprietor In the event the owner

of a licensed sole proprietorship dies the licensee s executor administrator

heir s or assign s may continue operation of such proprietorship solely

27 F M C
42 FEDERAL MARITIME COMMISSI N

with respect to shipments for which the deceased sol proprietor had under

taken to act as an ocean freight forwarder pursuant 0 the existing license

if the death is reported within thirty 30 days t the Commission and

to all principals for whom services on such shipme ts are to be rendered

The acceptance or solicitation of any other shipments is expressly prohibited

until a new license has been issued Applications for a new license by

the said executor administrator heir s or assign s shall be made on

Form FMC 18 Rev and shall be accompanied b the transfer fee set

forth in 510 19 e of this part

c Operation after retirement resignation or deat ofqualifying individ

ual When a partnership or corporation has been licensed on the basis

of the qualifications of one or more of the partn rs or officers thereof

and such qualifying individual s shall no longer se e in a full time active

capacity with the firm the licensee shall report such hange to the Commis

sion within thirty 30 days Within the same 30 d y period the licensee

shall furnish to the Commission the name s and detailed ocean freight

forWarding experience of other active managing p

er s or officer s who

may qualify the licensee Such qualifying individual must meet the appli

cable requirements set forth in 510 11 a of this art The licensee may

continue to operate as an ocean freight forwarder hile the Commission

investigates the qualifications of the newly design ted partner or officer

d Incorporation of branch office In the eve t a licensee s validly

operating branch office undergoes incorporation as a separate entity the

licensee may continue to operate such office pend receipt of a separate

license provided that

1 The separately incorporated entity applies 0the Commission

for its own license within ten 10 days after ncorporation and

2 The continued operation of the office i carried on as a

bona fide branch office of the licensee und r its full control

and responsibility and not as an operation of th separately incor

porated entity

e Application form and fee Applications for C mmission approval of

status changes or for license transfers under 510 9 a of this part shall

be filed in duplicate with the Director Bureau of T ffs Federal Maritime

Commission on Form FMC 18 Rev together wi a processing fee of

100 made payable by money order certified ch ck or cashier s check

to the Federal Maritime Commission

SUBPART C DUTIES AND RESPONSIBIU ES OF FREIGHT

FORWARDERS FORWARDING CHARGES REPORTS TO

COMMISSION

510 21 General duties

a License name and number Each licensee sha 1 carry on the business

of forwarding only under the name in which its license is issued and

27 FM C
LICENSING OF OCEAN FREIGHT FORWARDERS 43

only under its license number as assigned by the Commission Wherever

the licensee s name appears on shipping documents its FMC license number

shall also be included

b Stationery and billing forms notice of shipper affiliation

1 The name and license number of each licensee shall be perma

nently imprinted on the licensee s office stationery and billing

forms The Commission may temporarily waive this requirement

for good cause shown if the licensee rubber stamps or types

its name and FMC license number on all papers and invoices

concerned with any forwarding transaction

2 When a licensee is a shipper or seller of goods in international

commerce or affiliated with such an entity the licensee shall

have the option of i

identifying itself as such andlor where

applicable listing its affiliates on its office stationery and billing

forms or ii including the following notice of such items

This company is a shipper or seller of goods in international

commerce or is affiliated with such an entity Upon request

a general statement of its business activities and those of its

affiliates along with a written list of the names of such affili

ates will be provided

c Use of license by others prohibition No licensee shall permit its

license or name to be used by any person who is not a bona fide individual

employee of the licensee Unincorporated branch offices of the licensee

may use the license number and name of the licensee if such branch

offices 1 have been reported to the Commission in writing and 2

are covered by an increased bond in accordance with 51O 14 c of this

part

d Arrangements with forwarders whose licenses have been revoked

Unless prior written approval from the Commission has been obtained

no licensee shall directly or indirectly 1 agree to perform forwarding

services on export shipments as an associate correspondent officer em

ployee agent or sub agent of any person whose license has been revoked

or suspended pursuant to 510 16 of this part 2 assist in the furtherance

of any forwarding business of such person 3 share forwarding fees or

freight compensation with any such person or 4 permit any such person

directly or indirectly to participate through ownership or otherwise in

the control or direction of the freight forwarding business of the licensee

e Arrangements with unauthorized persons No licensee shall enter into

an agreement or other arrangement excluding sales agency arrangements

not prohibited by law or this part with an unlicensed person so that

any resulting fee compensation or other benefit inures to the benefit of

the unlicensed person When a licensee is employed for the transaction

of forwarding business by a person who is not the person responsible

for paying the forwarding charges the licensee shall also transmit to the

27 F M C
44 FEDERAL MARITIME COMMISSI I

N

person paying the forwarding charges acopy of i s invoice for services

rendered I

f

False orfraudulent claims false information NO licensee shall prepare

or file or assist in the preparation or filing of any I

claim affidavit letter

of indemnity or other paper or document concernifg a forwarding trans

action which it has reason to believe is false 011 fraudulent nor shall

any such licensee knowingly impart to a PrinCiP I

common carrier or

other person false information relative to any forwar ng transaction

g Response to requests of Commission Upon the request ofany author

ized representative of the Commission a licensee shall make available

promptly for inspection or reproduction all records j

and books of account

in connection with its forwarding business and s all respond promptly

to any lawful inquiries by such representative

h Policy against rebates The following dec1mtation shall appear on

all invoices submitted to principals i

i

Name of firm has a policy against payme t solicitation or

receipt of any rebate directly or indirectly whic would be unlaw

ful under the United States Shipping Act of 198

510 22 Forwarder and principal fees

a Compensation or fee sharing No licensee shall share directly or

indirectly any compensation or freight forwarding fe with a shipper con

signee seller or purchaser or an agent affiliate i or employee thereof

nor with any person advancing the purchase price of the property or guaran

teeing payment therefor nor with any person havi1g a beneficial interest

in the shipment

b Withholding information No licensee shall withhold any information

concerning a forwarding transaction from its principal

c Due diligence Each licensee shall exercise du diligence to ascertain

the accuracy of any information it imparts to a pqncipal concerning any

forwarding transaction

I

d Errors and omissions Each licensee shall omply with the laws

of the United States and any involved State Territory or possession thereof

and shall assure that to the best of its knowledge i there exists no error

misrepresentation in or omission from any export de aratiOn bill of lading

affidavit or other document which the licensee e ecutes in connection

with a shipment A licensee who has reason to be ieve that its principal

has not with respect to a shipment to be handled by uch licensee complied

with the laws of the United States or any State Com onwealth orTerritory

thereof or has made any error or misrepresentation iin or omission from

any export dec1aration bill of lading affidavit or pther paper which the

principal executes in connection with such shipmen shall advise its prin

cipal promptly of the suspected noncompliance error misrepresentation

or omission and shall decline to participate in an transaction involving

such document until the matter is properly and lawful resolved

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 45

e Express written authority No licensee shall endorse or negotiate

any draft check or warrant drawn to the order of its principal without

the express written authority of such principal

f Receipt for cargo Each receipt issued for cargo by a licensee shall

be clearly identified as Receipt for Cargo and be readily distinguishable

from a bill of lading

g

Invoices documents available upon request A licensee may charge

its principal for services rendered Upon request of its principal each li

censee shall provide a complete breakout of the components of its charges

and a true copy of any underlying document or bill of charges pertaining

to the licensee s invoice The following notice shall appear on each invoice

to a principal

Upon request we shall provide a detailed breakout of the compo

nents of all charges assessed and a true copy of each pertinent

document relating to these charges

h Special contracts To the extent that special arrangements or contracts

are entered into by a licensee the licensee shall not deny equal terms

to other shippers similarly situated

i Reduced forwarding fees No licensee shall render or offer to render

any freight forwarding service free of charge or at a reduced fee in consider

ation of receiving compensation from a common carrier or for any other

reason Exception A licensee may perform freight forwarding services for

recognized relief agencies or charitable organizations which are designated

as such in the tariff of the common carrier free of charge or at reduced

fees

U Accounting to principal Each licensee shall account to its principal s

for overpayments adjustments of charges reductions in rates insurance

refunds insurance monies received for claims proceeds of c o d

shipments

drafts letters of credit and any other sums due such principal s

510 23 Forwarder and carrier compensation

a Disclosure of principal The identity of the shipper must always

be disclosed in the shipper identification box on the bill of lading The

licensee s name may appear after the name of the shipper but the licensee

must be identified as the shipper s agent

b Certification required for compensation A common carrier may pay

compensation to a licensee only pursuant to such common carrier s tariff

provisions Where a common carrier s tariff provides for the payment of

compensation such compensation shall be paid on any shipment forwarded

on behalf of others where the licensee has provided a written certification

as prescribed in 51O 23 c of this part and the shipper has been disclosed

on the bill of lading as provided for in 51O 23 a of this part The

common carrier shall be entitled to rely on such certification unless it

knows that the certification is incorrect The common carrier shall retain

such certification for a period of five 5 years

27 F M C
46 FEDERAL MARITIME COMMISSIPN

c Form of certification Where a licensee is e litled to compensation

the licensee shall provide the common carrier witli a signed certification

which indicates that the licensee has performed th required services that

entitle it to compensation The certification shall read as follows

The undersigned hereby certifies that neither t nor any holding

company subsidiary affiliate officer director gent or executive

of the undersigned has a beneficial interest in is shipment that

it is the holder of valid FMC License No issued by

the ederal Maritime Commission and has perfo ed the following

servIces i

1 Engaged booked secured reserved or pontracted directly

with the carrier or its agent for space aboard a vessel or confirmed

the availability of that space and

2 Prepared and processed the ocean bill of l ding dock receipt

or other similar document with respect to the shirment

The required certification may be placed on one I copy of the relevant

bill of lading a

summary statement from the licensFe the licensee s com

pensation invoice or as an endorsement on the carriefs compensation check

Each licensee shall retain evidence in its shipment I

files that the licensee

in fact has performed the required services enumerated on the certification

d Compensation pursuant to tariff provisions N licensee or employee

thereof shall accept compensation from a common c er which is different

than that specifically provided for in the carrier s ef ective tariff s

lawfully

on file with the Commission No conference or grofp

of common carriers

shall deny in the export commerce of the Unite States compensation

to an ocean freight forwarder or limit that compejnsation to less than a

reasonable amount I

e Compensation services performed by underlyihg carrier exemptions

No licensee shall charge or collect compensation in tlte event the underlying

common carrier or its agent has at the request of s ch licensee performed

any of the forwarding services set forth in 51O 2 h unless such carrier

or agent is also a licensee or unless no other l censee is willing and

able to perform such services i

f Duplicative compensation A common carrier s all not pay compensa

tion for the services described in 51O 23 c more than once on the same

shipment I

I

g

Licensed non vessel operating common carriers compensation

1 A non vessel operating common carrier or p

rson related there

to licensed under this part may collect compe sation when and

only when the following certification is made I together with the

certification required under paragraph c of this ection

The undersigned certifies that neither it no anY related person

has issued a bill of lading or otherwise u dertaken common

carrier responsibility as a non vessel operati gcommon carrier

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 47

for the ocean transportation of the shipment covered by this

bill of lading

2 Whenever a person acts in the capacity of a non vessel operat

ing common carrier as to any shipment such person shall not

collect compensation nor shall any underlying ocean common

carrier pay compensation to such person for such shipment

h A freight forwarder may not receive compensation from a common

carrier with respect to any shipment in which the forwarder has a beneficial

interest or with respect to any shipment in which any holding company

subsidiary affiliate officer director agent or executive of such forwarder

has a beneficial interest

510 24 Records required to be kept

Each licensee shall maintain in an orderly and systematic manner and

keep current and correct all records and books of account in connection

with its business of forwarding These records must be kept in the United

States in such manner as to enable authorized Commission personnel to

readily determine the licensee s cash position accounts receivable and ac

counts payable The licensee must maintain the following records for a

period of five years

a General financial data A current running account of all

receipts and disbursements accounts receivable and payable and

daily cash balances supported by appropriate books of account

bank deposit slips canceled checks and monthly reconciliation

of bank statements

b Types of services by shipment A separate file shall be

maintained for each shipment Each file shall include a copy

of each document prepared processed or obtained by the licensee

including each invoice for any service arranged by the licensee

and performed by others with respect to such shipment

c Receipts and disbursements by shipment A record of all

sums received andor disbursed by the licensee for services ren

dered and out of pocket expenses advanced in connection with

each shipment including specific dates and amounts

d Special contracts A true copy or if oral a true and com

plete memorandum of every special arrangement or contract with

a principal or modification or canceIlation thereof to which it

may be a party Authorized Commission personnel and bona fide

shippers shall have access to such records upon reasonable request

510 25 Anti rebate certifications

By March 1st of each year the Chief Executive Officer of every licensee

shall certify that it has a policy against rebates that it has promulgated

such policy to all appropriate individuals in the firm that it has taken

steps to prevent such illegal practices which measures must be fuIly de

scribed in detail and that it will cooperate with the Commission in any

1 C ft r
48 FEDERAL MARITIME COMMISSION

investigation of suspected rebates This certification shall be in accordance

with the following format

Name of Filing Firm

Certification of Policies and Efforts to Combat Rebating in the Foreign

Commerce of the United States

Pursuant to the provisions of section 15 b of the Shipping Act of 1984

and Federal Maritime Commission regulations promulgated pursuant thereto

46 CPR Parts 510 and 582

I Chief Executive Officer of name of firm

holder of valid ocean freight forwarder license state under

oath that

1 It is the policy of name of firm to prohibit the participation

of said freight forwarder in the payment solicitation or receipt

of any rebate directly or indirectly to or by any carrier or shipper

which is unlawful under the provisions of the Shipping Act of

1984

2 Each owner officer employee and agent of name of firm was

notified or reminded of this policy on or before

of the present year

3 Set forth the details of measures instituted within the filing firm

or otherwise to prohibit participation in the payment of illegal

rebates in the foreign commerce of the United States

4 Name of firm affirms that it will fully cooperate with the Com

mission in its investigation of suspected rebating in United States

foreign trades

S

Subscribed to and sworn before me

this day of 19

S

Notary Public

510 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control numbers assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980 Pub

L 96511 The Commission intends that this part comply with the require

ments of section 3507 fof the Paperwork Reduction Act which requires

that agencies display a current control number assigned by the Director

of the Office of Management and Budget OMB for each agency informa

tion collection requirement

27 F M C
LICENSING OF OCEAN FREIGHT FORWARDERS 49

Section

Current

OMB Con

trol No

510 12 Form FMC 18

510 14

510 15

510 19 Form FMC 18

510 21 through 510 25

3072018

3072018

3072018

3072018

3072018

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

46 CPR PARTS 515 520 525 530 540

DOCKET NO 8418

INlERIM RULES TO IMPLEMENT THE SHIPPING ACT OF 1984

SUBCHAPTER B FINAL RULES FOR MARINE TERMINAL

OPERATIONS AND PASSENGER VESSELS

September 10 1984

Final Rules

On March 20 1984 the President signed the Shipping

Act of 1984 which became effective on June 18 1984

The Commission hereby issues final roles to supersede

previously issued interim roles to implement the Shipping

Act of 1984 In addition minor style and technical

changes have been made The parts which are included

in this rolemaking are Part 515 filing of tariffs by

marine terminal operators old part 533 Part 520 filing

of tariffs by terminal barge operators in Pacific Slope

States old part 550 Part 525 free time and demur

rage old part 526 Part 530 trnck detention at New

York old part 551 and Part 540 security for the pro

tection of the public on passenger vessels Along with

the final role on Part 510 Ocean Freight Forwarders

published separately all of Subchapter B is now final

DATE October 15 1984

SUPPLEMENTARY INFORMATION

These final roles together with the simultaneous but separately published

final rule on Part 510 Ocean Freight Forwarders finalize Subchapter B

of Chapter IV Title 46 of the Code of Federal Regulations The new

Title for Subchapter B is

ACTION

SUMMARY

j

1

REGULATIONS AFFECTING OCEAN FREIGHT FORWARDERS

MARINE TERMINAL OPERATIONS AND PASSENGER VESSELS

This proceeding was instituted by a Notice entitled Interim Rules to

Implement the Shipping Act of 1984 published in the Federal Register

on May 3 1984 49 FR 18846 26 F M C 611 which cited the Federal

Maritime Commission s interim rulemaking authority under section 17 b

of the Shipping Act of 1984 46 D S C app 1716 b and the necessity

50 27 FM C
REGULATION AFFECTING OCEAN FREIGHT FORWARDERS 51

MARINE TERMINAL OPERATIONS AND PASSENGER VESSELS

under that statute for publishing superseding final rules by December

15 1984 These rules are being published as such final superseding rules

without prejudice however to the promulgation of any further rules that

may be desirable from time to time before or after December 15 1984

The Interim Rules finalized herein restructure the Commission s Code

of Federal Regulations Part numbers for logic and convenience The new

numbers are effective as of June 18 1984 while the old numbers

apped in the October 1 1983 Title 46 Shipping Part 400 to End

editio 1 of the CFR

The major changes made by the Interim Rules to the old rules involved

the Authority Citations penalty provisions and the exclusion of forest

products bulk cargo and recyclable metal scrap waste paper and paper

waste from the tariff filing requirements all to implement the Shipping

Act of 1984 See 49 FR 18846

The Supplementary Information to the interim rules also mentioned Dock

et No 83 38 Notice of Inquiry and Intent to Review Regulations of Ports

and Marine Terminal Operators presided over by Commissioner Robert

Setrakian The issues in that proceeding may affect marine terminal oper

ations and suggest further amendments to the rules in the parts published

here Such further rulemaking if necessary may be outside the scope of

the Interim Rules and therefore require a separate rulemaking Accordingly

at this time the Commission will not defer finalization of these marine

terminal related rules

The Interim Rules published on May 3 1984 generated only two com

ments one from the Maryland Port Administration which endorsed the

language modifications to Part 515 Filing of Tariffs by Terminal Opera

tors and the other from the National Maritime Council which had no

further comment other than recognizing that the Interim Rules were required

for technical compliance with the 1984 Act The Commission therefore

sees no need to make any substantive changes in any of the Interim

Rules and is publishing them as final superseding rules in this proceeding

in their entirety

In preparing the various parts for publication certain other non substantive

changes suggested themselves Most of such minor changes made here

involve style e g for OMB Control Numbers or exemptions under the

Paperwork Reduction Act changing provided however to except

elimination of gender specific references etc grammar syntax numbering

punctuation correction of typographical errors and removal of superfluous

verbiage all without affecting substance

In addition we are restoring to the Authority Citation in old Part

550 new Part 520 reference to Sec 3 of the Shipping Act 1916 46

U S C app 804 we are deleting obsolete effective date provisions appear

ing in old sections 533 4 and 540 4 b a new map of the New York

Port District is being provided for new Part 530 and we think a more

27 F M C
j

1

I

i

I

I

I

52 FEDERAL MARITIME COMMISSION

descriptive nomenclature is Marine Terminal Operators instead ofmerely

Terminal Operators

The Federal Maritime Commission has determined that this rule is not

a major rule as defined in Executive Order 12291 dated February 17

1981 because it will not result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies that this

rule will not have a significant economic impact on a substantial number

of small entities including small businesses small organizational units and

small governmental jurisdictions

List ofSubjects

46 CPR Parts 515 520 525 and 530

Barges Cargo Cargo vessels Harbors Imports Maritime carriers Motor

carriers Ports Rates and fares Reporting and recordkeeping requirements

Trucks Water carriers Waterfront facilities Water transportation

46 CPR Part 540

Rates and fares Passenger vessels Reporting and recordkeeping require

ments Surety bonds

CORRECTIONS

These fmal rules are subject to review and editing of form before

publication in the Code ofFederal Regulations Users are requested

to notify the Commission of any omissions and typographical

type errors in order that corrections can be made before the Com

mission s CPR book goes to press in January 1985

Therefore pursuant to 5 U S C 552 553 sees 3 17 18 a 21 and

43 of the Shipping Act 1916 46 U S C app 804 816 817 a 820

and 841a sec 2 of the Intercoastal Shipping Act 1993 46 U S C app

844 secs 8 10 15 and 17 of the Shipping Act of 1984 46 U S C

app 1707 1709 1714 and 1716 and secs 2 and 3 Pub L 89 777

80 Stat 13561358 46 U S C app 817d and 817e

27 F M C
REGULATION AFFECTING OCEAN FREIGHT FORWARDERS 53

MARINE TERMINAL OPERATIONS AND PASSENGER VESSELS

I The Title to Subchapter B is revised to read as follows

SUBCHAPTER B REGULATIONS AFFECTING OCEAN FREIGHT

FORWARDERS MARINE TERMINAL OPERATIONS AND

PASSENGER VESSELS

2 Title 36 Code of Federal Regulations Parts 515 520 525 530 and

540 are revised to read as follows

27 F M C
Scope

Purpose

Persons who must file

Filing of tariffs and tariff changes

Compliance with this part and other terminal tariff filing require

ments

Definitions

OMB Control numbers assigned pursuant to the Paperwork Re

duction Act

AUTHORITY 5 U S C 553 secs 17 21 43 of the Shipping Act

1916 46 U S C app 816 820 841a secs 10 15 17 of the Shipping

Act of 1984 46 U S C app 1709 1714 1716

515 1 Scope

This part sets forth rules and regulations for the filing of terminal tariffs

by persons engaged in carrying on the business of furnishing wharfage

dock warehouse or other terminal facilities within the United States or

a commonwealth territory or possession thereof in connection with a

common carrier by water in the foreign or domestic offshore commerce

of the United States

515 2 Purpose

The purpose of this part is to enable the Commission to discharge its

responsibilities under section 17 of the Shipping Act 1916 and section

10 of the Shipping Act of 1984 by keeping informed of practices rates

and charges related thereto instituted and to be instituted by marine termi

nals and by keeping the public informed of such practices Compliance

is mandatory and failure to file the required tariffs may result in a peanlty

of not more than 5 000 for each day such violation continues Additionally

if willful and knowing the Shipping Act of 1984 provides a civil penalty

of not more than 25 000 for each day a violation continues

515 3 Persons who must file

Except with regard to bulk cargo forest products recycled metal scrap

waste paper and paper waste every person other than the Department

of Defense including the military department and all agencies of the Depart

ment of Defense carrying on the business of furnishing wharfage dock

warehouse or other terminal facilities as described in 515 1 including

but not limited to terminals owned or operated by States and their political

subdivisions railroads who perform port terminal services not covered by

Sec

515 1

515 2

515 3

515 4

515

515 6

515 91

j

54

FEDERAL MARITIME COMMISSION

46 CPR PART 515

FILING OF TARIFFS BY MARINE TERMINAL OPERATORS

27 F M C
FILING OF TARIFFS BY MARINE TERMINAL OPERATORS 55

their line haul rates common carriers who perform port terminal services

and warehousemen who operate port terminal facilities shall file in duplicate

with the Bureau of Tariffs Federal Maritime Commission and shall keep

open for inspection at all its places of business a schedule or tariff showing

all its rates charges rules and regulations relating to or connected with

the receiving handling storing andor delivering of property at its terminal

facilities except that rates and charges for terminal services performed

for water carriers pursuant to negotiated contracts and for storage of cargo

and services incidental thereto by public warehousemen pursuant to storage

agreements covered by issued warehouse receipts need not be filed for

purposes of this part

515 4 Filing of tariffs and tariff changes

Every tariff or tariff change shall be filed on or before its effective

date except as required by Commission Order or by agreements approved

pursuant to section 15 of the Shipping Act 1916 andor effective under

section 6 of the Shipping Act of 1984 and be kept open for public

inspection as provided in 515 3

515 5 Compliance with this part and other terminal tariff filing require

ments

Persons who file tariffs pursuant to requirements of Commission Orders

or agreements approved under section 15 of the Shipping Act 1916 and

or effective under section 6 of the Shipping Act of 1984 and shall not

be relieved of such requirements by this part Marine Terminal Operators

who file tariffs with the Interstate Commerce Commission pursuant to statute

or rule of that Commission may satisfy the requirements of this part by

filing with the Federal Maritime Commission a copy of any such tariff

filed with the Interstate Commerce Commission

515 6 Definitions

a The definitions of terminal services set forth in paragraph d of

this section shall be set forth in tariffs filed pursuant to this part except

that other definitions of terminal services may be used if they are correlated

by footnote or other appropriate method to the definitions set forth herein

Any additional services which are offered shall be listed and charges therefor

shall be shown in terminal tariffs

b These definitions shall apply to port terminal facilities which

are defined as one or more structures comprising a terminal unit and

include but are not limited to wharves warehouses covered andor open

storage spaces cold storage plants grain elevators andor bulk cargo loading

andor unloading structures landings and receiving stations used for the

transmission care and convenience of cargo andor passengers in the inter

change of same between land and water carriers or between two water

carriers

c For the purpose of this section point of rest means that area

on the terminal facility which is assigned for the receipt of inbound cargo

27 F M C
j

I

1 I

56 FEDERAL MARITIME COMMISSION

from the ship and from which inbound cargo may be delivered to the

consignee and that area which is assigned for the receipt of outbound

cargo from shippers for vessel loading

d Definitions of terminal services

1 Dockage means the charge assessed against a vessel for berthing

at a wharf pier bulkhead structure or bank or for mooring to a vessel

so berthed

2 Wharfage means a charge assessed against the cargo or vessel

on all cargo passing or conveyed over onto or under wharves or between

vessels to or from barge lighter or water when berthed at wharf or

when moored in slip adjacent to wharf Wharfage is solely the charge

for use of wharf and does not include charges for any other service

3 Free time means the specified period during which cargo may

occupy space assigned to it on terminal property free of wharf demurrage

or terminal storage charges immediately prior to the loading or subsequent

to the discharge of such cargo on or off the vessel

4 Wharf demurrage means a charge assessed against cargo remaining

in or on terminal facilities after the expiration of free time unless arrange

ments have been made for storage

5 Terminal storage means the service of providing warehouse or

other terminal facilities for the storing of inbound or outbound cargo after

the expiration of free time including wharf storage shipside storage closed

or covered storage open or ground storage bonded storage and refrigerated

storage after storage arrangements have been made

6 Handling means the service of physically moving cargo between

point of rest and any place on the terminal facility other than the end

of ship s tackle

7 Loading and unloading means the service of loading or unloading

cargo between any place on the terminal and railroad cars trucks lighters

or barges or any other means of conveyance to or from the terminal

facility

8 Usage means the use of terminal facility by any rail carrier

lighter operator trucker shipper or consignee its agents servants and

or employees when it performs its own car lighter or truck loading or

unloading or the use of said facilities for any other gainful purpose for

which a charge is not otherwise specified

9 Checking means the service of counting and checking cargo against

appropriate documents for the account of the cargo or the vessel or other

person requesting same

10 Heavy lift means the service of providing heavy lift cranes and

equipment for lifting cargo

515 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control numbers assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

27 F M C
FILING OF TARIFFS BY MARINE TERMINAL OPERATORS 57

ment and Budget pursuant to the Paperwork Reduction Act of 1980 Pub

L 96511 The Commission intends that this section comply with the

requirements of section 3507 f of the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

Director of the Office of Management and Budget OMB for each agency

information collection requirement

Section

Current

OMB Con

trol No

515 3 through 515 307200

27 F M C
i

FEDERAL MARITIME COMMISSION

46 CFR PART 520

FILING OF TARIFFS BY TERMINAL BARGE OPERATORS IN

PACIFIC SLOPE STATES

Sec

520 1 Scope

520 2 Tariff filing requirements

AUTHORITY 5 U S C 553 secs 3 18 a and 43 of the Shipping

Act 1916 46 U S C app 804 817 a and 841 a sec 2 of the Intercoastal

Shipping Act 1933 46 U S C app 844 and secs 8 and 17 of the

Shipping Act of 1984 46 U S C app 1707 and 1716

520 1 Scope

a The rules and regulations set forth in this part cover the filing

of tariffs by terminal barge operators in Pacific Slope States in the foreign

and domestic commerce of the United States

b Terminal barge operators moving containers or containerized cargo

by barge between points in the Continental United States shall file a sched

ule of their rates charges and services solely with the Federal Maritime

Commission where

1 The cargo is moving between a point in a foreign country or a

noncontiguous State territory or possession and a point in the United

States

2 The transportation by barge between points in the United States

is furnished by a terminal operator as a service substitute in lieu of a

direct vessel call by the common carrier by water transporting the containers

or containerized cargo under a through bill of lading

3 Such terminal operator is a Pacific Slope State municipality or other

public body or agency subject to the jurisdiction of the Federal Maritime

Commission and the only one furnishing the particular circumscribed barge

service on January 2 1975

4 Such terminal operator is in compliance with the rules and regulations

of the Federal Maritime Commission for the operator of such barge service

c The terminal operator providing such service shall be subject to

the provisions of the Shipping Act 1916 andor the Shipping Act of 1984

520 2 Tariff filing requirements

a Terminal barge operators subject to this part shall comply with the

tariff filing requirements of Part 580 of this Chapter with respect to the

publication of rates charges and services for cargo moving in the foreign

andor domestic offshore commerce of the United States

b Terminal barge operators while exempt from the tariff filing form

requirements of Part 550 of this Chapter with respect to their operations

iR nMr
FILING OF TARIFFS BY TERMINAL BARGE OPERATORS IN 59

PACIFIC SLOPE STATES

as water carriers carrying cargo in the domestic offshore trades shall comply

with all other required regulations where applicable

c Tariff s filed pursuant to 520 2 a shall specifically provide that

rates charged are based upon factors normally considered by a

regular

commercial operator in the same service

NOTE In accordance with 44 V S C 3506 c 5

any information request

or requirement in this part is not subject to the requirements

of section 3507 f of the Paperwork Reduction Act because

there are nine or fewer respondents

7FMr
FEDERAL MARITIME COMMISSION

46 CFR PART 525

FREE TIME AND DEMURRAGE CHARGES ON IMPORT PROPERTY

APPLICABLE TO ALL COMMON CARRIERS BY WATER

AUTHORITY 5 U S C 553 secs 17 and 43 of the Shipping Act

1916 46 U S C app 816 841a secs 10 and 17 of the Shipping Act

of 1984 46 U S C app 1709 and 1716

525 1 Free time and demurrage charges at the Port of New York

a Free time of five days exclusive of Saturdays Sundays and legal

holidays computed from the start of business on the first day after complete

discharge of the vessel is adequate free time on import property at New

York under present conditions

b Free time on import property at New York shall not be less than

five days except on property of such a special nature as to require earlier

removal because of local ordinances or other governmental regulations

or because piers are not equipped to care for such property for such

period or except as the Commission may hereafter direct

c Except as provided in 530 3 e 2 530 4e and 530 4 g

of this

Chapter where a carrier is for any reason unable or refuses to tender

cargo for delivery during free time free time must be extended for a

period equal to the duration of the carrier s disability or refusal If such

condition arises after the expiration of free time either no demurrage or

first period demurrage whichever is specified in the appropriate tariff

will be charged for a period equal to the duration of the carrier s

inability

or refusal

d Where a consignee is prevented from removing its cargo by factors

beyond its control such as but not limited to longshoremen s strikes

trucking strikes or weather conditions which affect an entire port area

or a substantial portion thereof and when a consignee is prevented from

removing its cargo by a longshoremen s strike which affects only one

pier or less than a substantial portion of the port area carriers shall after

expiration of free time assess demurrage against imports at the rate applica

ble to the first demurrage period for such time as the inability to remove

the cargo may continue Every departure from the regular demurrage charges

shall be reported to the Commission

e The Commission makes no finding approving or disapproving demur

rage rates presently effective as to import property at the port of New

York

f Following a longshoremen s strike of five 5 days or more

1 Free time shall be extended for a period not less than five 5

days exclusive of Saturdays Sundays and legal holidays beyond the

fO 27 F M C
FREE TIME DEMURRAGE CHARGES ON IMPORT PROP 61

APPLICABLE TO ALL COMMON CARRIERS BY WATER

time at which it would normally terminate for cargo which was in a

free time period at the commencement of the longshoremen s strike

2 First period demurrage shall be extended for a

period not less than

five 5 calendar days beyond the time at which it would normally terminate

for cargo which was subject to first period demurrage at the commencement

of the longshoremen s strike

g

The extensions set forth in paragraphs tl and t

2 of this section

shall apply only 1 if the cargo is actually picked up within such extended

time or 2 if pursuant to an appointment system adopted by both carriers

and consignees cargo is picked up within twenty four 24 hours of advance

notification that cargo is available for pickup and readily accessible in

which latter event time shall not be extended more than twenty four 24

hours beyond the additional free time or demurrage period

Note In accordance with 44 D S C 3506 c 5

any information request

or requirement in this part is not subject to the requirements of

section 3507 t of the Paperwork Reduction Act because there are

nine or fewer respondents

27 F M C
Sec

530 1

530 2

530 3

530 4

530

530 6

530 7

530 8

530 91

FEDERAL MARITIME COMMISSION

46 CPR PART 530

TRUCK DETENTION AT THE PORT OF NEW YORK

General provisions

Documentation

Terminals operating on appointment system

Terminals operating a non appointment system

Combination non appointmentappointment system

Computation of time

Penalties

Submission of claims for penalties

OMB control numbers assigned pursuant to the Paperwork Re

duction Act

Appendix A New YorkNew Jersey Port District

Appendix B Motor carrier Preference Slip

AUTHORITY 5 U S C 553 secs 17 and 43 of the Shipping Act

1916 46 U S C app 816 and 841a secs 10 and 17 of the Shipping

Act of 1984 46 U S C app 1709 and 1716

530 1 General provisions

a The Port of New York is that area designated as The Port

District on the map Appendix A

b For purposes of this part a terminal operator is any person who

receives cargo from motor carriers andor delivers cargo to motor carriers

in connection with transportation by common carrier by water excluding

persons who operate marine terminal facilities controlled by the Department

of Defense including the military department and all agencies of the Depart

ment of Defense

c Motor carriers common contract or private terminal operators

including steamship companies acting as terminal operators and steamship

companies whose action or inaction otherwise impedes expeditious pickup

and delivery of cargo by motor carriers at marine terminal facilities within

the Port of New York shall be subject to the provisions established by

terminal operators in accordance with this part which provisions shall be

reflected in the tariff of each such terminal operator

d Importers and exporters or motor carriers or other agents of importers

or exporters and terminal operators at marine terminal facilities in the

Port of New York shall be entitled to receive remuneration in accordance

with the provisions of this part

e The person responsible for operating each marine terminal facility

within the Port of New York shall identify itself to the Federal Maritime

Commission not more than 10 days after the effective date of this part

62 27 F M C
TRUCK DETENTION AT THE PORT OF NEW YORK 63

and shall thereafter promptly notify the Commission of any change in

responsibility Based thereon the Federal Maritime Commission Commis

sion will publish and maintain a current list identifying as to each such

marine terminal facility the party responsible for receipt and settlement

of claims arising under this part

f

All communications to the Federal Maritime Commission required

by this part shall be directed to the Federal Maritime Commission Office

of the Secretary 1100 L Street N W Washington D C 20573

g l Except as provided in paragraph g

2 of this section no penalty

shall be imposed upon a terminal operator under this part if receipt or

delivery of cargo at a marine terminal facility is prevented or delayed

by strike or work stoppage act of God fire serious accident or severe

or unusual weather condition The Commission shall be notified in writing

by the party claiming the existence of the condition who shall specify

the date and time of commencement and termination of any such strike

work stoppage or severe or unusual weather or other condition

2 No terminal operator shall be absolved from liability under this

part for delays resulting from inadequate or insufficient labor andor equip

ment other than reasonable delays necessary to obtain special equipment

required for handling unusual cargo on a non appointment basis

h Terminal operators shall not be liable for delays due to United

States Government regulations nor shall terminal operators be liable for

time consumed by receipt or delivery of cargo by marks other than by

bill of lading provided at the request of the shipper consignee or motor

carrier

iSteamship companies responsible for house to house movement of

containers Le containers moving as a unit from origin to destination

are responsible under this part for delay occasioned by lack of sufficient

chassis or unavailability action or inaction of their container inspection

personnel For purposes of this part containers shall include empty

as well as stuffed containers

U Disputes concerning liability under any provisions of this part shall

be settled by an impartial Adjudicator selected by the Commission

k Terminal operators are not required to deliver cargo to motor carriers

prior to the time that the ocean vessel which transported said cargo is

fully discharged If a terminal operator exercises the option of delivering

cargo to motor carriers prior to the time that the ocean carrier which

transported said cargo is fully discharged the terminal operator shall notify

the consignee or its designated agent that the cargo is on the pier at

its place of rest and segregated by bill of lading and shall identify the

terminal operator employee giving such notification

1 Marine terminal facilities in the Port of New York shall be operated

in accordance with the appointment non appointment or combination ap

pointment non appointment procedures established by the terminal operator

in accordance with this part Each terminal operator shall identify in its

27 EMC
I

i

64 FEDERAL MARITIME COMMISSION

respective tariff whether its marine terminal facility will be operated on

an appointment non appointment or combination appointmentnon appoint

ment basis Said tariff shall incorporate the specific procedures applicable

at each such marine terminal facility which procedures shall comply with

the provisions of this part be prominently displayed at the marine facility

and shall be modified on not less than 30 days notice

m Compliance is mandatory and failure of terminal operators or motor

carriers to follow the provisions of this part may result in the assessment

of penalties as specified in 5307

530 2 Documentation

a l Delivery orders shall not be mailed or delivered to terminal opera

tors not mailed or delivered to steamship companies for receipt on behalf

of terminal operators prior to arrival of motor carrier vehicles at marine

terminal facilities Dock receipts may be lodged with terminal operators

or steamship companies for receipt on behalf of terminal operators prior

to arrival of motor carrier vehicles at marine terminal facilities Upon

arrival at marine terminal facilities motor carrier vehicle operators shall

have physical possession of delivery orders required by this part and shall

either have physical possession of dock receipts required by this part or

shall have had said dock receipts lodged with the terminal operator or

steamship company in accordance with the above described procedure

Motor carrier vehicles having physical possession of delivery orders or

dock receipts immediately shall be issued a sequentially numbered and

time stamped gate pass by order of arrival When dock receipts are lodged

with the terminal operator or steamship company the sequentially numbered

and time stamped gate pass immediately shall be issued upon tender of

the dock receipt to the gateman by the motor carrier vehicle driver The

sequential number and all time stamps and notations recorded on the gate

pass and any other arrival document shall be recorded on the copy of

the delivery order or dock receipt retained by the motor carrier Motor

carrier vehicles not complying with the requirements of this paragraph

shall be denied entry to the marine terminal facility

2 Motor carriers shall be permitted to receive cargo on Open Delivery

Orders ie single delivery orders covering multiple truckloads or shipments

and deliver cargo on Open Dock Receipts ie single dock receipts covering

multiple truckloads or shipments upon presenting to the terminal operator

subsequent to receipt or delivery of the initial load satisfactory evidence

of authorization to effect receipt or delivery of the remaining truckloads

or shipments as established by the terminal operator and published in

its tariff

b Dock receipts required as full and complete documentation for receipt

of export cargo shall include the following information

1 Name of the motor carrier

2 Name of forwarding agent Ifnone insert none

3 Shipper

27 F M C
TRUCK DETENTION AT THE PORT OF NEW YORK 65

4 Name of vessel

5 Pier berth or area designated for receipt of cargo

6 Port of discharge

7 Container identification and seal number On full container loads

8 Booking number

9 Cargo to be held on dock should be so indicated in space provided

for vessel name

10 Marks number of packages commodity cube and weight

11 An original and three copies of the dock receipt authorized by

the steamship line that is to receive the cargo must be tendered to the

terminal operator one copy of which shall be returned to and retained

by the motor carrier in accordance with 530 2 a 1

c Delivery order required as full and complete documentation for the

delivery of import cargo shall provide the following information

1 Name and address of party issuing delivery order

2 Address of terminal

3 Name and address of motor carrier making pickup

4 Vessel name

5 Voyage number or estimated date of arrival

6 Bill of Lading number

7 Port of Lading

8 City of destination On full container loads

9 Container identification number On full container loads

10 Booking number On receipt of empty containers

11 Marks number of packages commodity cube and weight When

partial lots are to be delivered they should be identified by marks

12 Date free time expires

13 Date through which demurrage is paidguaranteed after free time

has expired

14 An original and two copies of the delivery order the original legibly

signed in ink with the name of the signer typed below the signature

shall be tendered to the terminal operator one copy of which shall be

returned to and retained by the motor carrier in accordance with

530 2 a 1

d 1 Terminal operators shall not honor delivery orders with strikeouts

or other changes to the original

2 If a motor carrier named in an original delivery order substitutes

another motor carrier in its place the motor carrier named in the original

delivery order shall provide a turnover order to the second carrier containing

all information required by the original delivery order Both the original

delivery order and the turnover order must be presented to the terminal

operator by the motor carrier requesting delivery of cargo Upon written

request in accordance with procedures established by the terminal operator

and published in its tariff special arrangements may be made to accommo

date general agency situations

27 F M C
I

I

1

66 FEDERAL MARITIME COMMISSION

e If a motor carrier presents documents to the terminal operator which

do not contain all information required by this part or which are complete

but contain inaccurate information said motor carrier shall be required

to surrender its gate pass and shall be denied service or at the request

of said motor carrier the terminal operator may correct or complete the

deficient document and service said motor carrier in accordance with this

part

t If documents are rejected by the terminal operator or service is

refused for any other reason the terminal operator shall provide the motor

carrier written explanation time stamped of the deficiencies in documenta

tion or other reason s for refusal of service and shall attach thereto a

copy of the deficient document if any

g Section 530 2 e shall not be applicable if documents are incorrect

because of substitution of one vessel for another redocking of a vessel

from a scheduled pier to another or change in consignment of an export

shipment from a scheduled vessel to another due to an early closeout

of the scheduled vessel or other such rescheduling for the convenience

of the steamship company or terminal operator Delay occasioned in such

circumstances shall be included in the computation of time for purposes

of this rule and chargeable to the party responsible for such change

530 3 Terminals operating on appointment system

Subject to the following provisions of this section terminal operators

shall establish the basis upon which appointments will be available and

shall publish in their tariffs reasonable methods and procedures for booking

appointments

a I Except for good cause all requests for appointments shall be

granted If a request for an appointment is not granted the terminal operator

shall record the request and reason for refusal

2 Appointments when granted shall be identified by sequentially as

signed numbers The terminal operator shall record the date and time of

requests for appointments the name of the person making the requests

the date time and identification number of scheduled appointments and

shall identify the terminal operator employee granting the appointment

b Appointments to receive delivery of cargo shall not be granted by

terminal operators unless and until a freight release covering subject cargo

has been provided by the steamship company Appointments shall be granted

only if the terminal operator is advised of the nature type and quantity

of cargo to be delivered or received If because of the size weight or

shape of the cargo special equipment is required the terminal operator

shall so advise the motor carrier at the time the appointment is granted

and the motor carrier shall advise the terminal operator of the type of

rolling stock which it will employ to effectuate the interchange of cargo

c I Gate passes shall be issued to motor carriers by order of arrival

at the marine terminal facility Motor carriers arriving after the time of

27 F M C
TRUCK DETENTION AT THE PORT OF NEW YORK 67

a scheduled appointment shall be deemed to have missed the appointment

and may be denied service

2 Except where a terminal operator has arranged for delivery of cargo

on the last day of free time or on the first or second day of demurrage

in accordance with paragraph e 2 of this section motor carriers may

cancel appointments without penalty provided the terminal operator is

given three 3 working hours notice of said cancellation

d l Upon receipt of a gate pass issued pursuant to paragraph c l

of this section motor carrier personnel holding dock receipts or other

satisfactory evidence of authorization to effect delivery or cargo shall pro

ceed immediately to the receiving clerk of the terminal operator who shall

immediately time stamp the gate pass upon presentation of documents After

said documents are determined to be in proper order the motor carrier

shall be routed for unloading

2 Upon receipt of a gate pass issued pursuant to paragraph c l

of this section motor carrier personnel holding delivery orders or other

satisfactory evidence of authorization to receive delivery of cargo shall

proceed to the Bureau of Customs for completion of required procedures

and thereafter shall immediately proceed to the delivery clerk of the termi

nal operator who shall immediately time stamp the gate pass upon presen

tation of documents After said documents are determined to be in proper

order the motor carrier shall be routed for loading

e l See 525 I c of this Chapter for provisions regarding extension

of free time

2 At full appointed terminals if an appointment is not available as

requested an appointment shall be granted within 72 hours three business

days of said request except as provided by paragraphs e 2 i and

e

2 ii of this section

i Cargo permitted 5 days free time Extension offree time

A If an appointment is requested at least 48 hours prior to the expiration

of free time the terminal operator shall arrange to deliver cargo prior

to expiration of free time or extend free time until an appointment is

granted

B If an appointment is requested less than 48 hours but more than

24 hours prior to expiration of free time the terminal operator shall ar

range for delivery of cargo prior to the close of business on the first

working day of demurrage for which first demurrage day the cargo shall

be liable or after said first demurrage day cargo shall assume non demur

rage status until an appointment is granted

C If an appointment is requested less than 24 hours prior to expiration

of free time the terminal operator shall arrange for delivery of cargo

prior to the close of business on the second working day of demurrage

for which two 2 demurrage days the cargo shall be liable or after

said two 2 demurrage days cargo shall assume non demurrage status

until an appointment is granted

27 F M C
68 FEDERAL MARITIME COMMISSION

ii Cargo permitted 2 or 3 days free time Extension of free time

A If an appointment is requested at least 24 hours prior to expiration

of free time the terminal operator shall arrange to deliver cargo prior

to expiration of free time or extend free time until an appointment is

granted

B If an appointment is requested less than 24 hours prior to expiration

of free time the terminal operator shall arrange for delivery of cargo

prior to the close of business on the first working day of demurrage

for which first demurrage day the cargo shall be liable or after said

first demurrage day cargo shall assume non demurrage status until an ap

pointment is granted

530 4 Terminals operating a non appointment system

a Each business day shall be divided into a number of service periods

for example periods commencing at 8 am 10 a m 1 pm 3 pm

as scheduled by the terminal operator according to the nature and capabilities

of the particular facility

b Motor carriers arriving at marine terminal facilities shall be issued

sequentially numbered time stamped gate passes by order of arrival valid

for entry to the terminal facility at the time of commencement of the

service period indicated thereon

c Upon receipt of a gate pass issued pursuant to paragraph b of

this section motor carrier personnel holding dock receipts or other satisfac

tory evidence of authorization to effect delivery of cargo shall proceed

immediately to the receiving clerk of the terminal operator who shall imme

diately time stamp the gate pass upon presentation of documents After

said documents are determined to be in proper order the motor carrier

shall be routed for unloading

d Upon receipt of a gate pass issued pursuant to paragraph b of

this section motor carrier personnel holding delivery orders or other satisfac

tory evidence of authorization to receive delivery of cargo shall proceed

to the Bureau of Customs for completion of required procedures and there

after immediately proceed to the delivery clerk of the terminal operator

who shall immediately time stamp the gate pass upon presentation of docu

ments After said documents are determined to be in proper order the

motor carrier shall be routed for loading

e A motor carrier entitled to a gate pass scheduling service for a

later service period but unwilling to wait for that service may elect

not more than 30 minutes after issuance of said gate pass to receive

a preference slip Appendix B entitling said motor carrier to service on

the next business day as specified thereon However free time will not

be extended if cargo is on the last day of free time nor will collection

of demurrage charges be suspended

f Motor carriers arriving at a marine terminal facility after the capacity

of said facility has been reached may be turned away but shall be given

preference for service on the next business day according to the order

27 F M C
TRUCK DETENTION AT THE PORT OF NEW YORK 69

in which they arrived and were turned away Motor carriers turned away

under these circumstances shall be issued a preference slip Appendix B

sequentially numbered which shall assure preference for service on the

next business day and where cargo is on the last day of free time create

a one day extension of free time or suspend collection of demurrage charges

for one day as to cargo already on demurrage The preference slip shall

be attached to the gate pass when said gate pass is issued and all notations

recorded on the preference slip shall be duplicated on the motor carrier s

copy of the delivery order or dock receipt

g

If at the commencement of its scheduled service period a motor

carrier is not available to receive cargo which is on the last day of free

time and because of the unavailability of said motor carrier the terminal

operator is unable to provide service on that day there shall be no extension

of free time

h If all vehicles scheduled for a service period are discharged prior

to the end of that period the motor carrier available and holding the

next sequenced gate pass shall be served

i

It shall be the responsibility of the motor carrier to determine from

the terminal operator whether cargo to be delivered to said motor carrier

is on the pier at its place of rest and segregated by bill of lading

530 5 Combination non appointmentappointment system

a An express line or non appointment line may be established in con

junction with an appointment system in such a manner as the terminal

operator determines best suits the needs of the particular facility

b All rules applicable to non appointment facilities 53004 shall be

applicable to the non appointment portion of a combination non appoint

mentappointment terminal operation

c If a motor carrier attempts to make an appointment at a facility

operating a combination system and no appointment is available and then

said motor carrier seeks service as a non appointment vehicle said motor

carrier shall be treated as a non appointment vehicle for purposes of exten

sion of free time

530 6 Computation of time

a Validation time is 1 time of issuance of a gate pass upon a motor

carrier s arrival at a marine terminal facility or 2 if upon arrival a

motor carrier is scheduled for a later service period the time of commence

ment of that scheduled service period or 3 if a motor carrier is issued

a preference slip pursuant to 53004 e or 53004 f the time scheduled

thereon

b Time for purposes of this part shall accrue from validation or appoint

ment time Delay demonstrated by the terminal operator to be due to

United States Government regulations action or inaction of motor carrier

personnel or other such cause shall be excluded from computation of

time Time elapsed if any between appointment or validation time and

27 F M C
70 FEDERAL MARITIME COMMISSION

presentation of documents to the delivery or receiving clerk shall be pre

sumed to be due to such cause

530 7 Penalties

a A terminal operator who refuses to serve a motor carrier after reject

ing for lack of full and complete documentation a delivery order or

dock receipt which does contain the information required by this part

shall be subject to a penalty of 30

b If a motor carrier fails to meet a scheduled appointment at a marine

terminal facility said motor carrier shall be subject to a charge of 15

If pursuant to 530 3 b a motor carrier is advised that special equipment

will be required and the motor carrier fails to meet said appointment

the motor carrier shall be subject to a charge of 30

c If pursuant to 530 2 e a terminal operator completes or corrects

deficient documents presented by a motor carrier a charge of 15 shall

be assessed against said motor carrier

d If contrary to 530 3 b a freight release covering subject cargo

has not been authorized prior to a scheduled appointment the terminal

operator that granted said appointment shall be assessed a penalty of 30

e If pursuant to 530 1 k or a request under 530 4i a terminal

operator notifies a motor carrier that cargo is on the pier at its place

of rest and segregated by bill of lading and cargo is not on the pier

at its place of rest and segregated by bill of lading when the motor

carrier attempts to obtain said cargo the terminal operator shall be subject

to a penalty of 30

f

Time allowances

1 Containers handled as a single unit If service is not completed

within the following times penalty charges will accrue against the terminal

operator at a rate of 4 per 15 minutes or any fraction thereof in excess

of these times

Appointment 75 minutes

Non appointment 120 minutes

2 Non containerized cargo When vehicles are loaded by the terminal

operator or unloaded by the terminal operator at the request of the motor

carrier within the time periods set forth below there will be no penalty

If a vehicle is not loaded or unloaded within the following time periods

penalty charges will accrue against the terminal operator at a rate of 4 00

per 15 minutes or any fraction thereof in excess of these times

i Non Appointment Vehicles

o to 5 000 pounds

5 001 to 10 000 pounds

10 001 to 15 000 pounds

15 001 to 30 000 pounds

210 minutes

240 minutes

270 minutes

285 minutes

27 F M C
TRUCK DETENTION AT THE PORT OF NEW YORK 71

Over 30 000 pounds 300 minutes

ii Appointment Vehicles

2 000 pounds or less 90 minutes

2 001 to 5 000 pounds 120 minutes

5 001 to 10 000 pounds 150 minutes

10 001 to 15 000 pounds 180 minutes

15 001 to 20 000 pounds 210 minutes

20 001 to 25 000 pounds 240 minutes

Over 25 000 pounds 270 minutes

g

When freight is unloaded by the driver or other personnel of the

motor carrier and unloading is not completed within the times prescribed

by paragraph t

of this section as computed from the time that the vehicle

is spotted at a place convenient for unloading the terminal operator shall

be entitled to a penalty payment of 4 for each 15 minute period or

any fraction thereof in excess of the specified time unless the delay is

demonstrated by the motor carrier to have been occasioned by the action

or inaction of the terminal operator

h A motor carrier admitted to a marine terminal facility for loading

or unloading or holding an appointment for loading or unloading shall

be completely loaded or unloaded prior to the close of that business day

If the motor carrier is not completely loaded or unloaded when the terminal

closes on that business day time for purposes of this part shall accrue

only while the terminal is conducting operations In addition

I Motor carriers holding appointments shall be entitled to a

penalty

payment of 30 from the terminal operator whether the shutout of the

vehicle was due to refusal of management to authorize overtime or labor s

refusal to work overtime

2 Non appointment vehicles shall be entitled to a penalty payment

of 30 from the terminal operator if the shutout of the vehicle was due

to refusal of management to authorize overtime If the shutout results from

labor s refusal to work overtime the terminal operator shall not be subject

to a penalty

3 Management shall be presumed to have refused to authorize overtime

unless the terminal operator establishes otherwise

530 8 Submission of claims for penalties

a All communication required by this section shall be via certified

mail return receipt requested

b Any person claiming payments under this section shall file a written

claim with the terminal operator or motor carrier against whom said claim

is made

c 1 Claims shall be filed within forty five 45 calendar days from

the date on which the clait ll arose or said claim shall be barred The

party against whom claim is made shall within twenty 20 calendar days

from receipt of said claim make payment thereon or reject In rejecting

a claim the terminal operator or motor carrier shall set forth the reason

27 F M C
72 FEDERAL MARITIME COMMISSION

I

or reasons for said rejection and shall provide available documentation

substantiating said rejection Claims rejected because they do not contain

sufficient information may be resubmitted no later than twenty 20 days

from receipt of rejection

2 Rejected claims may be submitted for review within twenty 20

days of receipt of rejection to the Adjudicator who will affirm or reverse

the rejection of claims within 30 days of receipt of the request for review

All decisions of said adjudicator shall be final and binding

d I Claims submitted by motor carriers or importers or exporters

on whose behalf motor carriers act shall include the motor carrier s copy

of the applicable delivery order or dock receipt any other relevant docu

ment a brief but complete description of the facts giving rise to the

claim and a statement of the amount claimed

2 Claims filed by terminal operators shall include the terminal operator s

copy of the applicable delivery order or dock receipt a

copy of the gate

pass and any other arrival documents issued copies of all other relevant

documents a brief explanation of the facts giving rise to the claim and

a statement of the amount claimed

e I Ifthe party identified as the terminal operator at a marine terminal

facility under 530 1 erejects a claim pursuant to 530 l e or 530 2 g

or otherwise denies a claim on the ground that the delay was caused

by the steamship company the original claim and a statement ofthe reasons

for rejection shall be forwarded within seven days to the steamship company

alleged by the terminal operator to be liable for the claim copy to the

claimant

2 The steamship company shall payor reject the claim within twenty

20 calendar days from receipt thereof

3 If the claim is rejected by the steamship company the claimant

may submit both rejections to the Adjudicator who shall review the rejection

of the claim by both parties and determine liability as between the two

530 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control numbers assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980 Pub

L 96511 The Commission intends that this section comply with the

requirements of section 3507 f

of the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

Director of the Office of Management and Budget OMB for each agency

information collection requirement j

i

Section

Current

OMB Con

trol No

530 1 through 530 3 3072010

27 F M C
TRUCK DETENTION AT THE PORT OF NEW YORK 73

Section

Current

OMB Con

trol No

530 8 3072010

27 F M C
74 FEDERAL MARITIME COMMISSION

FrolD 1981 New York Port

Handbook

New York New Jersey

PortDistrict

App nd1x A to 4 eFR

Part 530

l

27 F M C
TRUCK DETENTION AT THE PORT OF NEW YORK 75

Appendix B to 46 CFR Part 530

MOtor Carrier Preference Slip

See S S30 4

No TIMSTMP

STEVEIIlUOO CD m

ION Pier Berth Shed

rorm CAIIlI ER

The above indicated vehicle could not be serviced today

Preference for service will be given the next business

day at am p m

DR s Pkgs Pleces lIEI HI

D O s Pkgs Pleces WEI HI

INrAINER IMN

27 F M C
FEDERAL MARITIME COMMISSION

46 CPR PART 540

SECURITY FOR THE PROTECTION OF THE PUBLIC

SUBPART A PROOF OF FINANCIAL RESPONSIBILITY BONDING

AND CERTIFICATION OF FINANCIAL RESPONSIBILITY FOR

INDEMNIFICATION OF PASSENGERS FOR NONPERFORMANCE OF

TRANSPORTATION

i

Sec

540 1

540 2

540 3

540 4

540 5

540 6

540 7

540 8

540 9

Form

Form

Form

Scope

Definitions

Proof of financial responsibility when required

Procedure for establishing financial responsibility

Insurance guaranties escrow accounts and self insurance

Surety bonds

Evidence of financial responsibility

Denial revocation suspension or modification

Miscellaneous

FMC 131

132A

133A

SUBPART B PROOF OF FINANCIAL RESPONSIBILITY BONDING

AND CERTIFICATION OF FINANCIAL RESPONSIBILITY TO MEET

LIABILITY INCURRED FOR DEATH OR INJURY TO PASSENGERS

OR OTHER PERSONS ON VOYAGES

540 20

540 21

540 22

540 23

540 24

540 25

540 26

540 27

Form

Form

Scope

Definitions

Proof of financial responsibility when required

Procedure for establishing financial responsibility

Insurance surety bonds self insurance guaranties and escrow

accounts

Evidence of financial responsibility

Denial revocation suspension or modification

Miscellaneous

FMC 132B

FMC 133B

SUBPART C ASSESSMENT REMISSION AND MITIGATION OF

CIVIL PENALTIES

540 30 Scope

76 27 F M C
Sec

540 31

540 32

540 33

540 34

540 35

540 36

590 91

SECURITY FOR THE PROTECTION OF THE PUBLIC 77

Definitions

Procedure

Petition for remission or mitigation of penalty

Settlement execution of agreement form

Referral to Department of Justice

Payment of penalties

OMB control numbers assigned pursuant to the Paperwork Re

duction Act

Appendix A Example of Settlement Agreement to be used under 46 CFR

540 30540 36

Appendix B Example of promissory note to be used under 46 CFR

540 36

AUTHORITY 5 US C 552 553 Sees 2 and 3 Pub L 89 777 80

Stat 13561358 46 U S C app 817e 817d Sec 43 of the Shipping

Act 1916 46 U S C app 841a Sec 17 of the Shipping Act of 1984

46 US c app 1716

SUBPART A PROOF OF FINANCIAL RESPONSIBILITY BONDING

AND CERTIFICATION OF FINANCIAL RESPONSIBILITY FOR

INDEMNIFICATION OF PASSENGERS FOR NONPERFORMACE OF

TRANSPORTATION

540 1 Scope

a The regulations contained in this subpart set forth the procedures

whereby persons in the United States who arrange offer advertise or

provide passage on a vessel having berth or stateroom accommodations

for 50 or more passengers and embarking passengers at U S ports shall

establish their financial responsibility or in lieu thereof file a bond or

other security for obligations under the terms of ticket contracts to indemnify

passengers for nonperformance of transportation to which they would be

entitled Included also are the qualifications required by the Commission

for issuance of a Certificate Performance and the basis for the denial

revocation modification or suspension of such Certificates

b Failure to comply with this part may result in denial of an application

for a certificate Vessels operating without the proper certificate may be

denied clearance and their owners may also be subject to a civil penalty

of not more than 5 000 in addition to a civil penalty of 200 for each

passage sold such penalties to be assessed by the Federal Maritime Com

mission 46 U S C app 91 817d and 817e

540 2 Definitions

As used in this subpart the following terms shall have the following

meanings

27 F M C
78 FEDERAL MARITIME COMMISSION

a Person includes individuals corporations partnerships associations

and other legal entities existing under or authorized by the laws of the

United States or any State thereof or the District of Columbia the Common

wealth of Puerto Rico the Virgin Islands or any territory or possession

of the United States or the laws of any foreign country

b Vessel means any commercial vessel having berth or stateroom

accommodations for 50 or more passengers and embarking passengers at

U S ports

c Commission means the Federal Maritime Commission

d United States includes the Commonwealth of Puerto Rico the

Virgin Islands or any territory or possession of the United States

e Berth or stateroom accommodations or passenger accommoda

tions includes all temporary and all permanent passenger sleeping facilities

f Certificate Performance means a Certificate of Financial Respon

sibility for Indemnification of Passengers for Nonperformance of Transpor

tation issued pursuant to this subpart

g Passenger means any person who is to embark on a vessel at

any U S port and who has paid any amount for a ticket contract entitling

him to water transportation

h Passenger revenue means those monies wherever paid by pas

sengers who are to embark at any U S port for water transportation and

all other accommodations services and facilities relating thereto

i Unearned passenger revenue means that passenger revenue received

for water transportation and all other accommodations services and facilities

relating thereto not yet performed

j

Insurer means any insurance company underwriter corporation

or association of underwriters ship owners protection and indemnity asso

ciation or other insurer acceptable to the Commission

k Evidence of insurance means a policy certificate of insurance

cover note or other evidence of coverage acceptable to the Commission

540 3 Proof of financial responsibility when required

No person in the United States may arrange offer advertise or provide

passage on a vessel unless a Certificate Performance has been issued

to or covers such person

540 4 Procedure for establishing financial responsibility

a In order to comply with section 3 of Pub L 89 777 80 Stat

1357 1358 enacted November 6 1966 there must be filed an application

on Form FMC 13l for a Certificate of Financial Responsibility for Indem

nification of Passengers for Nonperformance of Transportation Copies of

Form FMC 13l may be obtained from the Secretary Federal Maritime

Commission Washington D C 20573 or at the Commission s offices at

New York N Y New Orleans La San Francisco Calif Miami Fla

Los Angeles Calif Hato Rey P R and Chicago 111

b An application for a Certificate performance shall be filed in dupli

cate with the Secretary Federal Maritime Commission by the vessel owner

27 F M C
SECURITY FOR THE PROTECTION OFTHE PUBLIC 79

or charterer at least 60 days in advance of the arranging offering advertis

ing or providing of any water transportation or tickets in connection there

with except that any person other than the owner or charterer who arranges

offers advertises or provides passage on a

vessel may apply for a Certifi

cate Performance Late filing of the application will be permitted only

for good cause shown All applications and evidence required to be filed

with the Commission shall be in English and any monetary terms shall

be expressed in terms of U S currency The Commission shall have the

privilege of verifying any statements made or any evidence submitted under

the rules of this subpart An application for a Certificate Performance

shall be accompanied by a filing fee remittance of 1 600

c The application shall be signed by a duly authorized officer or rep

resentative of the applicant with a copy of evidence of his or her authority

In the event of any material change in the facts as reflected in the applica

tion an amendment to the application shall be filed no later than five

5 days following such change For the purpose of this subpart a material

change shall be one which 1 results in a

decrease in the amount submitted

to establish financial responsibility to a level below that required to be

maintained under the rules of this subpart or 2requires that the amount

to be maintained be increased above the amount submitted to establish

financial responsibility Notice of the application for issuance denial rev

ocation suspension or modification of any such Certificate shall be pub

lished in the Federal Register

540 5 Insurance guaranties escrow accounts and self insurance

Except as provided in 540 9j

the amount of coverage required under

this section and 54O 6 b shall be in an amount determined by the Commis

sion to be no less than 110 percent of the unearned passenger revenue

of the applicant on the date within the 2 fiscal years immediately prior

to the filing of the application which reflects the greatest amount of un

earned passenger revenue except that the Commission for good cause

shown may consider a time period other than the previous 2 fiscal year

requirement in this section or other methods acceptable to the Commission

to determine the amount of coverage required Evidence of adequate finan

cial responsibility for the purposes of this subpart may be established by

one or a combination including 540 6 Surety Bonds of the following

methods

a Filing with the Commission evidence of insurance issued by an

insurer providing coverage for indemnification of passengers in the event

of the nonperformance of water transportation

1 Termination or cancellation of the evidence of insurance whether

by the assured or by the insurer and whether for nonpayment of premiums

calls or assessments or for other cause shall not be effected i until

notice in writing has been given to the assured or to the insurer and

to the Secretary of the Commission at its office in Washington D C

20573 by certified mail and ii until after 30 days expire from the

7 F M
80 FEDERAL MARITIME COMMISSION

date notice is actually received by the Commission or until after the

Commission revokes the Certificate Performance whichever occurs first

Notice of termination or cancellation to the assured or insurer shall be

simultaneous to such notice given to the Commission The insurer shall

remain liable for claims covered by said evidence of insurance arising

by virtue of an event which had occurred prior to the effective date of

said termination or cancellation No such termination or cancellation shall

become effective while a

voyage is in progress

2 The insolvency or bankruptcy of the assured shall not constitute

a defense to the insurer as to claims included in said evidence of insurance

and in the event of said insolvency or bankruptcy the insurer agrees to

pay any unsatisfied final judgments obtained on such claims

3 No insurance shall be acceptable under these rules which restricts

the liability of the insurer where privity of the owner or charterer has

been shown to exist

4 Paragraphs a lthrough a 3 of this section shall apply to the

guaranty as specified in paragraph c of this section

b Filing with the Commission evidence of an escrow account acceptable

to the Commission for indemnification of passengers in the event of non

performance of water transportation

c Filing with the Commission a guaranty on Form FMC 133A by

a guarantor acceptable to the Commission for indemnification of passengers

in the event of nonperformance ofwater transportation

d Filing with the Commission for qualification as a self insurer such

evidence acceptable to the Commission as will demonstrate continued and

stable passenger operations over an extended period of time in the foreign

or domestic trade of the United States In addition applicant must dem

onstrate financial responsibility by maintenance of working capital and net

worth each in an amount calculated as in the introductory text of this

section except that the Commission for good cause shown may waive

the requirement as to the amount of working capital The Commission

will take into consideration all current contractual requirements with respect

to the maintenance of such working capital andor net worth to which

the applicant is bound Evidence must be submitted that the working capital

and net worth required above are physically located in the United States

This evidence of financial responsibility shall be supported by and subject

to the following which are to be submitted on a continuing basis for

each year or portion thereof while the Certificate Performance is in effect

1 A current quarterly balance sheet except that the Commission for

good cause shown may require only an annual balance sheet

2 A current quarterly statement of income and surplus except that

the Commission for good cause shown may require only an annual state

ment of income and surplus

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 81

3 An annual current balance sheet and an annual current statement

of income and surplus to be certified by appropriate certified public account

ants

4 An annual current statement of the book value or current market

value of any assets physicaIly located within the United States together

with a certification as to the existence and amount of any encumbrances

thereon

5 An annual current credit rating report by Dun and Bradstreet or

any similar concern found acceptable to the Commission

6 A list of all contractual requirements or other encumbrances and

to whom the applicant is bound in this regard relating to the maintenance

ofworking capital and net worth

7 AIl financial statements required to be submitted under this section

shaIl be due within a reasonable time after the close of each pertinent

accounting period

8 Such additional evidence of financial responsibility as the Commission

may deem necessary in appropriate cases

5406 Surety bonds

a Where financial responsibility is not established under 540 5 a

surety bond shaIl be filed on Form FMC 132A Such surety bond shaIl

be issued by a bonding company authorized to do business in the United

States and acceptable to the Commission for indemnification of passeng rs

in the event of nonperformance of water transportation

b In the case of a surety bond which is to cover all passenger operations

of the applicant subject to these rules such bond shaIl be in an amount

calculated as in the introductory text of 540 5

c In the case of a surety bond which is to cover an individual voyage

such bond shaIl be in an amount determined by the Commission to equal

the gross passenger revenue for that voyage

d The liability of the surety under the rules of this subpart to any

passenger shaIl not exceed the amount paid by any such passenger except

that no such bond shaIl be terminated while a voyage is in progress

540 7 Evidence of financial responsibility

Where satisfactory proof of financial responsibility has been given or

a satisfactory bond has been provided a Certificate Performance covering

specified vessels shaIl be issued evidencing the Commission s finding of

adequate financial responsibility to indemnify passengers for nonperformance

of water transportation The period covered by the Certificate Performance

shaIl be indeterminate unless a termination date has been specified thereon

540 8 Denial revocation suspension or modification

a Prior to the denial revocation suspension or modification of aCertifi

cate Performance the Commission shaIl advise the applicant of its inten

tion to deny revoke suspend or modify and shaIl state the reasons therefor

If the applicant within 20 days after the receipt of such advice requests

27 F M C
82 FEDERAL MARITIME COMMISSION

a hearing to show that the evidence of financial responsibility filed with

the Commission does meet the rules of this subpart such hearing shall

be granted by the Commission except that a Certificate Performance

shall become null and void upon cancellation or termination of the surety

bond evidence of insurance guaranty or escrow account

b A Certificate Performance may be denie j

revoked suspended or

modified for any of the following reasons

1 Making any willfully false statement to the Commission in connection

with an application for aCertificate Performance

2 Circumstances whereby the party does not qualify as financially re

sponsible in accordance with the requirements of the Commission

3 Failure to comply with or respond to lawful inquiries rules regula

tions or orders of the Commission pursuant to the rules of this subpart

c If the applicant within 20 days after notice of the proposed denial

revocation suspension or modification under paragraph b of this section

requests a hearing to show that such denial revocation suspension or

modification should not take place such hearing shall be granted by the

Commission

540 9 Miscellaneous

a If any evidence filed with the application does not comply with

the requirements of this subpart or for any reason fails to provide adequate

or satisfactory protection to the public the Commission will notify the

applicant stating the deficiencies thereof

b Any financial evidence submitted to the Commission under the rules

of this subpart shall be written in the full and correct name of the person

to whom the Certificate Performance is to be issued and in case of

a partnership all partners shall be named

c The Commission s bond Form FMC 132A guaranty Form FMC

133A and application Form FMC 131 forms are hereby incorporated

as a part of the rules of this subpart Any such forms filed with the

Commission under this subpart must be in duplicate

d Any securities or assets accepted by the Commission from applicants

insurers guarantors escrow agents or others under the rules of this subpart

must be physically located in the United States

e Each applicant insurer escrow agent and guarantor shall furnish

a written designation of a person in the United States as a legal agent

for service of process for the purposes of the rules of this subpart Such

designation must be acknowledged in writing by the designee In any

instance in which the designated agent cannot be served because of its

death disability or unavailability the Secretary Federal Maritime Commis

sion will be deemed to be the agent for service of process A party

serving the Secretary in accordance with the above provision must also

serve the Certificant insurer escrow agent or guarantor as the case may

be by registered mail at its last known address on file with the Commission

f RESERVED

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 83

g

Financial data filed in connection with the rules of this subpart

shall be confidential except in instances where information becomes relevant

in connection with hearings which may be requested by applicant pursuant

to 54O 8 a or 540 8 b

h Every person who has been issued a Certificate Performance must

submit to the Commission a semiannual statement of any changes that

have taken place with respect to the information contained in the application

or documents submitted in support thereof Negative statements are required

to indicate no change Such statements must cover every 6 month period

of the fiscal year immediately subsequent to the date of the issuance of

the Certificate Performance In addition the statements will be due within

30 days after the close of every such 6 month period

i RESERVED

U The amount of I

insurance as specified in 54O 5 a 2 the escrow

account as specified in 54O 5 b 3 the guaranty as specified in 540 5 c

or 4 the surety bond as specified in 540 6 shall not be required to

exceed 10 million dollars U S

k Every person in whose name a Certificate Performance has been

issued shall be deemed to be responsible for any unearned passage money

or deposits in the hands of its agents or of any other person or organization

authorized by the certificant to sell the certificants tickets Certificants

shall promptly notify the Commission of any arrangements including char

ters and subcharters made by it or its agent with any person pursuant

to which the certificant does not assume responsibility for all passenger

fares and deposits collected by such person or organization and held by

such person or organization as deposits or payment for services to be

performed by the certificant If responsibility is not assumed by the

certificant the certificant also must inform such person or organization

of the certification requirements of Public Law 89 777 and not permit

use of its name or tickets in any manner unless and until such person

or organization has obtained the requisite Certificate Performance from

the Commission

27 F M C
84 FEDERAL MARITIME COMMISSION

Form FMC 131

FEDERAL MARITIME COMMISSION

WASHINGTON D C 20573

APPLICATION FOR CERTIFICATE OF FINANCIAL RESPONSIBILITY

In compliance with the provisions of Public Law 89 777 and 46 CPR

Part 540 application is hereby made for a Certificate of Financial Respon

sibility check one or both as applicable

for indemnification of passengers for nonperformance Initial

application Certificate has previously been applied for if so give

date of application and action taken thereon

to meet liability incurred for death or injury to passengers or other

persons Initial application Certificate has previously been applied

for if so give date of application and action taken thereon

INSTRUCTIONS

Submit two 2 typed copies of the application to the Secretary Federal

Maritime Commission Washington D C 20573 The application is in four

parts Part IGeneral Part II Performance Part III Casualty and Part

IV Declaration Applicants must answer all questions in Part I and Part

IV then Parts II andor Part III as appropriate Instructions relating to

Part II and Part III are contained at the beginning of the respective part

If the information required to be submitted under 46 CPR Part 540 has

been previously submitted under other rules and regulations of the Commis

sion state when and for what reason such information was submitted

If previously submitted it is not necessary to resubmit If additional space

is required supplementary sheets may be attached

PART IGENERAL

ANSWER ALL QUESTIONS

1 a Legal business name

b English equivalent of legal name if customarily written in language

other than English

c Trade name or names used

2 a State applicant s

legal form of organization ie whether operating

as an individual corporation partnership association joint stock company

business trust or other organized group of persons whether incorporated

or not or as a receiver trustee or other liquidating agent and describe

current business activities and length of time engaged therein

b If a corporation association joint stock company business trust

or other organization give

Name of State or country in which incorporated or organized

Date of the incorporation or organization

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 85

c If a

partnership give name and address of each partner

3 Give following information regarding any person or company control

ling controlled by or under common control with you answer only if

applying as a self insurer under Part II or Part III

Name Address Business and relationship to you

4 In relation to the passenger transportation engaged in by you to or

from U S ports

Do you own all the vessels Yes No If No indicate the

nature of the arrangements under which those not owned by you are avail

able to you e g

bareboat time voyage or other charter or arrangement

5 Name of each passenger vessel having accommodations for 50 or

more passengers and embarking passengers at U S ports

Name

Maximum number of

berth or stateroom

accommodations

Country of registry Registration No

6 Submit a

copy of passenger ticket or other contract evidencing the

sale of passenger transportation

7 Name and address of applicant s U S agent or other person authorized

to accept legal service in the United States

PART II PERFORMANCE

Answer items 8 15 if applying for Certificate of Financial Responsibility

for Indemnification of Passengers for Nonperformance If you are filing

evidence of insurance escrow account guaranty or surety bond under Sub

part A of 46 CFR Part 540 and providing at least ten 10 million dollars

U S of coverage you need not answer questions 10 15

8 If you are providing at least ten 10 million dollars U S of coverage

state type of evidence and name and address of applicant s insurer escrow

agent guarantor or surety as appropriate

9 A Certificate Performance is desired for the following proposed

passenger voyage or voyages Give itinerary and indicate whether the

Certificate is for a

single voyage multiple voyages or all voyages scheduled

annually

The tiling of sailing schedules will be acceptable in answers to this question

77 PM r
86 FEDERAL MARITIME COMMISSION

Vessel Vessel date Voyage itinerary

I

10 Items 11 15 are optional methods answer only the one item which

is applicable to this application Check the appropriate box below

Insurance item 11

Escrow item 12

Surety bond item 13

Guaranty item 14

Self insurer item 15

11 a Total amount of performance insurance which is to be computed

in accordance with 540 5 of 46 CPR Part 540 Evidence of insurance

must be filed with the Federal Maritime Commission before a Certificate

Performance may be issued

b Method by which insurance amount is determined attach data substan

tiating that amount is not less than that prescribed in 540 5 of 46 CPR

Part 540

c Name and address of applicant s insurer for performance policy

12 a Name and address of applicant s escrow agent Applicants may

pledge cash or U S Government securities in lieu of a surety bond to

fulfill the indemnification provisions of Public Law 89 777

b Total escrow deposit which is to be computed in accordance with

540 5 of 46 CPR Part 540 Escrow agreement must be filed with the

Federal Maritime Commission before a Certificate Performance will be

issued Cash U S Government Securities

c Method by which escrow amount is determined attach data substan

tiating that amount is not less than that prescribed by 540 5 of 46 CPR

Part 540

13 a Total amount of surety bond in accordance with 540 6 of

46 CPR Part 540 The bond must be filed with the Federal Maritime

Commission before a Certificate Performance may be issued

b Method by which bond amount is determined attach data substantiat

ing that amount is not less than that prescribed in 540 6 of 46 CFR

Part 540

c Name and address of applicant s

surety on performance bond

14 a Total amount of guaranty which is to be computed in accordance

with 540 5 of 46 CPR Part 540 Guaranty must be filed with the Federal

Maritime Commission before a Certificate performance may be issued

b Method by which guaranty amount is determined attach data substan

tiating that amount is not less than that prescribed in 540 5 of 46 CPR

Part 540

c Name and address of applicant s guarantor

i 27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 87

15 If applicant intends to qualify as a self insurer for a Certificate

Performance under 540 5 of 46 CFR Part 540 attach all data statements

and documentation required therein

PART mCASUALTY

ANSWER ITEMS 1622 IF APPLYING FOR CERTIFICATE OF

FINANCIAL RESPONSIBILITY TO MEET LIABILITY INCURRED

FOR DEATH OR INJURY TO PASSENGERS OR OTHER PERSONS

16 Name of passenger vessel subject to section 2 of Public Law 89

777 operated by you to or from U S ports which has largest number

of berth or stateroom accommodations State the maximum number of berth

or stateroom accommodations

17 Amount of death or injury liability coverage based on number of

accommodations aboard vessel named in item 16 above calculated in ac

cordance with 540 24 of 46 CFR Part 540

ITEMS 18 22 ARE OPTIONAL METHODS ANSWER ONLY THE

ONE ITEM WHICH IS APPLICABLE TO THIS APPLICATION

18 a Total amount of applicant s insurance Evidence of the insurance

must be filed with the Federal Maritime Commission before a Certificate

Casualty will be issued

b Name and address of applicant s insurer

19 a Total amount of surety bond Bond must be filed with the

Federal Maritime Commission before a Certificate Casualty will be issued

b Name and address of applicant s surety for death or injury bond

20 a Total amount of escrow deposit Escrow agreement must be

filed with the Federal Maritime Commission before a Certificate Casualty

will be issued

b Name and address of applicant s escrow agent

21 a Total amount of guaranty Guaranty must be filed with the

Federal Maritime Commission before a Certificate Casualty will be issued

b Name and address of applicant s guarantor

22 If applicant intends to qualify as a self insurer for a Certificate

Casualty under 54O 24 c of 46 CFR Part 540 attach all data statements

and documentation required therein

PART IV DECLARATION

This application is submitted by or on behalf of

a Name

b Name and title of official

c Home office Street and number

d City

e State or country

f

ZIP Code

27 F M C
88 FEDERAL MARITIME COMMISSION

g Principal office in the United StatesStreet and number

h City

i State

I declare that I have examined this application including accompanying

schedules and statements and to the best of my knowledge and belief

it is true correct and complete

By

Signature of official

Date

Comments

27 F M C
SECURITY FOR THE PROTECTION OFTHE PUBLIC 89

Form FMC 132A

PASSENGER VESSEL SURETY BOND

46 CFR PART 540

Know all men by these presents that We

of applicant of City

as Principal hereinafter called Principal and

Name of surety a

company created and existing under the laws of

State and country and authorized to do business in the

United States as Surety hereinafter called Surety are held and firmly

bound unto the United States ofAmerica in the penal sum of

for which payment well and truly to be made we bind ourselves and

our heirs executors administrators successors and assigns jointly and

severally firmly by these presents

Whereas the Principal intends to become a holder of a Certificate Per

formance pursuant to the provisions of Subpart A of Part 540 of Title

46 Code of Federal Regulations and has elected to file with the Federal

Maritime Commission such a bond to insure financial responsibility and

the supplying transportation and other services subject to Subpart A of

Part 540 of Title 46 Code of Federal Regulations in accordance with

the ticket contract between the Principal and the passenger and

Whereas this bond is written to assure compliance by the Principal as

an authorized holder of a Certificate Performance pursuant to Subpart

A of Part 540 of Title 46 Code of Federal Regulations and shall insure

to the benefit of any and all passengers to whom the Principal may be

held legally liable for any of the damages herein described

Now therefore the condition of this obligation is such that if the Principal

shall payor cause to be paid to passengers any sum or sums for which

the Principal may be held legally liable by reason of the Principals failure

faithfully to provide such transportation and other accommodations and

services in accordance with the ticket contract made by the Principal and

the passenger while this bond is in effect for the supplying of transportation

and other services pursuant to and in accordance with the provisions of

Subpart A of Part 540 of Title 46 Code of Federal Regulations then

this obligation shall be void otherwise to remain in full force and effect

The liability of the Surety with respect to any passenger shall not exceed

the passage price paid by or on behalf of such passenger

The liability of the Surety shall not be discharged by any payment

or succession of payments hereunder unless and until such payment or

payments shall amount in the aggregate to the penalty of the bond but

in no event shall the Surety s obligation hereunder exceed the amount

of said penalty The Surety agrees to furnish written notice to the Federal

Maritime Commission forthwith of all suits filed judgments rendered and

payments made by said Surety under this bond

Name

State and country

l7lMf
90 FEDERAL MARITIME COMMISSION

This bond is effective the day of

19 12 01 am standard time at the address of the Principal as

stated herein and shall continue in force until terminated as hereinafter

provided The Principal or the Surety may at any time terminate this bond

by written notice sent by certified mail to the other and to the Federal

Maritime Commission at its office in Washington D C such termination

to become effective thirty 30 days after actual receipt of said notice

by the Commission except that no such termination shall become effective

while a

voyage is in progress The Surety shall not be liable hereunder

for any refunds due under ticket contracts made by the Principal for the

supplying of transportation and other services after the termination of this

bond as herein provided but such termination shall not affect the liability

of the Surety hereunder for refunds arising from ticket contracts made

by the Principal for the supplying of transportation and other services

prior to the date such termination becomes effective

In witness whereof the said Principal and Surety have executed this

instrument on day of 19

PRINCIPAL

Name

By

Signature and title

Witness

SURETY

SEAL Name

By

Signature and title

Witness

Only corporations or associations of individual insurers may qualify to

act as surety and they must establish to the satisfaction of the Federal

Maritime Commission legal authority to assume the obligations of surety

and financial ability to discharge them

27 EMC
SECURITY FOR THE PROTECTION OF THE PUBLIC 91

Form FMC 133A

GUARANTY IN RESPECT OF LIABILITY FOR NONPERFORMANCE

SECTION 3 OF THE ACT

1 Whereas Name of applicant Hereinafter re

ferred to as the Applicant is the Owner or Charterer of the passenger

Vessel s

specified in the annexed Schedule the Vessels which are

or may become engaged in voyages to or from United States ports and

the Applicant desires to establish its financial responsibility in accordance

with Section 3 of Public Law 89 777 89th Congress approved November

6 1966 the Act then provided that the Federal Maritime Commission

FMC shall have accepted as sufficient for that purpose the Applicant s

application supported by this Guaranty and provided that FMC shall issue

to the Applicant a Certificate Performance Certificate the undersigned

Guarantor hereby guarantees to discharge the Applicant s

legal liability

to indemnify the passengers of the Vessels for nonperformance of transpor

tation within the meaning of Section 3 of the Act in the event that

such legal liability has not been discharged by the Applicant within 21

days after any such passenger has obtained a final judgment after appeal

if any against the Applicant from a United States Federal or State Court

of competent jurisdiction or has become entitled to payment of a specified

sum by virtue of a compromise settlement agreement made with the Appli

cant with the approval of the Guarantor whereby upon payment of the

agreed sum the Applicant is to be fully irrevocably and unconditionally

discharged from all further liability to such passenger for such nonperform

ance

2 The Guarantor s liability under this Guaranty in respect to any pas

senger shall not exceed the amount paid by such passenger and the aggre

gate amount of the Guarantor s liability under this Guaranty shall not

exceed

3 The Guarantor s liability under this Guaranty shall attach only in

respect of events giving rise to a cause of action against the Applicant

in respect of any of the Vessels for nonperformance of transportation

within the meaning of Section 3 of the Act occurring after the Certificate

has been granted to the Applicant and before the expiration date of this

Guaranty which shall be the earlier of the following dates

a The date whereon the Certificate is withdrawn or for any reason

becomes invalid or ineffective or

b The date 30 days after the date of receipt by FMC of notice in

writing including telex or cable that the Guarantor has elected to terminate

this Guaranty except that

i If on the date which would otherwise have been the expiration

date under the foregoing provisions a or b of this Clause 3 any of

the Vessels is on a

voyage whereon passengers have been embarked at

a United States port then the expiration date of this Guaranty shall in

27 F M C
92 FEDERAL MARITIME COMMISSION

respect of such Vessel be postponed to the date on which the last passenger

on such voyage shall have finally disembarked and

ii Such termination shall not affect the liability of the Guarantor for

refunds arising from ticket contracts made by the Applicant for the supplying

of transportation and other services prior to the date such termination be

comes effective

4 If during the currency of this Guaranty the Applicant requests that

a vessel owned or operated by the Applicant and not specified in the

annexed Schedule should become subject to this Guaranty and if the

Guarantor accedes to such request and so notifies FMC in writing including

telex or cable then provided that within 30 days of receipt of such

notice FMC shall have granted a Certificate such Vessel shall thereupon

be deemed to be one of the Vessels included in the said Schedule and

subject to this Guaranty

5 The Guarantor hereby designates with offices

at as the Guarantor s

legal agent for service of

process for the purposes of the Rules of the Federal Maritime Commission

Subpart A of Part 540 of Title 46 Code of Federal Regulations issued

under Section 3 of Public Law 89777 80 Stat 1357 1358 entitled

Security for the Protection of the Public

Place and Date ofExecution

Type Name of Guarantor

Type Address of Guarantor

By

Signature and Title

SCHEDULE OF VESSELS REFERRED TO IN CLAUSE

VESSELS ADDED TO THIS SCHEDULE IN ACCORDANCE WITH

CLAUSE 4

SUBPART B PROOF OF FINANCIAL RESPONSIBILITY BONDING

AND CERTIFICATION OF FINANCIAL RESPONSIBILITY TO MEET

LIABILITY INCURRED FOR DEATH OR INJURY TO PASSENGERS

OR OTHER PERSONS ON VOYAGES

540 20 Scope

The regulations contained in this subpart set forth the procedures whereby

owners or charterers of vessels having berth or stateroom accommodations

for 50 or more passengers and embarking passengers at U S ports shall

establish their financial responsibility to meet any liability which may be

incurred for death or injury to passengers or other persons on voyages

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 93

to or from U S ports Included also are the qualifications required by

the Commission for issuance of a Certificate Casualty and the basis for

the denial revocation suspension or modification of such Certificates

540 21 Definitions

As used in this subpart the following terms shall have the following

meanings

a Person includes individuals corporations partnerships associations

and other legal entities existing under or authorized by the laws of the

United States or any state thereof or the District of Columbia the Common

wealth of Puerto Rico the Virgin Islands or any territory or possession

of the United States or the laws of any foreign country

b Vessel means any commercial vessel having berth or stateroom

accommodations for 50 or more passengers and embarking passengers at

U S ports

c Commission means the Federal Maritime Commission

d United States includes the Commonwealth of Puerto Rico the

Virgin Islands or any territory or possession of the United States

e Berth or stateroom accommodations or passenger accommoda

tions includes all temporary and all permanent passenger sleeping facilities

f Certificate Casualty means a Certificate of Financial Responsibil

ity to Meet Liability Incurred for Death or Injury to Passengers or Other

Persons on Voyages issued pursuant to this subpart

g Voyage means voyage of a vessel to or from U S ports

h Insurer means any insurance company underwriter corporation

or association of underwriters ship owners protection and indemnity asso

ciation or other insurer acceptable to the Commission

i

Evidence of insurance means a policy certificate of insurance

cover note or other evidence of coverage acceptable to the Commission

U For the purpose of determining compliance with 540 22 passengers

embarking at United States ports means any persons not necessary to

the business operation or navigation of a vessel whether holding a ticket

or not who board a vessel at a port or place in the United States and

are carried by the vessel on a

voyage from that port or place

540 22 Proof of financial responsibility when required

No vessel shall embark passengers at U S ports unless a Certificate

Casualty has been issued to or covers the owner or charterer of such

vessel

540 23 Procedure for establishing financial responsibility

a In order to comply with section 2 of Pub L 89 777 80 Stat

1357 1358 enacted November 6 1966 there must be filed an Application

on Form FMC 131 for a Certificate of Financial Responsibility to Meet

Liability Incurred for Death or Injury to Passengers or Other Persons on

Voyages Copies of Form FMC 131 may be obtained from the Secretary

Federal Maritime Commission Washington D C 20573 or at the Commis

27 F M C
i

94 FEDERAL MARITIME COMMISSION

sion s offices at New York N Y New Orleans La San Francisco Calif

Miami Fla Los Angeles Calif HateRey P R and Chicago Ill

b An application for a Certificate Casualty shall be filed in duplicate

with the Secretary Federal Maritime Commission by the vessel owner

or charterer at least 60 days in advance of the sailing Late filing of

the application will be permitted only for good cause shown All applications

and evidence required to be filed with the Commission shall be in English

and any monetary terms shall be expressed in terms of U S currency

The Commission shall have the privilege of verifying any statements made

or any evidence submitted under the rules of this subpart An application

for a Certificate Casualty shall be accompanied by a filing fee remittance

of 800

c The application shall be signed by a duly authorized officer or rep

resentative of the applicant with a

copy of evidence of his authority In

the event of any material change in the facts as reflected in the application

an amendment to the application shall be filed no later than five 5

days following such change For the purpose of this subpart a material

change shall be one which 1 results in a decrease in the amount submitted

to establish financial responsibility to a level below that required to be

maintained under the rules of this subpart or 2 requires that the amount

to be maintained be increased above the amount submitted to establish

financial responsibility Notice of the application for issuance denial rev

ocation suspension or modification of any such Certificate shall be pub

lished in the Federal Register

540 24 Insurance surety bonds self insurance guaranties and escrow

accounts

Evidence of adequate financial responsibility for the purposes of this

subpart may be established by one of the following methods

a Filing with the Commission evidence of insurance issued by an

insurer providing coverage for liability which may be incurred for death

or injury to passengers or other persons on voyages in an amount based

upon the number of passenger accommodations aboard the vessel calculated

as follows

Twenty thousand dollars for each passenger accommodation up to and

including 500 plus

Fifteen thousand dollars for each additional passenger accommodation

between 501 and 1 000 plus

Ten thousand dollars for each additional passenger accommodation be

tween 1001 and 1 500 plus

Five thousand dollars for each passenger accommodation in excess of

1 500

Except that if the applicant is operating more than one vessel subject

to this subpart the amount prescribed by this paragraph shall be based

upon the number of passenger accommodations on the vessel being so

operated which has the largest number of passenger accommodations

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 95

1 Termination or cancellation of the evidence of insurance whether

by the assured or by the insurer and whether for nonpayment of premiums

calls or assessments or for other cause shall not be effected i until

notice in writing has been given to the assured or to the insurer and

to the Secretary of the Commission at its office in Washington D C

20573 by certified mail and ii until after 30 days expire from the

date notice is actually received by the Commission or until after the

Commission revokes the Certificate Casualty whichever occurs first No

tice of termination or cancellation to the assured or insurer shall be simulta

neous to such notice given to the Commission The insurer shall remain

liable for claims covered by said evidence of insurance arising by virtue

of an event which had occurred prior to the effective date of said termination

or cancellation No such termination or cancellation shall become effective

while a

voyage is in progress

2 The insolvency or bankruptcy of the assured shall not constitute

a defense to the insurer as to claims included in said evidence of insurance

and in the event of said insolvency or bankruptcy the insurer agrees to

pay any unsatisfied final judgments obtained on such claims

3 No insurance shall be acceptable under these rules which restricts

the liability of the insurer where privity of the owner or charterer has

been shown to exist

4 Paragraphs a 1 through a 3 of this section shall apply to the

guaranty as specified in paragraph d of this section

b Filing with the Commission a

surety bond on Form FMC 132B

issued by a bonding company authorized to do business in the United

States and acceptable to the Commission Such surety bond shall evidence

coverage for liability which may be incurred for death or injury to pas

sengers or other persons on voyages in an amount calculated as in paragraph

a of this section and shall not be terminated while a

voyage is in

progress

c Filing with the Commission for qualification as a self insurer such

evidence acceptable to the Commission as will demonstrate continued and

stable passenger operations over an extended period of time in the foreign

or domestic trade of the United States In addition applicant must dem

onstrate financial responsibility by maintenance of working capital and net

worth each in an amount calculated as in paragraph a of this section

The Commission will take into consideration all current contractual require

ments with respect to the maintenance of working capital andor net worth

to which the applicant is bound Evidence must be submitted that the

working capital and net worth required above are physically located in

the United States This evidence of financial responsibility shall be submitted

on a continuing basis for each year or portion thereof while the Certificate

Casualty is in effect

1 A current quarterly balance sheet except that the Commission for

good cause shown may require only an annual balance sheet

27 F M C
96 FEDERAL MARITIME COMMISSION

2 A current quarterly statement of income and surplus except that

the Commission for good cause shown may require only an annual state

ment of income and surplus

3 An annual current balance sheet and an annual current statement

of income and surplus to be certified by appropriate certified public account

ants

4 An annual current statement of the book value or current market

value of any assets physically located within the United States together

with a certification as to the existence and amount of any encumbrances

thereon

5 An annual current credit rating report by Dun and Bradstreet or

any similar concern found acceptable to the Commission

6 A list of all contractual requirements or other encumbrances and

to whom the applicant is bound in this regard relating to the maintenance

of working capital and net worth

7 All financial statements required to be submitted under this section

shall be due within a reasonable time after the close of each pertinent

accounting period

8 Such additional evidence offmancial responsibility as the Commission

may deem necessary in appropriate cases

d Filing with the Commission a guaranty on Form FMC 133B by

a guarantor acceptable to the Commission Any such guaranty shall be

in an amount calculated as in paragraph a ofthis section

e Filing with the Commission evidence of an escrow account acceptable

to the Commission the amount of such account to be calculated as in

paragraph a of this section

f

The Commission will for good cause shown consider any combination

of the alternatives described in paragraphs a through e of this section

for the purpose of establishing financial responsibility

540 25 Evidence of financial responsibility

Where satisfactory proof of financial responsibility has been established

a Certificate Casualty covering specified vessels shall be issued evidencing

the Commission s finding of adequate financial responsibility to meet any

liability which may be incurred for death or injury to passengers or other

persons on voyages The period covered by the certificate shall be indetermi

nate unless a termination date has been specified therein

540 26 Denial revocation suspension or modification

a Prior to the denial revocation suspension or modification of a Certifi

cate Casualty the Commission shall advise the applicant of its intention

to deny revoke suspend or modify and shall state the reasons therefor

Ifthe applicant within 20 days after the receipt of such advice requests

a hearing to show that the evidence of financial responsibility filed with

the Commission does meet the rules of this subpart such hearing shall

be granted by the Commission except that a Certificate Casualty shall

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 97

become null and void upon cancellation or termination of evidence of

insurance surety bond guaranty or escrow account

b A Certificate Casualty may be denied revoked suspended or modi

fied for any of the following reasons

1 Making any willfully false statement to the Commission in connection

with an application for a Certificate Casualty

2 Circumstances whereby the party does not qualify as financially re

sponsible in accordance with the requirements of the Commission

3 Failure to comply with or respond to lawful inquiries rules regula

tions or orders of the Commission pursuant to the rules of this subpart

c Ifthe applicant within 20 days after notice of the proposed denial

revocation suspension or modification under paragraph b of this section

request a hearing to show that such denial revocation suspension or modi

fication should not take place such hearing shall be granted by the Commis

sion

540 27 Miscellaneous

a If any evidence filed with the application does not comply with

the requirements of this subpart or for any reason fails to provide adequate

or satisfactory protection to the public the Commission will notify the

applicant stating the deficiencies thereof

b Any financial evidence submitted to the Commission under the rules

of this subpart shall be written in the full and correct name of the person

to whom the Certificate Casualty is to be issued and in case of a

partnership all partners shall be named

c The Commission s bond Form FMC 132B guaranty Form FMC

133B and application Form FMC 131 as set forth in Subpart A of

this part forms are hereby incorporated as a

part of the rules of this

subpart Any such forms filed with the Commission under this subpart

must be in duplicate

d Any securities or assets accepted by the Commission from applicants

insurers guarantors escrow agents or others under the rules of this subpart

must be physically located in the United States

e Each applicant insurer escrow agent and guarantor shall furnish

a written designation of a person in the United States as legal agent

for service of process for the purposes of the rules of this subpart Such

designation must be acknowledged in writing by the designee In any

instance in which the designated agent cannot be served because of death

disability or unavailability the Secretary Federal Maritime Commission

will be deemed to be the agent for service of process A

party serving

the Secretary in accordance with the above provision must also serve the

certificant insurer escrow agent or guarantor as the case may be by

registered mail at its last known address on file with the Commission

f

In case of any charter arrangements involving a vessel subject to

the regulations ofthis subpart the vessel owner in the event of a subcharter

27 F M C
98 FEDERAL MARITIME COMMISSION

the charterer shall file must within 10 days file with the Secretary of

the Commission evidence of any such arrangement

g

Financial data filed in connection with the rules of this subpart

shall be confidential except in instances where information becomes relevant

in connection with hearings which may be requested by applicant pursuant

to 540 26 a 540 26 b

h Every person who has been issued a Certificate Casualty must

submit to the Commission a semiannual statement of any changes that

have taken place with respect to the information contained in the application

or documents submitted in support thereof Negative statements are required

to indicate no change Such statements must cover every 6 month period

commencing with the first 6 month period of the fiscal year immediately

subsequent to the date of the issuance of the Certificate Casualty In

addition the statements will be due within 30 days after the close of

every such 6 month period

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 99

Form FMC 132B

567

FEDERAL MARITIME COMMISSION

Surety Co Bond No

FMC Certificate No

PASSENGER VESSEL SURETY BOND 46 CPR Part 540

Know all men by these presents that we

of applicant of City

as Principal hereinafter called Principal and

ety a company created and existing under the laws of

State and country and authorized to do business in the United States

as Surety hereinafter called Surety are held and firmly bound unto the

United States of America in the penal sum of for which

payment well and truly to be made we bind ourselves and our heirs

executors administrators successors and assigns jointly and severally firm

ly by these presents

Whereas the Principal intends to become a holder of a Certificate Cas

ualty pursuant to the provisions of Subpart B of Part 540 of Title 46

Code of Federal Regulations and has elected to file with the Federal

Maritime Commission such a bond to insure financial responsibility to

meet any liability it may incur for death or injury to passengers or other

persons on voyages to or from U S ports and

Whereas this bond is written to assure compliance by the Principal

as an authorized holder of a Certificate Casualty pursuant to Subpart

B of Part 540 of Title 46 Code of Federal Regulations and shall inure

to the benefit of any and all passengers or other persons to whom the

Principal may be held legally liable for any of the damages herein described

Now therefore the condition of this obligation is such that if the Principal

shall payor cause to be paid to passengers or other persons any sum

or sums for which the Principal may be held legally liable by reason

of the Principal s failure faithfully to meet any liability the Principal may

incur for death or injury to passengers or other persons on voyages to

or from U S ports while this bond is in effect pursuant to and in accordance

with the provisions of Subpart B of Part 540 of Title 46 Code of Federal

Regulations then this obligation shall be void otherwise to remain in

full force and effect

The liability of the Surety with respect to any passenger or other persons

shall in no event exceed the amount of the Principal slegal liability under

any final judgment or settlement agreement except that if the aggregate

amount of such judgments and settlements exceeds an amount computed

in accordance with the formula contained in section 2 a of Public Law

89 777 then the Surety s total liability under this surety bond shall be

limited to an amount computed in accordance with such formula

Name

State and country

name of sur

27 F M C
I

100 FEDERAL MARITtME COMMISSION

The Surety agrees to furnish written notice to the Federal Maritime

Commission forthwith of all suits filed judgments rendered and payments

made by said Surety under this bond

This bond is effective the day of

19 12 01 am standard time at the address of the Principal

as stated herein and shall continue in force until terminated as hereinafter

provided The Principal or the Surety may at any time terminate this bond

by written notice sent by certified mail to the other and to the Federal

Maritime Commission at its office in Washington D C such termination

to become effective thirty 30 days after actual receipt of said notice

by the Commission except that no such termination shall become effective

while a

voyage is in progress The Surety shall oot be liable hereunder

for any liability incurred for death or injury to passengers or other persons

on voyages to or from U S ports after the termination of this bond as

herein provided but such termination shall not affect the liability of the

Surety hereunder for such liability incurred for death or injury to passengers

or other persons on voyages to or from U S ports prior to the date such

termination becomes effective

In witness whereof the said Principal and Surety have executed this

instrument on the day of 19

Name PRINCIPAL

By

Signature and title

Witness

Name

By

SURETY

SEAL

Signature and title

Witness

Only corporations or associations of individual insurers may qualify to

act as Surety and they must establish to the satisfaction of the Federal

Maritime Commission legal authority to assume the obligations of surety

and financial ability to discharge them

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 101

Form FMC 133B

567

FEDERAL MARITIME COMMISSION

Guaranty No

FMC Certificate No

GUARANTY IN RESPECT OF LIABILITY FOR DEATH OR INJURY

SECTION 2 OF THE ACT

1 Whereas Name of Applicant Hereinafter re

ferred to as the Applicant is the Owner or Charterer of the passenger

Vessel s specified in the annexed Schedule the Vessels which are

or may become engaged in voyages to or from U S ports and the Applicant

desires to establish its financial responsibility in accordance with section

2 of Public Law 89 777 89th Congress approved November 6 1966

the Act then provided that the Federal Maritime Commission FMC

shall have accepted as sufficient for that purpose the Applicant s applica

tion supported by this Guaranty and provided that FMC shall issue to

the Applicant a Certificate Casualty Certificate the undersigned Guar

antor hereby guarantees to discharge the applicant s

legal liability in respect

of claims for damages for death or injury to passengers or other persons

on voyages of the Vessels to or from US ports in the event that such

legal liability has not been discharged by the Applicant within 21 days

after any such passenger or other person or in the event of death his

or her personal representative has obtained a final judgment after appeal

if any against the Applicant from a U S Federal or State Court of com

petent jurisdiction or has become entitled to payment of a specified sum

by virtue of a compromise settlement agreement made with the Applicant

with the approval of the Guarantor whereby upon payment of the agreed

sum the Applicant is to be fully irrevocably and unconditionally discharged

from all further liability to such passenger or other person or to such

personal representative with respect to such claim

2 The Guarantor s

liability under this Guaranty shall in no event exceed

the amount of the Applicant s

legal liability under any such judgment

or settlement agreement except that if the aggregate amount of such judg

ments and settlements exceeds an amount computed in accordance with

the formula contained in section 2 a of the Act then the Guarantor s

total liability under this Guaranty shall be limited to an amount computed

in accordance with such formula

3 The Guarantor s liability under this Guaranty shall attach only in

respect of events giving rise to causes of action against the Applicant

in respect of any of the Vessels for damages for death or injury within

the meaning of section 2 of the Act occurring after the Certificate has

been granted to the Applicant and before the expiration date of this Guar

anty which shall be the earlier of the following dates

27 F M C
102 FEDERAL MARITIME COMMISSION

a The date whereon the Certificate is withdrawn or for any reason

becomes invalid or ineffective or

b The date 30 days after the date of receipt by FMC of notice in

writing including telex or cable that the Guarantor has elected to terminate

this Guaranty except that if on the date which would otherwise have

been the expiration date of this Guaranty under the foregoing provisions

of this Clause 3 any of the Vessels is on a

voyage in respect of which

such Vessel would not have received clearance in accordance with section

2 e of the Act without the Certificate then the expiration date of this

Guaranty shall in respect of such Vessel be postponed to the date on

which the last passenger on such voyage shall have fully disembarked

4 If during the currency of this Guaranty the Applicant requests that

a vessel owned or operated by the Applicant and not specified in the

annexed Schedule should become subject to this Guaranty and if the

Guarantor accedes to such request and so notifies FMC in writing including

telex or cable then provided that within 30 days of receipt of such

notice FMC shall have granted a Certificate such vessel shall thereupon

be deemed to be one of the Vessels included in the said Schedule and

subject to this Guaranty

5 The Guarantor hereby designates with offices at

as the Guarantor s

legal agent for service of process

for the purposes of the Rules of the Federal Maritime Commission Subpart

B of Part 540 of Title 46 Code of Federal Regulations issued under

section 2 of the Public Law 89 777 80 Stat 1357 1358 entitled Security

for the Protection of the Public

Place and Date ofExecution

Name and Guarantor

Address of Guarantor

By

Name and Title

SCHEDULE OF VESSELS REFERRED TO IN CLAUSE

VESSELS ADDED TO THIS SCHEDULE IN ACCORDANCE WITH

CLAUSE 4

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 103

SUBPART C ASSESSMENT REMISSION AND MITIGATION OF

CIVIL PENALTIES

540 30 Scope

Sections 2 and 3 of Pub L 89 777 subject any person who violates

the provisions of those sections to a civil penalty of not more than 5 000

in addition to a civil penalty of 200 for each passage sold such penalties

to be assessed by the Federal Maritime Commission These sections further

provide that such penalties may be remitted or mitigated by the Commis

sion upon such terms as they in their discretion shall deem proper

This subpart sets forth regulations prescribing standards and procedures

for the collection mitigation and remission of civil penalties incurred under

sections 2 and 3 of Pub L 89 777 and the rules and regulations promul

gated pursuant thereto l

540 31 Definitions

As used in this subpart the following terms shall have the following

meanings

a Person includes individuals corporations partnerships associations

and other legal entities existing under or authorized by the laws of the

United States or any State thereof or the District of Columbia the Common

wealth of Puerto Rico the Virgin Islands or any territory or possession

of the United States or the laws of any foreign country

b Commission means the Federal Maritime Commission

c The Act means Public Law 89 777 80 Stat 1356 1357 1358

d Offender means any person charged with a violation

540 32 Procedure

a If it is adjudged or otherwise determined that a violation has occurred

and it is decided to invoke a statutory penalty a

registered letter will

be sent to the offender informing him of the nature of the violation

the statutory and factual basis of the penalty and the amount of the penalty

This notification shall further advise the offender that within 20 days

or such longer period as the Commission in its discretion may allow

he or she may either pay the penalty demanded or petition for the remission

or mitigation of such penalty

b All correspondence petitions forms or other instruments regarding

the collection remission or mitigation of any penalty under this subpart

should be addressed to the Bureau of Hearing Counsel Federal Maritime

Commission Washington D C 20573

540 33 Petition for remission or mitigation of penalty

a An offender may submit any oral or written material or information

in answer to the notification letter explaining mitigating showing extenuat

ing circumstances or where there has been no formal proceeding on the

I Sections 2 d and 3 d of Pub L 89 777 authorize the Federal Maritime Commission to prescribe such

regulations as may be necessary to carry out the provisions of sees 2 and 3

17 FMr
104 FEDERAL MARITIME COMMISSION

merits denying the violation Material or information so presented will

be considered in making the final determination as to whether to mitigate

the penalty and the amount for which it will be mitigated or whether

to remit it in full

b When no penalty is invoked or the penalty is remitted no further

action by the offender will be necessary When the penalty is mitigated

such mitigation will be made conditional upon the full payment within

15 days or such longer period as the Commission in its discretion may

allow unless the offender within that time executes a promissory note

as provided by 540 36

540 34 Settlement execution of agreement form

When a statutory penalty is mitigated and the offender agrees to settle

for that amount he or she shall be provided with a Settlement Agreement

Form Appendix A to be signed in duplicate and returned This form

after reciting the nature of the violation will contain a statement evidencing

the offender s agreement to settlement of the Commission s penalty claim

for the amount set forth in the agreement and shall also embody an ap

proval and acceptance provision Upon settlement of the penalty in the

agreed amount one copy of the Settlement Agreement shall be returned

to the debtor with the Approval and Acceptance thereon signed by

the Director Bureau ofHearing Counsel

540 35 Referral to Department of Justice

a The Commission will refer violations to the Department of Justice

with the recommendation that action be taken to collect the full statutory

penalty when

1 The offender within the prescribed time does not explain the viola

tion petition for mitigation or remission or otherwise respond to letters

or inquiries

2 The offender having responded to such letters or inquiries fails

or refuses to pay the statutory or mitigated penalty as determined by

the Commission within the prescribed time

b No action looking to the remission or mitigation of a penalty shall

be taken on any petition irrespective of the amount involved if the case

has been referred to the Department of Justice for collection

540 36 Payment of penalties

Payment of penalties by the offender shall be made by

a A bank cashier s check or other instrument acceptable to the Commis

sion

b Regular installments by check after the execution of a promissory

note containing a confess judgment agreement Appendix B

c A combination of the alternatives described in paragraphs a and

b of this section All checks or other instruments submitted in payment

of claims shall be made payable to Federal Maritime Commission

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 105

540 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control numbers assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980 Pub

L 96511 The Commission intends that this section comply with the

requirements of section 3507 f of the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

Director of the Office of Management and Budget OMB for each agency

information collection requirement

Section

Current

OMB Con

trol No

540 4 Form FMC 131

540 5

540 6

540 8

540 9

540 23 Form FMC 131

540 24

540 26

540 27

307201

3072 00 11

3072 00 11

3072 0011

3072 0011

307201

3072 0011

3072 0011

3072 0011

27 F M C
106 FEDERAL MARITIME COMMISSION

APPENDIX A EXAMPLE OF SETTLEMENT AGREEMENT TO BE

USED UNDER 46 CFR 540 30540 36

SETTLEMENT AGREEMENT

FMC FILE NO

This Agreement is entered into between 1 the Federal Maritime Com

mission and 2

hereinafter referred to as Respond

ent

WHEREAS the Commission is considering the institution of an assess

ment proceeding against Respondent for the recovery of civil penalties

provided under the Act for

alleged violations s of Section s

WHEREAS this course of action is the result of practices believed

by the Commission to have been engaged in by Respondent to wit

WHEREAS the parties are desirous of expeditiously settling the matter

according to the conditions and terms of this Agreement and wish to

avoid the delays and expense which would accompany agency litigation

concerning these penalty claims and

WHEREAS Section of the Act au

thorizes the Commission to collect and compromise civil penalties arising

from the alleged violation s set forth and described above and

WHEREAS the Respondent has terminated the practices which are the

basis of the alleged violation s set forth herein and has instituted and

indicated its willingness to maintain measures designed to eliminate discour

age and prevent these practices by Respondent or its officers employees

and agents

NOW THEREFORE in consideration of the premises herein and in

compromise of all civil penalties arising from the violation s set forth

and described herein that may have occurred between date

and date the undersigned Respondent herewith tenders to the

Federal Maritime Commission a bank cashier s check in the sum of

upon the following terms of settlement

1 Upon acceptance of this agreement of settlement in writing by the

Director of the Bureau ofHearing Counsel of the Federal Maritime Commis

sion this instrument shall forever bar the commencement or institution

of any assessment proceeding or other claims for recovery of civil penalties

from Respondent arising from the alleged violations set forth and described

herein that have been disclosed by Respondent to the Commission and

that occurred between date and date

2 The undersigned voluntarily signs this instrument and states that no

promises or representations have been made to the Respondent other than

the agreements and consideration herein expressed

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 107

3 It is expressly understood and agreed that this Agreement is not

to be construed as an admission of guilt by undersigned Respondent to

the alleged violations set forth above

4 Insofar as this agreement may be inconsistent with Commission proce

dures for compromise and settlement of violations as set out at 46 CFR

Part 505 the parties hereby waive application of such procedures

By

TITLE

DATE

Approval and Acceptance

The above Terms and Conditions and Amount of Consideration are hereby

Approved and Accepted

By the Federal Maritime Commission

S

Hearing Counsel

S

Director Bureau of Hearing Counsel

Date

27 F M C
108 FEDERAL MARITIME COMMISSION

APPENDIX B EXAMPLE OF PROMISSORY NOTE TO BE USED

UNDER 46 CFR 540 36

PROMISSORY NOTE CONTAINING AGREEMENT FOR JUDGMENT

FMC FILE NO

For value received promises to pay to the Federal

Maritime Commission the Commission the principal sum of

to be paid at the offices of the Commission

in Washington D C by bank cashier s or certified check in the following

installments

within months of execution

of the settlement agreement by the Director of the Bureau of Hearing

Counsel

within months of execution

of the agreement

within months of execution

of the agreement

Further payments if necessary

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 of the execution of this Promissory Note by

the Director of the Bureau of Hearing Counsel and be computed at the

rate of r percent per annum

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

of ten 10 days after becoming due and payable the entire unpaid principal

amount of this 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

this Promissory Note Respondent does hereby

authorize and empower any U S attorney any of its assistants or any

attorney of any court of record Federal or State to appear for him or

her and to enter and confess judgment against

Respondent for the entire unpaid principal amount of this Promissory

Note together with interest in any court of record Federal or State to

waive the issuance and service of process upon

Respondent 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 immediate execution on said judgment

Respondent 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 Respondent

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

27 F M C
SECURITY FOR THE PROTECTION OF THE PUBLIC 109

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

prepayment

By

TITLE

DATE

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

46 CPR PART 572

DOCKET NO 8426

RULES GOVERNING AGREEMENTS BY OCEAN COMMON

CARRIERS SUBJECT TO THE SHIPPING ACT OF 1984

SUSPENSION OF REPORTING REQUIREMENTS

September 11 1984

Interim Rules

The Commission amends its Interim Rules governing

agreements by ocean common carriers and other persons

subject to the Shipping Act of 1984 These amendments

issued pursuant to the interim rulemaking authority pro

vided in the Act defer implementation of the Interim

Rule provisions requiring 1 a conference or other

agreement body to specify in reports of meetings what

documents have been distributed to its members and

2 the agreement body to maintain and file an index

of documents with the Commission

DATE September 14 1984

SUPPLEMENTARY INFORMATION

The Shipping Act of 1984 1984 Act Public Law 98 237 98 Stat

67 46 U S C app 1701 1720 became effective on June 18 1984 Section

17 b of the 1984 Act authorizes the Commission to prescribe interim

rules without adhering to the normal notice and comment procedures under

the Administrative Procedure Act 5 D S C 553 On May 29 1984 the

Commission published an Interim Rule and Request for Comments imple

menting those provisions of the Act which govern agreements by ocean

common carriers and other persons subject to the 1984 Act 26 FM C

681 This Interim Rule became effective on June 18 1984 Interested

persons were given 90 days from the date of publication in the Federal

Register in which to comment on the interim rules

The Commission has now been requested by certain conferences to imme

diately suspend the requirement in section 572 704 that conferences maintain

and file with the Commission an index of documents and the related

requirement in section 572 703 b that meeting reports

shall specify any documents distributed by the conference

or other agreement to inform or assist the members on such

matters

ACTION

SUMMARY

110 27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 111

CARRIERS SUBJECT TO THE SHIPPING ACT OF 1984

occurring within the scope of the agreement and which are being discussed

or considered by the membership

Section 704 of the Interim Rule provides

a Each agreement required to file minutes pursuant to 572 703

shall maintain an index of all reports circulars notices statistics

analytical studies or other documents not otherwise filed with

the Commission pursuant to this subpart which are distributed

to the member lines

b Each index required by paragraph a of this section shall

be filed with the Commission on a quarterly basis the first to

be filed for the period ending September 30 1984 and for each

succeeding quarterly period thereafter Each index must be certified

by an official of the agreement as true and correct

Upon consideration of the emergency comments we have determined

to grant the interim relief requested and defer implementation of these

requirements pending issuance of a Final Rule This action is not a deter

mination on the ultimate merit of these comments which will be considered

in connection with the issuance of a final rule Accordingly section 572 704

is being amended to provide that for the index of documents the first

period to be reported is that ending March 31 1985 rather than Septem

ber 30 1984 Also section 572 703 is amended to provide that minutes

need not specify documents which are distributed until January 1 1985

List of Subjects in 46 CFR Part 572

Antitrust Contracts Maritime carriers Administrative practice and

procedure Rates and fares Reporting and record keeping require

ments

Therefore pursuant to 5 U S C 553 and sections 5 6 and 17 of the

Shipping Act of 1984 46 U S c app 1704 1705 and 1716 the Commis

sion amends Title 46 Code of Federal Regulations Part 572 Subpart

G as follows

1 In 572 703 revise paragraph b to read as follows

572 703 Filing of minutes

b Content of Minutes Conferences interconference agree

ments agreements between a conference and one or more

ocean common carriers pooling agreements equal access

agreements discussion agreements marine terminal con

ferences and marine terminal rate fixing agreements shall

through a designated official file with the Commission a

report of each meeting describing all matters within the scope

In addition to the comments seeking immediate relief numerous other comments have been filed regard

ing the Interim Rule These other comments require no immediate attention and are not addressed in this

notice They will be considered at alater date

l7 U
112 FEDERAL MARITIME COMMISSION

of the agreement which are discussed or considered at any

such meeting shall specify any documents distributed by the

conference or other agreement to inform or assist the members

on such matters and shall indicate the action taken These

reports need not disclose the identity of parties that partici

pated in discussions or the votes taken Reports of meetings

filed with the Commission in accordance with this require

ment need not specify documents that were distributed until

January 1 1985

2 In 572 704 Index of Documents in paragraph b remove Septem

ber 30 1984 and insert March 31 1985

By the Commission

S FRANCIS C HURNEY

Secretary

1

71lMr
FEDERAL MARITIME COMMISSION

46 CFR PART 582

DOCKET NO 8 25

CERTIFICATION OF COMPANY POLICIES AND EFFORTS TO

COMBAT REBATING IN THE FOREIGN COMMERCE OF THE

UNITED STATES

September 17 1984

Final Rules

These Final Rules modify the Commission s regulations

requiring the filing of certifications of company practices

to combat rebating in the foreign commerce ofthe United

States to bring them into conformity with the Shipping

Act of 1984 which expands the application ofthe annual

certification requirement from vessel operating common

carriers to all common carriers

Final Rules effective October 22 1984 except Section

582 3 which will become effective December 15 1984

SUPPLEMENTARY INFORMATION

The Shipping Act of 1984 1984 Act 46 U S C app 1701 1720 was

enacted on March 20 1984 and became effective on June 18 1984

Section 15 b of the 1984 Act 46 U S C app 1714 b makes substantive

changes to the previous requirements of section 21 b of the Shipping

Act 1916 1916 Act 46 U S C app 820 b

regarding the certification

of company policies and efforts to combat rebating in the foreign commerce

of the United States The fundamental change is the expansion of the

certification requirements to all common carriers from the former limited

application to vessel operating common carriers only

On May 29 1984 the Commission published in the Federal Register

49 FR 22294 26 F M C 676 an Interim Rule and Request for Comments

which implements the 1984 Act s certification requirements The Interim

Rule reflected changes in definitions and application contained in the 1984

Act particularly the requirement that every non vessel operating common

carrier NVO as well as every vessel operating common carrier in the

foreign commerce filean annual anti rebating certification

The Interim Rule also reflected the altered statutory scheme of the 1984

Act under section 15 b which permits the Commission to require certifi

cation from any shipper shippers association marine terminal operator

ocean freight forwarder or broker The Interim Rule did not require peri

odic certifications from entities other than those mandated by statute but

ACTION

SUMMARY

DATES

27 F M C 113
114 FEDERAL MARITIME COMMISSION

provided that the Commission in its discretion could make such require

ments applicable to shippers shippers associations marine terminal opera

tors freight forwarders and brokers

Comments in response to the Interim Rule and Request For Comments

were received from five parties Sea Land Service Inc and The National

Maritime Council filed comments supporting adoption of the Interim Rule

as aFinal Rule

NAVTRANS International Forwarding Inc NAVTRANS a licensed

ocean freight forwarder and subsidiary of North American Van Lines op

poses the Interim Rule with respect to its discretionary application to ocean

freight forwarders in 46 CFR 582 2 NAVTRANS points out that it is

required to file an annual anti rebating certification on March 1 of each

year under 46 CFR 510 35 of the Commission s current freight forwarder

regulations and maintains that the requirement of certification of the same

basic information at the Commission s discretion under 46 CFR 582 2 would

be costly unnecessary and administratively burdensome

Section 582 5 b of the Interim Rule makes clear that the certifications

which may be required from persons enumerated in section 582 1 will

be occasional rather than periodic since they are to be submitted on

the date designated and thereafter as the Commission may direct

The requirement for annual certifications from ocean freight forwarders

is continued in Docket No 8419 Licensing ofOcean Freight Forwarders

and the regulations at 46 CFR Part 510 promulgated therein 49 FR 36296

Sept 14 1984 In view of the continuing requirement for both annual

certification and notification to shippers under those rules we agree with

NAVTRANS that the inclusion in this Rule of freight forwarders among

those from whom the Commission may occasionally require certification

under section 582 2 is unnecessary and duplicative We therefore have

deleted the reference to freight forwarders in section 582 2 of the Final

Rule We have however added a new paragraph b to section 581 1

Scope cross referencing the anti rebating certification requirements for

freight forwarders contained in 46 CFR Part 510 1

The Inter American Freight Conference IAPC submitted comments sug

gesting several technical amendments to the Interim Rule and taking issue

with the penalties established in section 582 1 b and the requirement of

section 582 4 that a new certificate be filed upon appointment of a new

Chief Executive Officer CEO of a common carrier

IAPC argues that because the general penalty of no more than 25 000

per day for violations of the 1984 Act wilfully and knowingly committed

is established for violations for which no other penalty is provided it

is inapplicable to section 15b which contains a specific penalty of no

more than 5 000 per day for failure to file an anti rebating certificate

I The existing subsection b of 582 1 is being redesignated as subsection c without change

27 F M C
CERTIFICATION OF CO POLICIES EFFORTS TO COMBAT 115

REBATING IN THE FOREIGN COMMERCE OF THE U S

We agree that the language unless otherwise provided in this Act

would appear to preclude application of the 25 000 penalty for wilfull

and knowing violations of sections specifying lesser penalties We have

therefore deleted the 25 000 penalty provision from the Final Rule thereby

limiting the penalty for failure to file the required reports to 5 000 for

each day the violation continues

In response to IAFC s comments we have also deleted from the Final

Rule section 582 4

2 which required that a certificate be filed each time

a new CEO is appointed While the rules in section 582 2 require that

the CEO act as certifying official the CEO s

responsibility in this regard

is to act as authorized spokesman for the corporation Because the certifi

cation is filed on behalf of the company not the individual officer we

see no need for renewal upon each change of personneJ 3 The technical

wording changes suggested by IAFC to assure that the language of the

regulations tracks the statute have also been adopted

The North European Conferences Conferences filed joint comments gen

erally supporting the Commission s Interim Rule and urging adoption as

a Final Rule 4The Conferences however propose significant additional

coverage and enforcement mechanisms The Conferences urge the Commis

sion to actively enforce the anti rebating certification requirement and to

issue and enforce a variety of new regulations against foreign domiciled

NVO s operating in the U S import trades foreign domiciled as well as

domestic cargo brokers and freight forwarders and shippers associations

The thrust of these proposals is that the anti rebating certification require

ments should be applied equally to the U S import and export trades

and that various enforcement mechanisms are available to accomplish that

end While the Conferences proposals appear to raise legitimate issues

they exceed those noticed in the Interim Rule and therefore are beyond

the scope of this proceeding The Commission will consider making these

proposals the subject of rules in a separate proceeding

One additional item needs be addressed Section 582 2 of the Interim

Rule required that every common carrier submit an annual anti rebating

certificate by its Chief Executive Officer and section 582 3

required that

each common carrier file by September 18 1984 a provision in each

of its tariffs noting inter alia that such anti rebating policy has been

certified to the Federal Maritime Commission in accordance with the Ship

2

Section 582 5 of the Interim Rule is hereby renumbered as section 582 4

3

In doing so we reverse a decision we made in adopting the original anti rebating certification rules issued

under the 19 6 Act based on statutory language similar to that of the 1984 Act We simply see no regulatory

purpose to be served by continuation of this requirement CF Docket 79 65 45 FR 12794 1980

4

The North European Conferences are North Atlantic United Kingdom Freight Conference North Atlantic

French Atlantic Freight Conference North Atlantic Continental Freight Conference North Atlantic Baltic

Freight Conference Scandinavia Ba tic U S North Atlantic Westbound Freight Conference Continental North

Atlantic Westbound Freight Conference North Atlantic Westbound Freight Association United Kingdom

U S A Gulf Westbound Rate Agreement Continental U S Gulf Freight Association Gulf United Kingdom

Conference Gulf European Freight Association North Europe U S South Atlantic Rate Agreement and U S

South Atlantic Europe Rate Agreement

7FMr
116 FEDERAL MARITIME COMMISSION

ping Act of 1984 and the regulations of the Commission set forth in

46 CFR Part 582 No comment was received with respect to the inter

relationship of these provisions or their relationship to the certifications

previously filed by vessel operating common carriers pursuant to the 1916

Act and the Commission s

regulations which were codified at 46 CFR

Part 552 We note however that the certification requirements of the

two Acts being almost identical it appears to be duplicative and unnecessary

to require vessel operating common carriers who filed an anti rebating

certification on or before May 15 1984 to file an additional certification

before September 18 1984 merely to comply with the recitation to be

filed in their tariffs by that date that their compliance with the 1984

Act has been certified to the Commission The Commission will therefore

regard the anti rebating certificate filed by each vessel operating common

carrier on or before May 15 1984 under the 1916 Act to constitute compli

ance with the requirement of the 1984 Act and section 582 2 for the

1984 annual certificate

The NVO certification being a new requirement is a different matter

The Interim Rule required an NVO to file an anti rebating policy statement

in its tariff on or before September 18 1984 Because that statement

must make reference to the fact that a CEO certification has been filed

with the Commission it was our intention that the CEO certification also

be filed on or before September 18 1984 It now appears however that

some confusion or uncertainty exists regarding what was actually required

from NVO s by the Interim Rule As a result and to allow NVO s adequate

time to comply with the newly imposed certification requirement the date

by which NVO s must file the initial CEO certification and the date for

all common carriers including NVO s to file the tariff provision under

the 1984 Act shall be deferred until December 15 1984 Further certifi

cations will be required on May 15 1985 and each subsequent May 15

The Federal Maritime Commission has determined that this final rule

is not a major rule as defined in Executive Order 12291 dated February

17 1981 because it will not result in

l

An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies that this

final rule will not have a significant economic impact on a substantial

number of small entities including small businesses small organizational

units and small governmental jurisdictions

7PMr
CERTIFICATION OF CO POLICIES EFFORTS TO COMBAT 117

REBATING IN THE FOREIGN COMMERCE OF THE U S

List of Subjects in Part 582

Cargo Cargo vessels Exports Foreign relations Freight forwarders Im

ports Maritime carriers Rates and fares Reporting and recordkeeping re

quirements Water carriers Water transportation

These final rules are subject to review and editing of form before publica

tion in the Code of Federal Regulations Users are requested to notify

the Commission of any omissions and typographical type errors in order

that corrections can be made before the Commission s CFR book goes

to press in January 1985

For the reasons set out in the preamble and pursuant to the authority

set forth in the Authority Citation Part 582 of Subchapter D Chapter

IV of Title 46 Code of Federal Regulations is revised to read as follows

27 EM C
FEDERAL MARITIME COMMISSION

46 CPR PART 582

CERTIFICATION OF COMPANY POLICIES AND EFFORTS TO

COMBAT REBATING IN THE FOREIGN COMMERCE OF THE

UNITED STATES

Sec

582 1

582 2

582 3

582 4

582 91

Scope

Form ofcertification

Tariff notification

Reporting requirements

OMB control numbers assigned pursuant to the Paperwork Re

duction Act

APPENDIX ACERTIFICATION OF COMPANY POLICIES AND

EFFORTS TO COMBAT REBATING IN THE FOREIGN COMMERCE

OF THE UNITED STATES

AUTHORITY 5 U S C 553 secs 2 3 8 10 13 15 16 and 17

of the Shipping Act of 1984 46 U S C app 1701 1702 1707 1709

1712 1714 1715 and 1716

582 1 Scope

a The requirements set forth in this part are binding upon every common

carrier by water in the foreign commerce of the United States and at

the discretion of the Commission will be applicable to any shipper ship

pers association marine terminal operator or broker

b Information obtained under this part will be used to maintain continu

ous surveillance over common carrier activities and to provide a deterrent

against rebating practices Failure to file the required reports may result

in a civil penalty of not more than 5 000 for each day such violation

continues

NOTE Ocean freight forwarders certify their anti rebating policies and

efforts pursuant to 510 21 and 510 25 of this chapter

582 2 Form of Certification

The Chief Executive Officer i e the most senior officer within the com

pany designated by the board of directors owners stockholders or control

ling body as responsible for the direction and management ofthe company

of each common carrier and when so ordered at the discretion of the

Commission the Chief Executive Officer of any shipper shippers associa

tion marine terminal operator or broker shall file with the Secretary Fed

eral Maritime Commission a written certification under oath as set forth

in the format Appendix A to this part attesting to the following

11 R 27 F M C
CERTIFICATION OF CO POLICIES EFFORTS TO COMBAT 119

REBATING IN THE FOREIGN COMMERCE OF THE U S

a

l

That it is the stated policy of the filing company that the payment

solicitation or receipt of any rebate by the company which is unlawful

under the provisions of the Shipping Act of 1984 is prohibited and

2 That such company policy was promulgated recently together with

the date of such promulgation to each owner officer employee and agent

thereof

b The details of the efforts made within the company or otherwise

to prevent or correct illegal rebating and

c That the filing company will fully cooperate with the Commission

in its efforts to end those illegal practices

582 3 TariffNotification

a Each common carrier shall file a provision in each of its tariffs

that shall read substantially as follows

Name of Company has a policy against the payment of any

rebate by the company or by any officer employee or agent

thereof which payment would be unlawful under the United States

Shipping Act of 1984 Such policy has been certified to the Fed

eral Maritime Commission in accordance with the Shipping Act

of 1984 and the regulations of the Commission set forth in 46

CFR Part 582

b When the common carrier s tariff is a conference or rate agreement

tariff the common carrier shall ensure that the conference or rate agreement

publishes the common carrier s tariff provision set forth in paragraph a

ofthis section in the tariff

c The anti rebate tariff provision as set forth in paragraph a of

this section shall be effective upon filing

582 4 Reporting requirements

a Every common carrier required by this part to file a written certifi

cation as provided for in 582 2 shall file such certification on or before

May 15 of each year

b Every person other than a common carrier who is ordered by the

Commission to file a written certification under 582 2 shall file the initial

certification on the date designated by the Commission and thereafter

as the Commission may direct

582 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control numbers assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980

Pub L 96511 The Commission intends that this section comply with

the requirements of section 3507 tof the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

Director of the Office of Management and Budget OMB for each agency

information collection requirement

27 F M C
120 FEDERAL MARITIME COMMISSION

Section

Current

OMB Con

trol No

582 2 through 582 4 3072028

APPENDIX A TO 46 CFR PART 582

Name ofFiling Company

Certification of Company Policies and Efforts to Combat Rebating in

the Foreign Commerce of the United States

Pursuant to the requirements of section l5b of the Shipping Act of

1984 and Federal Maritime Commission regulations promulgated pursuant

thereto 46 CPR Part 582 I Chief Executive Officer of

name of company state under oath that

1 It is the policy of name of company that the payment solicitation

or receipt of any rebate which is unlawful under the provisions of the

Shipping Act of 1984 is prohibited

2 On or before 19 such company policy was promulgated

to each owner officer employee and agent of name of company who

is directly or indirectly connected with commercial ocean shipping import

or export sales or purchasing

3 Set forth the details of measures instituted by the filing company

otherwise to eliminate or prevent the payment of illegal rebates in the

foreign commerce of the United States

4 Name of company affirms it will fully cooperate with the Federal

Maritime Commission in any investigation of illegal rebating and with

the Commission s efforts to end such illegal practices

Subscribed and sworn to before me this

S

Chief Executive Officer

day of 19

Notary Public

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 572

DOCKET NO 8432

AMENDMENTS TO RULES GOVERNING AGREEMENTS BY OCEAN

COMMON CARRIERS AND OTHER PERSONS SUBJECT TO THE

SHIPPING ACT OF 1984

Interim rule and request for comments

This rule adds sections to 46 CFR Part 572 to state

Commission policy that an agreement filed pursuant to

the Shipping Act of 1984 must be definite complete

and specific with regard to the authority contained there

in The rule establishes guidelines for distinguishing be

tween impermissible open ended authority and allowable

interstitial authority This statement of policy and rule

is necessary to enable the Commission to evaluate the

impact of an agreement to monitor its operations and

to clarify the scope of the antitrust immunity contained

therein

Interim rule effective September 17 1984 Comments

on or before October 17 1984

SUPPLEMENTARY INFORMATION

The Shipping Act of 1984 46 U S C app 1701 1720 hereinafter re

ferred to as the Act or the 1984 Act requires the Commission

to conduct both a technical and substantive review of agreements filed

pursuant to section 5 of the Act 46 U S C app 1704 Section 5 requires

that a true copy of every agreement within the scope of the Act be filed

with the Commission Under section 6 b of the Act 46 U S C app

1705b the Commission must conduct a preliminary review to determine

whether an agreement meets the requirements of section 5 The Commission

is authorized to reject agreements that do not meet these requirements

Under section 6 g46 U S C app 1705 gthe Commission must review

an agreement to determine whether it is substantially anticompetitive and

is likely to result in an unreasonable reduction in transportation service

or an unreasonable increase in transportation cost In performing its review

functions under section 6 the Commission must observe strict timeframes

which are mandated by statute

The 1984 Act also places an obligation on the Commission to monitor

operations conducted pursuant to an agreement In this regard the Commis

sion s

responsibility to evaluate an agreement under section 6g

continues

after an agreement becomes effective In addition section 10 of the Act

ACTION

SUMMARY

DATE

7PMr 111
122 FEDERAL MARITIME COMMISSION

46 D S C app 1709 enumerates certain acts which are prohibited Section

1O a 2 prohibits a person from operating under an agreement required

to be filed under section 5 that has not become effective under section

6 Section 1O a 3 prohibits a person from operating under an agreement

required to be filed under section 5 except in accordance with the terms

of the agreement

Section 7 of the Act 46 D S C app 1706 provides for an exemption

from the antitrust laws for certain enumerated categories of agreements

Section 7 a 2 states in relevant part that the antitrust laws do not apply

to

any activity or agreement within the scope of this Act

whether permitted under or prohibited by this Act undertaken

or entered into with a reasonable basis to conclude that A it

is pursuant to an agreement on file with the Commission and

in effect when the activity took place

In order to ensure that the Commission may adequately fulfill its respon

sibilities under the Act to review and monitor agreements and to ensure

that agreements are stated with sufficient precision to determine the scope

of the antitrust immunity conferred upon them the Commission is amending

its rules governing agreements by ocean common carriers and other persons

subject to the Act 46 CFR Part 572 1 These amendments consist of

a new rule stating Commission policy regarding the clarity completeness

and specificity required of agreements and a new rule which distinguishes

between impermissible open ended authority and allowable interstitial au

thority

IADDmON TO SUBPART AGENERAL PROVISIONS

Section 572 103 Policies

The addition to Subpart A 572 103 adds a new paragraph g which

states Commission policy regarding the clarity completeness and specificity

required in agreements An agreement filed under the Shipping Act of

1984 must be clear and definite in its terms must embody the complete

present understanding of the parties and must set forth the specific authori

ties and conditions under which the members of the agreement will conduct

IOn May 29 1984 the Commission published Interim Rules which implement those provisions of the

Shipping Act of 1984 which govern agreements by ocean common caniers and other persons subject to the

Act 49 FR 22296 These rules were issued pursuant to authority contained in section 17b of the Act 46

V S C app 1716b to issue interim rules without observing the normal notice and comment procedures

required by the Administrative Procedure Act 5 V S C 553 The preamble to these rules stated that persons

could file emergency comments prior to the effective date for consideration by the Commission A number

of such comments were received and on June 14 1984 the Commission published atnendments to its interim

agreements rules making cenain modifications and corrections in these rules 49 FR 24697 These Interim

Rules as amended went into effect on June 18 1984 They are codified in Title 46 of the Code of Federal

Regulations as Pan 572

27 F M C
AMENDMENTS TO RULES GOVERNING AGREEMENTS BY 123

OCEAN COMMON CARRIERS

their operations and regulate the relationships among the agreement mem

bers

An agreement should be sufficiently clear and definite in its essential

terms so as to apprise the Commission of the activities which will be

undertaken pursuant to the agreement so that the Commission may evaluate

its probable economic impact At the same time the Commission does

not interpret the 1984 Act to require agreements to be drafted to a degree

of exactitude that deprives the parties of a reasonable extent of commercial

flexibility within clearly defined parameters to respond to changing trade

conditions

One purpose of this policy is to ensure that the Commission may fulfill

its responsibility to review an agreement prior to its effectiveness Under

section 6 g of the Act the Commission is charged with making an analysis

of the competitive impact of an agreement This evaluation would be made

difficult or impossible where an agreement is vague incomplete or contains

open ended authority

A second purpose of this policy is to enable the Commission to monitor

operations under an agreement once it has gone into effect The Commis

sion s role as a monitoring agency has been heightened under the 1984

Act which generally allows most agreements to go into effect after a

brief waiting period Because of this shift in emphasis in the regulatory

regime it becomes even more important to have an agreement which is

clear complete and definite In this regard it should be noted that section

1O a 2 prohibits any person from operating under an agreement that has

not become effective and that section 1O a 3 prohibits any person from

operating under an agreement except in accordance with its terms It is

therefore also in the interest of the parties to an agreement to state their

agreement with precision

Finally agreement authority should be stated completely and specifically

in order to avoid to the maximum degree possible any ambiguity concern

ing antitrust immunity for any activity conducted under the agreement

Exemptions from the antitrust laws are generally strictly and narrowly con

strued The 1984 Act however extends antitrust immunity to an activity

undertaken or entered into with a reasonable basis to conclude that it

is pursuant to an agreement on file with the Commission and in effect

when the activity took place The risk of assuming that a particular

activity is pursuant to a stated authority is one that is undertaken by

the parties to an agreement In order for the parties to avoid difficult

issues regarding the scope of antitrust coverage the Commission believes

it is best that agreement activities and authorities be stated as clearly

as possible

The Shipping Act of 1984 does not affect previously established Commis

sion policy regarding the clarity completeness and specificity required in

agreements Accordingly the new policy statement in 572 103 g merely

represents a codification of that established policy There is however a

27 F M C
j

1

i

I

I

124 FEDERAL MARITIME COMMISSION

greater need for such a restatement of policy under the 1984 Act to enable

the Commission to carry out its review functions within strict statutory

deadlines and adequately monitor subsequent operations

II ADDITION TO SUBPART DFILING AND FORM OF

AGREEMENTS

Section 572 406 Clear and Definite Agreements

The addition to Subpart D adds a new 572 406 which establishes guide

lines for the completeness required of agreements and distinguishes between

impermissible open ended authority and permitted interstitial authority

Section 572 406 a requires that an agreement reflect the full and complete

present understanding of the parties as to its essential terms The agreement

must set forth in adequate detail the procedures and arrangements under

which the activity permitted by the agreement is to take place once the

agreement becomes effective For example an agreement which merely

stated that the parties are authorized to operate a joint service H

without

indicating the number or range of vessels committed to the service would

not be deemed to reflect the full understanding of the parties Such a

deficiency would defeat any meaningful Commission review Similarly a

statement in a joint service agreement which authorized the parties to

acquire substitute or additional tonnage would result in a situation where

the Commission would be unable to evaluate the economic impact of the

agreement on the trade under section 6 g Finally a filed agreement which

referred to or was governed by another agreement not filed with the Com

mission would be incomplete It should be noted that operation under

an agreement which is incomplete may constitute a violation of section

lO a 3 of the Act

Section 572 406 a also requires that agreements be specific as to the

understanding of the parties Agreements should specify the authority of

the agreement and the activities to be conducted under it The rule does

not contemplate that every activity be enumerated in detail However gen

eral grants of authority which do not specify the activities under the agree

ment are not favored For example an agreement which as it authority

merely recited the statutory language of section 4a I 7 of the Act

would require some further clarification Otherwise review of such an

agreement would be virtually meaningless Such general statements of au

thority even where clarified by subsequent refinement should be avoided

Section 572 406 b proscribes the use of clauses in agreements which

contain open ended authority unless such provisions expressly state that

any further such agreement cannot become operative unless filed and effec

tive under the 1984 Act Aproblem of open ended authority arises where

an agreement allow for future substantive modification of an agreement

without specifically requiring filing under section 5 Such general authority

to make future modifications without filing with the Commission would

27FM C
AMENDMENTS TO RULES GOVERNING AGREEMENTS BY 125

OCEAN COMMON CARRIERS

subvert the Commission s ability to review and monitor an agreement

Because any such future modifications to an agreement would generally

become effective within 45 days after the amendment is filed with the

Commission there is no undue burden or delay in gaining effectiveness

of an agreement

Section 572 406 c provides that activities which may reasonably be

viewed as interstitial to a stated agreement authority need not be expressly

stated For example authority to establish OCP rates would be viewed

as interstitial to general ratemaking authority However establishment of

a tariffed contract rate system would not be interstitial Changes in the

terms and conditions of a charter party underlying a space charter agreement

would generally be interstitial However changes in the number of vessels

or range of number of vessels and definition of vessel capacity or range

of capacities dedicated in a joint service or space charter agreement would

not The rule allows flexibility to make changes for tariff matters or routine

operational and administrative matters having no anticompetitive effect

The rule does not state how the Commission will treat an agreement

that is not sufficiently specific complete and definite In most cases such

deficiencies could probably be corrected through informal discussions be

tween the Commission s staff and the parties An agreement which is

severely deficient however may be rejected investigated or subject to

a formal request for additional information or to challenge in the court

under section 11 h of the Act

III CONCLUSION

This rule is being published as an interim rule pursuant to section

17 b of the Act with opportunity for comment It will become effective

on publication and will serve as an interim rule until such time as a

final rule supersedes it All interested persons have been provided 30 days

to comment on the interim rule This interim rule and all comments filed

within the 30 day period will be used as the basis for a final rule pursuant

to the requirements of the Administrative Procedure Act 5 U S c 553

The Chairman of the Commission certifies pursuant to section 605 b

of the Regulatory Flexibility Act 5 U S C 601 ef seq that these rules

will not have a significant economic impact on a substantial number of

small entities within the meaning of that Act

OMB clearance for the interim rules in 46 CFR 572 has been granted

under OMB Number 3072045 These interim amendments will also be

submitted and comments on the information collection aspects of the

amendments may be made at the time the interim rules are formally submit

ted to OMB as Final Rules

List ofSubjects in 46 CFR Part 572

Antitrust Contracts Maritime Carriers

Therefore pursuant to section 4 of the Administrative Procedure Act

5 US C 553 and sections 5 6 7 10 and 17 of the Shipping Act

27 F M C
1

i

j

126 FEDERAL MARITIME COMMISSION

of 1984 46 D S C app 1704 1705 1706 1709 1716 the Federal Mari

time Commission hereby amends Title 46 Code of Federal Regulations

Part 572 Subchapter D as follows

1 In Subpart A 572 103 add a new paragraph g

to read as follows

572 103 Policies

g An agreement filed under the Shipping Act of 1984 must be clear

and definite in its terms must embody the complete understanding of

the parties and must set forth the specific authorities and conditions under

which the parties to the agreement will conduct their present operations

and regulate the relationships among the agreement members

2 In Subpart D add a new 572 406 to read as follows

572 406 Clear and Defmite Agreements

a Any agreement required to be filed by the Act and the rules of

this Part shall be the complete agreement among the parties and shall

specify in detail the substance of the understanding ofthe parties

b Except as provided in paragraph c of this section open ended

or vague agreement which contemplate a further agreement or give the

parties authority to discuss andor negotiate a further agreement the terms

of which are not fully set forth in the enabling agreement will be permitted

only if the enabling agreement indicates that any such further agreement

cannot go into effect unless filed and effective under the Act

c Further specific agreements or understandings which are established

pursuant to express enabling authority in an agreement are considered inter

stitial and are permitted without further filing under section 5 of the Act

only when the further agreement concerns 1 routine operational or admin

istrative matters which will have no anticompetitive effect or 2 establish

ment of tariff rates rules and regulations which are routine and ordinary

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 22

NOTICE TO RESCIND PORTWIDE EXEMPTIONS GRANTED TO

THE PORTS OF PENSACOLA PORT EVERGLADES AND TAMPA

FLORIDA PURSUANT TO SECTION 51O 33 e OF GENERAL

ORDER 4 AND DISCONTINUANCE OF PROCEEDING

September 19 1984

By notice dated April 14 1982 the Commission instituted Docket No

82 22 Notice of Intent to Review Certain Portwide Exemptions Granted

Pursuant to Section 5JO 33 e of General Order 4 for the purpose of

determining whether portwide exemptions granted by the Commission some

seventeen years ago to the ports of Pensacola Port Everglades and Tampa

Florida were still justified

The proceeding in Docket No 82 22 has been held in abeyance pending

final action by the Commission on proposed revisions to 46 CFR Part

510 in Docket No 83 35 Licensing of Independent Ocean Freight For

warders The proposed revisions under review in Docket No 83 35 subse

quently were incorporated into an interim rule proceeding Docket No

8419 Licensing of Ocean Freight Forwarders which proposed rules to

implement the Shipping Act of 1984 46 U S C app 1701 1720 The

proceeding in Docket No 83 35 was discontinued by notice served April

24 1984

On August 15 1984 the Commission adopted Final Rules in Docket

No 8419 One of the revisions adopted modified 46 CFR 51O 33 e

redesignated as 46 CFR 51O 23 e in the Final Rules to allow compensation

to be paid to a forwarder who requests a carrier or its agent to perform

forwarding functions if such carrier or agent is a licensed ocean freight

forwarder With this allowance the portwide exemption provision contained

in the rules became unnecessary and it was deleted in the Final Rules

The issue of whether to continue the portwide exemptions in three Florida

ports which is the subject of Docket No 82 22 has thus become moot

Moreover with the deletion of the exemption provision from the rules

the exemptions granted to the three Florida ports identified above have

no force and effect Accordingly these exemptions will be rescinded

By a separate notice all other outstanding exemptions granted by the

Commission will be rescinded also

THEREFORE IT IS ORDERED that the portwide exemptions granted

to the ports of Pensacola Port Everglades and Tampa Florida are hereby

rescinded

27 F M C
128 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED that Docket No 82 22 is hereby discon

tinued

IT IS FURTHER ORDERED that a notice of these actions be published

in the Federal Register

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PARTS 502 512 AND 531

GENERAL ORDERS 11 16 AND 38 DOCKET NO 842

AMENDMENT OF CERTAIN REGULATIONS GOVERNING COMMON

CARRIERS BY WATER IN THE DOMESTIC OFFSHORE COMMERCE

OF U S

ACTION

SUMMARY

September 25 1984

Notice of Discontinuance

The Federal Maritime Commission discontinues this rule

making proceeding on the basis that the proposed regula

tion amendments cannot be adopted given existing statu

tory requirements This discontinuance will result in no

modifications to current regulatory requirements

DATE This action is effective September 28 1984

SUPPLEMENTARY INFORMATION

PROCEEDING

On January 26 1984 the Federal Maritime Commission 1 Commission

or FMC issued a notice of proposed rulemaking January Notice in the

above captioned proceeding proposing amendments to its regulations imple

menting the Intercoastal Shipping Act 1933 ISA 46 U S C app 843

et seq Essentially these amendments would exempt carriers serving the

Puerto Rico Virgin Islands domestic offshore trade from the otherwise appli

cable financial data reporting requirements and 60 day advance notice re

quirement for the implementation of general rate increases and decreases

The January Notice was issued in response to a Petition for Rulemaking

filed by Sea Land Serv ice Inc Sea Land Petition on September 12 1983

requesting the same relief A notice of filing of the Sea Land Petition

was published in the Federal Register 48 FR 44091 of Sep 27 1983

and comments of interested parties were solicited

Although twenty two parties responded to the Sea Land Petition the

responses failed to provide sufficient information for assessing the impact

of the proposal on Commission programs This rulemaking was instituted

to provide interested parties with that opportunity

The January Notice requested commentators to specifically address the

following matters

I Commissioner Moakley dissented to the issuance of the Notice of Proposed Rulemaking on the basis that

the reliefsought is beyond theCommission s statutory authority to grant

PMr l Q
130 FEDERAL MARITIME COMMISSION

1 If no financial data are submitted by carriers in the Puerto

Rico Virgin Islands trade how can the Commission effectively

review the reasonableness of a general rate increase prior to its

effective date

a Ifthis proposed rule is adopted how will interested persons

effectively exercise their statutory right to protest general rate

increases

2 If the proposed rule were adopted can an adequate system

of general rate increase review operate within 60 days as required

by the statute

a Assuming authority exists to establish a

thirty day review

period as Sea land has proposed can the requisite rate review

be accomplished within thirty days

3 If the Commission should order an investigation of a pro

posed general rate increase can such an investigation be completed

within 180 days as required by the statute in the absence of

pre filed financial data and supporting evidentiary materials by

the carrier

4 To what extent is port to port service competitive with inter

modal service by carries in the Puerto Rico Virgin Islands trades

a What are the regulatory requirements imposed on carriers

subject to ICC jurisdiction in these trades

b What specific differences between ICC and FMC regulatory

requirements impose a competitive disadvantage on FMC regu

lated carriers

c Can the needs of shippers in this trade the adequately

served if carriers offer only intermodal service subject to ICC

jurisdiction

This request however was without prejudice to the commentators address

ing any other matters which they viewed as warranting consideration The

Commission s Bureau of Hearing Counsel was directed to participate in

the proceeding

Sixteen parties filed comments in response to the January Notice Ten

parties generally supported the rulemaking proposal 2 while seven opposed

it3

The threshold issue addressed by most parties is whether section 35

of the Shipping Act 1916 46 D S C app 833a gives the Commission

the authority to grant the relief requested by Sea Land Those supporting

the proposal argue an interpretation of section 35 that would allow the

2Comments in support of the rulemaking proposal were filed by Sea Land Service Inc the U S Depart

ment of Transportation The Transportation Institute Houston Port Bureau Inc Jacksonville Port Authority

Delaware River Port Authority EI DuPont DeNemours Co RJ Reynolds Tobacco Co Lubrizol Cor

poration and PPG Industries Inc

3Comments in opposition to the rulemaking proposal were filed by the Government of the Virgin Islands

the Legislature of the Virgin Islands Hawaii Department of Commerce and Consumer Affairs U S Military

Sealift Command Puerto Rico Manufacturer Association IBP Inc and Hearing Counsel

27 F M C
AMENDMENT OF REGULATIONS GOVERNING COMMON 131

CARRIERS IN DOMESTIC OFFSHORE COMMERCE OF U S

Commission substantial authority while those opposing the proposal argue

an interpretation which would allow exemptions that have only a de minimis

effect on commerce While Hearing Counsel states that section 35 gives

the Commission sufficient authority to implement the proposed amendments

it also is of the opinion that such amendments are contrary to the intent

of Congress and would leave the Commission in a position of being

unable to meaningfully review the propriety of rate increase applications

within the required statutory time frame DOT urges an ad hoc carrier

by carrier approach rather than a trade wide approach

With regard to the Commission s specific questions concerning pre effec

tive date review and the 180 day investigation limitation opinions were

divided along similar lines Parties supporting the proposed amendments

argue that there should be no problem in meeting the deadlines or that

the deadlines are irrelevant because competition in the trade supplemented

by shipper complaint proceedings are sufficient in themselves to regulate

rates Those opposing the amendments argue that adequate review would

be impossible that competition in the trade is inadequate to regulate rates

and that the statutory right to protest rate increases would be effectively

abrogated by this rulemaking Hearing Counsel takes the position that the

Commission s staff could not properly evaluate rate increases under the

proposed amendments but did not express an opinion on the general need

for rate of return regulation in the domestic offshore trades

The Commission s questions in the January Notice concerning the rela

tionship between port to port and intermodal services in these trades also

prompted a similar division of opinions Those supporting the rulemaking

are generally of the opinion that Interstate Commerce Commission ICC

regulatory requirements are very minimal that Sea Land as the only port

to port service offeror in the trade is at a competitive disadvantage and

that the Commission should reduce its regulatory requirements to the level

of the ICC Those opposing the rulemaking generally argue that the services

are not directly in competition with each other that while there are dif

ferences between ICC and FMC regulation they impose no competitive

disadvantage on anyone carrier in the trade and that rather than reduce

its regulatory requirements the FMC should seek more effective jurisdiction

in the trade to strengthen its regulatory control over rates The only matter

the parties agree upon here is that there is a clear and continuing need

for port to port service in the trade

Few alternatives to the proposed amendments were offered One sugges

tion advanced is that the Commission should utilize a data base computer

model to establish reasonable rate levels in the trade on the basis of

industry average cost revenue and financial data Hearing Counsel proposed

that in lieu of the proposed amendments consideration should be given

to alternative avenues of regulatory relief including 1

increasing the

threshold level of trade revenue for financial data filing requirements 2

increasing the threshold level of individual and annual aggregate general

27 F M C
132 FEDERAL MARITIME COMMISSION

rate increases for financial data filing requirements from 3 and 9 to

15 and 25 respectively and 3 eliminating the requirement that carriers

file historical data with general rate increases

DISCUSSION

The Commission has determined that it could not adopt the amendments

proposed in this rulemakingand still carry out the statutory duties and

responsibilities imposed by sections 3 and 4 of the Intercoastal Shipping

Act 1933 particularly as amended in 1978 by P L 95475 4

Contrary to the assertions of the parties supporting this proposal the

effect of this rulemaking would not be the removal of unnecessary regula

tions Obtaining financial data from a carrier and giving interested parties

as well as the Commission adequate time to review such materials prior

to the effective date of a general rate increase would in the context of

other requirements and limitations of the Act appear necessary to determin

ing what constitutes a just and reasonable rate of return or profit for

common carriers serving this trade 46 U S C 845 a See S Rep No

1240 95th Cong 2d Sess 910 1978

In this regard we agree with the position taken by Hearing Counsel

and others that both elements of the Commission s

regulatory activity which

Sea Land wishes abandoned i e advance 60 day notice and financial infor

mation reporting requirements are critical and complementary to the statu

tory scheme contemplated by the ISA It does not appear economically

or practically possible for the Commission s staff and interested third parties

to review and respond to a proposed general revenue rate increase prior

to its effective date without the benefit ofsome advance on going carrier

financial data of the kind provided in the periodic reports and without

an adequate notice period Without the data and the time to analyze it

the Commission would be without the means to make an assessment of

the reasonableness of the rate increase as contemplated by the statute

Nor does the suggested investigate and refund alternative advanced

by Sea Land appear viable under the circumstances Section 3 of the ISA

imposes certain statutory conditions and requirements on the initiation and

conduct of rate investigations instituted pursuant to that section One of

these mandates that

The Commission shall not order a hearing unless the Commission

publishes in the Federal Register the reasons in detail why it considers

4The 1978 amendments to the ISA are the souree of many of the Commission regulations which Sea

Land and thitrulemaking proposed to change or eliminate The features of the 1978 amendments most rel

evant here are those which 1 require that the Commission by regulation prescribe guidelines for the

determination of what constitutes a just and reasonable rate of return 2 require the Commission to give

reasOns for any rate hearing instituted and strictly delineate the issues to be resolved in that hearing and

3 impose restrictive time limits on the completion of the various phases of the hearing Many of the specific

regulations put at issue in this rulemaking were promulgated in direct fulfillment of these amendments most

as ameans of enabling the Commission to meet the strict statutory scheduling deadlines established

27 F M C
AMENDMENT OF REGULATIONS GOVERNING COMMON 133

CARRIERS IN DOMESTIC OFFSHORE COMMERCE OF U S

such a hearing to be necessary and the specific issues to be resolved

by such hearing Emphasis added

The lack of advance carrier supplied financial data would in our opinion

render the Commission unable to meet this threshold statutory requirement

that the Commission indicate up front the scope of any rate investigation

Without the necessary data the Commission would not be in a position

to give reasons for the investigation specify in detail the issues to

be investigated or fashion an appropriate hearing order Accordingly Sea

Land s recommendation that the Commission in lieu of requiring advance

notice and pre filed financial data could investigate all general rate increases

and utilize the refund authority of the Act to compensate shippers if the

rates are found too high is not an acceptable alternative

Moreover even if the Commission were somehow able to specify the

investigation issues without the benefit of pre filed carrier data it is not

likely that the Commission could obtain the data during the course of

the investigation and complete that investigation within the 180 day limit

imposed by the statute

Therefore the proposed amendments to the advance notice and reporting

requirements taken together would if adopted generally render section

3 of the ISA unenforceable as it applies to the Puerto Rico Virgin Islands

trades The ultimate effect would be to discontinue FMC review functions

and shift the burden of proof in all general revenue rate proceedings to

shippers and the domestic offshore governments in complaint cases This

would be contrary to the regulatory scheme contemplated by the ISA and

the legislative determinations made in connection with the 1978 amendments

to the ISA See S Rep No 1240 95th Cong 2d Sess 67 1978

To the extent the Intercoastal Shipping Act 1933 prescribes a clear

and definite statutory scheme of regulation which the Commission is charged

with enforcing neither the exemption provision of section 35 nor the rule

making provision of section 43 of the Shipping Act 1916 46 V S C

app 841a provides the authority to repeal or substantially amend that

scheme The legislative history of section 35 indicates that the exemption

authority was to be used to exempt requirements which are notof signifi

cance in the overall design of regulation contemplated emphasis added

See H Rep No 2248 89th Cong 2d Sess 1 4 1966 Therefore any

deregulation initiatives must still comport with the legislative intent un

derlying the Act be harmonized with the statutory scheme and rely upon

a rational factual basis See generally Motor Vehicle Man Assn of U S

Inc v State Farm Mut Automobile Ins Co 103 S Ct 2856 51 V S LW

4945 49564957 1983 U S v Vogel Fertilizer Co 455 VS 16 26

1982 That standard could not be met on the basis of the record established

in this proceeding

The major focus of many of the comments submitted in support of

the proposed amendments has been to argue the virtues of deregulation

27 F M C
134 FEDERAL MARITIME COMMISSION

generally or specifically in the U SlPuerto Rico Virgin Islands trades S

and the alleged disadvantage that Sea Land s FMC regulated services are

experiencing vis a vis those regulated by the ICC Whatever the merits

of these arguments and the commentators offer differing and opposing

views they do not address the central issue raised by the rulemaking

or the more critical questions posed by the Commission in its January

Notice The issue here is not whether existing rate regulation is good

or bad or having an adverse impact on carriers subject to it but rather

whether the deregulation contemplated by the Sea Land proposals can

properly be effected within the framework of the current statutorily man

dated scheme It is on this point that the record in this proceeding fails

to provide critical information The comments favoring the rulemaking gen

erally consist of little more than broad conclusory statements of position

on the desirability of the Sea Land proposals None of these comments

is informative or responsive to the January Notice to the extent that they

explain how the Commission could adopt the Sea Land proposals and still

make a meaningful assessment of general rate increases consistent with

statutory requirements See generally Farmers Union Cent Exchange v

F E R C 734 F 2d 1486 D C Cir 1984 Cross Sound Ferry Services

Inc v IC C No 83 2155 D C Cir July 6 1984

The Commission notwithstanding its efforts to give interested parties

every opportunity to do so has simply not been provided with the manner

or method by which it can accommodate Sea Land s proposals and at

the same time carry out its statutory duty to oversee the validity of general

rate increases The proposals would simply leave the Commission in the

position of being unable to review and make reasoned decisions with

respect to these rate increases within the required statutory time frame

CONCLUSION

The record of this proceeding does not demonstrate any legal or factual

basis upon which the Commission could properly adopt the proposals under

consideration

THEREFORE IT IS ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

The level of competition in the U S Puerto Rico Virgin Islands trades is offered as a reason for reducing

or eliminating existing rate regulation While the Commission recognizes the competitive realities of this trade

it must also be recognized that Congress was aware of the extent of such competition when If formulated

the 1978 amendments to the ISA which established the substance of the present regulatory approach See

S Rep No 1240 95th Cong 2d Sess 2 3 1978

27 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1102

APPLICATION OF UNITED STATES ATLANTIC GULF JAMAICA

AND HISPANIOLA STEAMSHIP FREIGHT ASSOCIATION AND SEA

LAND SERVICE INC FOR THE BENEFIT OF UNITED BRANDS

FOR CHIQUITA INTERNATIONAL TRADING CO

ORDER DENYING PETITION FOR RECONSIDERATION

October 12 1984

On June 15 1984 the Commission served an Order Partially Adopting

Initial Decision in this proceeding 26 F M C 605 1984 The Order af

firmed the Initial Decision s grant of permission to Sea Land Service Inc

Sea Land as a member of the United States Atlantic and Gulf Jamaica

and Hispaniola Steamship Freight Association the Freight Association

to refund freight charges on certain shipments of pineapple pursuant to

section 18 b 3 of the Shipping Act 1916 46 US C 817 b 3 How

ever we reversed the Initial Decision to the extent it permitted such refunds

on shipments that occurred more than 180 days prior to the filing of

Sea Land s application because section 18 b 3 explicitly requires that an

application for refund or waiver of freight charges must be filed within

one hundred and eighty days from the date of shipment

Sea Land and the Freight Association filed on July 16 1984 a Petition

for Reconsideration of the Commission s Order The Petition alleges errors

of fact and law by the Commission I The arguments of law have primary

importance concerning as they do the extent of our special docket

jurisdiction under section 18 b 3

The Commission is well aware that Nepera Chemical Inc v FMC

662 F 2d 18 D C Cir 1981 Nepera instructs us to administer the

provisions of section 18 b 3 with the goal of effectuating whenever pos

sible the statute s remedial purposes Nepera holds that the corrective tariff

that is one of the statute s four jurisdictional requirements need not state

with mathematical exactitude the refund or waiver rate so long as it fairly

reflects the original intentions of the carrier and the shipper The Petition

would have the Commission apply a similar liberal construction of the

jurisdictional requirement at issue here However unlike the statutory lan

guage involved in Nepera the rate upon which such refund or waiver

1 To the extent the Petition alleges errorsof law it is subject to summary rejection Rule 261 of the Com

mission s Rules of Practice and Procedure governing petitions for reconsideration 46 C F R l502 26I does

not penn it such allegations Filing of Petitions for Reconsideration and Stay 22 F M C 351 1979 However

the Commission will waive the requirements of Rule 261 and consider the Petition on its merits

1l
136 FEDERAL MARITIME COMMISSION

would be based 180 days is a precise term that is not amenable to

a variety of interpretations 2

The Congress had to choose a cut off date

beyond which the Commission would not be authorized to consider refund

or waiver applications in order to eliminate stale or dated claims To

a certain extent such a date or time period will always be somewhat

arbitrary and can lead to arbitrary results Nevertheless Congress has ex

pressed its will by specifying a deadline of 180 days and the Commission

does not believe the holding or rationale of Nepera would support a result

in this case that evades or ignores that requirement 3

The Petition contends that a waiver of the l80 day requirement is

supported by Pacific Westbound Conference for the Benefit of Minnesota

Mining Manufacturing Co 2i S R R 793 1982 and Pacific Westbound

Conference for the Benefit of Mitsui and Co U SA inc 25 F M C

350 21 S R R 1275 1982 To the extent those decisions conflict in

part with the result in this case they are overruled Finally the factual

error alleged by the Petition i e that there may have been other shippers

shipping pineapple before the l80 day deadline who would benefit from

an extension of that deadline is actually dependent upon a favorable resolu

tion of the legal issue i e that the Commission has the power to grant

such an extension However the Commission has concluded that we have

no such power

THEREFORE IT IS ORDERED That the Petition for Reconsideration

is hereby denied

By the Commission

S FRANCIS C HURNEY

Secretary

2

It should be noted that while the Commission in other cases has calculated the 180 days liberally in

order to grant relief to shippen e

g

Sea Land Service Inc for the Benefit of GF Tujague Inc 22 S R R

619 1984 there is no dispute oruncertainty overthat calculation here

3

Even ifit is assumed arguendo that Nepera does apply to the 18O day requirement that would not change

the result here IfSea Land s application had involved shipments that had depaned only one or two days

beyond the deadline and if the canier had furnished a satisfactory explanation why its application had been

delayed a Commission order granting the application as it applied to such shipments might be consistent

with Nepera But the facts in this case are quite different Sea Land s

application was filed on November

9 1983 The ISOday period mandated by section 18 b 3 extended back to May 13 1983 Of the 38 ship

ments of pineapple listed on the application only five that sailed on May 14 were within the deadline The

other shipments were dated May 7 April 30 and April 9 1983 i e 186 193 and 214 days before the filing

of the canier s application Granting the application as it applies to those shipments would stretch the 180

day requirement beyond recognition paniculady where the canier baa furnished no explanation why the filing

of its application was delayed for so long Sea Land and the other memben of the Freight Association cor

rected theerroneous rate on May S 1983 and the new rate took effect ten days later

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 48

ALASKA MARITIME AGENCIES INC ET AL

v

PORT OF ANACORTES ET AL

NOTICE

October 15 1984

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

4 1984 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 FRANCIS C HURNEY

Secretary

27 F M C 137
FEDERAL MARITIME COMMISSION

DOCKET NO 83 48

ALASKA MARITIME AGENCIES INC ET AL

v

PORT OF ANACORTES ET AL

F Conger Fawcett forcomplainants

Frederick L Shreves II for port of Hueneme Port of Long Beach Port of Los Angeles

Port of Oakland Port of Richmond Port of San Diego Port of San Francisco and Encinal

Terminals respondents

John W Angus III for Port of Anacortes Port of Astoria Port of Bellingham Port

of Everett Port of Grays Harbor Port of Longview Port of Olympia Port of Port Angeles

Port of Portland Port of Seattle Port of Tacoma and Port of Vancouver respondents

Perrin Love forthe Port of Anchorage respondent

Edward J Sheppard Nfor Port of Sacramento respondent

Dennis Lindsay for Bunge Corporation Cargill Inc Columbia Grain Inc Continental

Grain Company and United Grain Corporation respondents

W Martin Tellegan forthe Port of Benicia respondent

David E Schricker forthe Port of Redwood City respondent

Bruce H Jackson forthe Port of Stockton respondent

Cyrus C Guidry for the Board of Commissioners of the Port of New Orleans intervenor

Carl S Parker Jr for the Board of Trustees of the Galveston Wharves intervenor

J Alton Boyer for the Association of Ship Brokers and Agents U S A Inc intervenor

Aaron W Reese as Hearing Counsel intervenor

INITIAL DECISION 1 AND ORDER APPROVING SETTLEMENT OF

JOSEPH N INGOLIA ADMINISTRATIVE LAW JUDGE

Finalized October 15 1984

This proceeding began as a complaint initially filed by twenty four steam

ship agencies against thirty two public or quasi public port and terminal

facilities located on the West Coast of the United States 2

The complaint

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

mission Rule 227 Rules of Practice and Procedure 46 CFR S02 227

2

The complainants named were Alaska Maritime Agencies Inc Cascade Shipping Co Dodwell of Wash

ington Fred F Noonan Company Inc Freighters Company Fritz Maritime Agencies General Steamship

Corporation Ltd Green Ocean Agencies Hapag L1oyd Agencies International Shipping Company Inc

Interocean Steamship Corporation Kerr Steamship Company Inc Lilly Shipping Agencies Matson Agen

cies Inc Monitor Steamship Agency Inc Murphy Shipping Co

Inc Nonh Star Terminal Stevedoring

Co Nonon Lilly Co Olympic Steamship Company Inc Seaspray Steamship Agency Inc Sunrise

Shipping Agency Inc Transmarine Navigation Corporation Transpacific Transponation Company and Wil

liams Dimond Co

138 27 F M C
ALASKA MARITIME AGENCIES INC ET AL V PORT OF 139

ANACORTES ET AL

alleges that the Respondents tariff provisions and practices purport

ing to hold agents liable as principals for portterminal charges constituted

a violation of sections 16 and 17 of the Shipping Act 1916 It also

alIeges that section 15 of the Shipping Act was violated because the Re

spondents tariff provisions and practices were adopted and enforced

by colIective action which operate to the detriment of the commerce

of the United States and are contrary to public policy and therefore

contrary to the public interest Parentheses supplied In the Answer

to the Complaint alI of the respondents denied that there was any violation

of sections 15 16 and 17 of the Shipping Act 1916 and the case proceeded

with initial discovery requests There were also several petitions to intervene

which were acted upon

3

Due to the number of parties involved as welI as the number of counsel

this proceeding was welI monitored from its inception and several prehearing

conferences were held Through the efforts of the parties and their counsel

it become apparent early that there was a possible basis of settlement

and that the settlement should be explored before large expenditures of

time and money were made in discovery Several meetings were held

and ultimately alI of the parties generalIy agreed to settlement of these

cases on the folIowing basis

1 The tariffs involved will be rewritten and filed in accordance

with the agreements made between the parties upon final approval

by the Commission

2 On the effective date of the tariffs the Complainants will file

a motion to withdraw the complaints and dismiss this proceeding

with prejudice in accordance with the terms of the settlement

agreement

3 If in good faith after using its best efforts to implement and

operate under the provisions of the agreements any party wishes

to withdraw and cancel the agreement as to that party only

it may do so upon 60 days written notice delivered by certified

mail to alI parties

In our view the agreements here should be approved In essence the

parties rather than elect the long and costly legal process that might be

The respondents named were Port of Anacortes Port of Anchorage Port of Astoria Port of Bellingham

Benicia Port Tenninal Co Port of Everett Port of Greys Harbor Hueneme Port of Oxnard Harbor Port

of Long Beach Port of Longview Port of Los Angeles Port of Oakland Port of Olympia Port of Port

Angeles Port of Portland Port of Redwood City Port of Richmond Port of Sacramento Port of San Diego

Port of San Francisco Port of Seattle Port of Stockton Port of Tacoma Port of Vancouver Washington

Encinal Tenninals Bunge Grain Tenninal Cargill Incorporated Columbia Grain Inc Continental Grain

Company Los Angeles Harbor Grain Tenninal Stockton Elevators and United Grain Corporation

3

Petitions to Intervene were filed by Hearing Counsel the Port of New Orleans Galveston Wharves and

the Association of Shipbrokers and Agents All the petitions were acted upon in various ways as disclosed

in the record Their disposition is not material to this Decision and Order

27 F M C
140 FEDERAL MARITIME COMMISSION

1

1

involved 4 have first chosen to be innovative by filing new tariffs While

there is no assurance that the provisions in the new tariffs will resolve

all the issues involved it is our view that if the parties approach the

problems which might arise reasonably and in good faith where they have

control over each set of circumstances the results may be much better

than they would be under some inflexible legal rule of thumb Whatever

the ultimate result we compliment all the parties and their counsel in

this proceeding for their effort in effecting a viable settlement of which

we approve Wherefore it is

Ordered that the agreements entered into by the parties are hereby

approved and after final Commission approval shall be implemented within

the time periods set forth in the agreements themselves It is

Further Ordered that the record does not now indicate that there are

either any issues remaining in this proceeding that need to be decided

or that any party desires any further trial Therefore there is no need

to set down a date for hearing Should any party disagree he is hereby

ordered to file a trial brief no later than September 17 1984 indicating

the precise issue to be tried the law upon which he relies the number

and identity of witnesses the estimated time the trial will take and any

other matter he deems pertinent If any further trial is necessary it will

not affect or delay the approval ofthe settlements herein involved

S JOSEPH N INGOLIA

Administrative Law Judge

4

At the time of settlement the parties to the proceeding had changed due to various circumstances There

were then twenty six complainants and thirty two respondents Beaufort Navigation Inc and Overseas Ship

ping Company were added to the original complainants Of the original respondents Stockton Elevators is

no longer in business under that name and has been taken over by one of the five remaining grain elevators

who have agreed to this settlement Los Angeles Harbor Grain Terminal never appeared in the proceeding

and since the complainants will withdraw their complaint as to all respondents their absence as a party in

settlement is immaterial

5

Each of the agreements is made a part of this Initial Decision and Order Appl Oving Settlement by ref

erence Copies of the agreements are attached to those copies of this Decision and Order which are being

distributed to the Commission Those copies of this Decision and Order which arebeing served on the panies

do not have copies of the agreements lllChed since they are already in the possession of the parties and

or are pan of the public record of this proceeding

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 8414

FIL AMERICAN TRADING CO INC

v

THE MAERSK LINE STEAMSHIP COMPANY

NOTICE

October 17 1984

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

11 1984 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 FRANCIS C HURNEY

Secretary

27 F M C 141
FEDERAL MARITIME COMMISSION

NO 8414

FIL AMERICAN TRADING CO INC

v

i

THE MAERSK LINE STEAMSHIP COMPANY

i

Complainant did not comply with the provisions of tariff Rule 36 of the Pacific Westbound

Conference Local and Overland Freight Tariff No FMC 23 so cannot take advantage

of the tariff unitization allowance

The Statute of Limitations set forth in section 22 of the Shipping Act 1916 cannot and

should not be waived

Claims for damages with respect to shipments dated prior to March 26 1982 unless payment

of freight charges brings the claim into good standing are barred by the two year

statute of limitations of the Shipping Act 1916

Complainant s wi lingness to reevaluate its claim as well as restate it comes too late The

litigation should come to an end

Complainant cannot recover from respondent on the basis of a moral obligation it is not

recognized by the law as adequate to set in motion the machinery of justice

Robert V LoForti President FH American Trading Co Inc for Complainant

Karen S Ostrow and Marc J Fink Bi lig Sher Jones P C for Respondent

INITIAL DECISION 1 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Finalized October 17 1984

This complaint case was brought by the Fil American Trading Co Inc

against the Maersk Line Steamship Company alleging that the Fil American

Trading Co Inc has been subjected to the payment of rates for transpor

tation by the respondent which were when exacted unjust and unreasonable

in violation of section 18b 3 of the Shipping Act 1916

The complainant asserts the failure of Maersk Line to class shipments

per the Unitized Rule during the period ending August 5 1983 has resulted

in overcharges The complainant alleges that he has been damaged in the

sum of 10 256 15 and seeks reparation of that sum or such other sum

as the Commission may determine to be proper He seeks also an order

commanding the respondent to cease and desist from the alleged violations

of the Act and to establish and put in force and apply in future such

other rates as the Commission may determine to be lawful In addition

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

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

142
FIL AMERICAN TRADING CO INC V THE MAERSK LINE 143

STEAMSHIP COMPANY

the complainant asks the Commission to waive the two year Statute of

Limitations

Respondent in its answer and affirmative defense to the complaint filed

May 14 1984 denied the averments of the complaint except admitted

that it was subject to the Act and that the Unitized Rule was not applied

and pointed out the complainant had failed to attach the bills of lading

BACKGROUND

The complaint in this case on the stationery of Fil American Trading

Co Inc dated February 15 1984 was received in the Office of the

Secretary of this Commission on February 21 1984 Under date of March

5 1984 the Secretary sent the following

Mr Robert V LoForti

Returned herewith is your complaint against Maersk Line Steam

ship Company The following defects are noted

1 The complaint should be submitted in an original and 15 copies

2 A 50 00 filing fee should accompany the complaint

3 Many of the overcharge claims are clearly barred by the two

year statute of limitations this limitation cannot be waived

In addition it would be to your advantage to explain more

fully the nature of the complaint The mere allegation set forth

in Paragraph IV does not fully outline the violation alleged against

the carrier

The complaint with addendums to Paragraph IV was received in the

Office of the Secretary March 26 1984 On April 9 1984 the complaint

was served upon the respondent Maersk Line Steamship Company Notice

of the filing of the complaint and assignment of the Presiding Administrative

Law Judge was served April 11 1984 published in the Federal Register

Vol 49 No 75 Tuesday April 17 1984 page 15134

The Commission s Office of Energy and Environmental Impact under

date of April 24 1984 issued a categorical exclusion for this Docket

No 8414 having examined the subject proceedings and determined that

no environmental analysis need be undertaken nor environmental documents

prepared in connection with this docket

Attorney Ostrow telephoned the Presiding Administrative Law Judge on

April 24 1984 and advised she had just been retained by respondent

wanted enlargement of time to answer complaint She was directed to

put request in writing

On April 24 1984 the respondent through its counsel filed a motion

for an enlargement of time of three weeks from April 30 1984 to May

21 1984 in which to file its response to the complaint By notice served

April 25 1984 the time for filing a response to the complaint was extended

from April 30 1984 to May 14 1984
144 FEDERAL MARITIME COMMISSION

Respondent Maersk Line s Answer and Affirmative Defense was filed

May 14 1984 At the same time the respondent filed a motion to dismiss

the complaint for failure to state a claim upon which relief can be granted

Said motion was denied May 31 1984 because the hearing which will

be represented in writing had not been received and there was still the

possibility of amendment ofthe pleadings

By notice served May 15 1984 a prehearing conference was announced

pursuant to Rule 94 of the Commission s Rules of Practice and Procedure

46 CPR 502 94 to be held on Tuesday June 12 1984 in Washington

D C In a letter dated May 23 1984 received May 29 1984 the complain

ant stated among other things that regretfully the company has neither

the personnel nor the resources to permit attending either a prehearing

conference or a formal hearing in Washington and requested that any

hearings be conducted in San Francisco The prehearing conference sched

uled for June 12 1984 was cancelled by notice served May 31 1984

Upon review of the record herein up to above noted points the Presiding

Administrative Law Judge found and concluded and served notice May

31 1984 that this proceeding can and should be conducted without oral

testimony and cross examination The procedural schedule to be followed

enunciated Complainant s case to be submitted in writing on or before

June 22 1984 respondent to submit its case in opposition on or before

July 16 1984 the complainant to submit its closing brief on or before

July 26 1984

Complainant telephoned the Presiding Administrative Law Judge on June

5 1984 requesting an extension of time he was directed that he put

the request in writing

In a letter dated June 5 1984 the complainant requested a week s

extension to June 29 1984 to submit its case in writing

Complainant s case in writing dated June 19 1984 received June 20

1984

Respondent s attorney telephoned the President Administrative Law Judge

on July 10 1984 requesting extension of time to write brief She was

instructed to reduce the request to writing Respondent on July 10 1984

filed a motion for enlargement of time of two weeks from July 16 to

July 30 1984 in which to reply to complainant sreply to respondent s

motion to dismiss This motion was denied as the respondent s motion

to dismiss had been denied by notice served May 31 1984 reiterated

in notice served July 11 1984 In the notice served July 11 1984 each

party was granted additional time because of apparent misunderstanding

as follows Respondent to submit its case in opposition to complainant s

case on or before July 23 1984 complainant to submit its closing brief

on or before August 3 1984

In a letter dated July 16 1984 received July 19 1984 the complainant

wrote among other things he did not understand closing brief Answer
FIL AMERICAN TRADING CO INC V THE MAERSK LINE 145

STEAMSHIP COMPANY

to this procedural query was supplied by the Presiding Administrative Law

Judge served July 20 1984

Respondent filed Opposition to Complainant s Claim for Overcharges

July 23 1984

Complainant in a letter dated July 26 1984 received July 30 1984

made its last pleading in the case stating among other things Fil Amer

ican Trading Co Inc readily concedes that the Bills of Lading submitted

in support of our claim were not prepared properly for the then application

ofthe Unitized Rule This was error

The July 26 1984 letter of complainant also stated This is a restate

ment of our case and we again call to your attention that we deem

Maersk Line morally responsible to have discovered this error rather than

ourselves

From exhibits together with all papers and requests filed in this proceed

ing the Presiding Administrative Law Judge finds the following

Facts

The complaint is an exporter ofbooks and magazines from San Francisco

California to Bangkok Thailand

The respondent is a common carrier by water engaged in transportation

between San Francisco and Bangkok and as such is subject to the provisions

of the Shipping Act 1916 as amended admitted by respondent in its

answer to the complaint

The Conference s Unitized Rule was not applied Complaint and Answer

to Complaint Complainant wrote in his letter of July 26 1984 Fil

American Trading Co Inc readily concedes that the Bills of Lading submit

ted in support of our claim were not prepared properly for the then

application of the Unitized Rule

Discussion Reasons Findings and Conclusions

The complaint filed in this case contains a prayer that the Commission

will waive the two year State of Limitations The respondent in its Answer

denied that the Statute of Limitations set forth in section 22 of the Shipping

Act 1916 can or should be waived And respondent added as an affirma

tive defense the complaint is barred by the Statute of Limitations set

forth in section 22 of the Shipping Act 1916

Respondent s opposition to claim for overcharges received July 23 1984

points out that the complaint herein was filed March 26 1984 Accordingly

any claim for damages with respect to shipments dated prior to March

26 1982 is barred and must be denied The Presiding Judge adds unless

payments is later and precludes the tolling of the statute In support of

its position the respondent cites Fiat Allis France Materiels v Atlantic

Container Line Docket No 79 64 22 EM C 544 1980 which states

that under the Shipping Act 1916 the statute of limitations is jurisdic
146 FEDERAL MARITIME COMMISSION

tional Failure to comply with section 22 leaves the Commission without

power to order a

respondent to pay reparation And to show the statute

of limitations is tolled only by a filing of the complaint with the Commis

sion cites Kelco Division of Merck Co v Johnson ScanStar Docket

No 8073 23 F M C 849 1981

The complainant other than making the prayer in the complaint that

the Commission waive the two year statute oflimitations set forth in section

22 of the Shipping Act 1916 apparently has accepted that the prayer

cannot be granted The Presiding Administrative Law Judge agrees with

and accepts the position of the respondent Any shipments not paid for

subsequent to March 26 1982 are barred by the statute of limitations

under the two year statute of limitations of the Shipping act 1916

Among matters stated in the complainant s letter of June 19 1984 is

Enclosed please find copies of all the bills of lading applicable to our

complaint against Maersk Line Each one bears our notation of payment

by date and check number

The bills of lading submitted with the June 19 1984 letter total 103

The latter also says All of these bills of lading are listed by date

and number on a separate sheet noting the quantity of skids These are

then regrouped by date at prevailing rates with the applicable quantity

of skids multiplied by 189M3 and then totaled This constitutes the over

charge In order to prove our claim we are submitting 2 examples

of bills of lading after corrections had been made we are attempting

to offer proof of our claim by contrasting overcharged bills of lading

with one referring to the unitized rule

Respondent in its opposition to claim for overcharges filed July 23

1984 argues that the complainant has submitted two bills of lading which

pertain to shipments subsequent to the period for which it is claiming

overcharges Since the unitization allowance was applied to those shipments

Fil American apparently believes that these documents support its claim

The complainant is clearly mistaken in this regard however Indeed those

bills prove that no unitization allowance should be applied to the shipments

herein at issue

Respondent says further in order to take advantage of the unitization

allowance or discount a shipper is obligated to comply with the provisions

of Tariff Rule 36 of the Pacific Westbound Conference Local and Overland

Freight Tariff No FMC 23 that Fil American did not comply with the

provisions of Rule 36

The respondent further asserts even if Rule 36 did not preclude recovery

herein it is quite clear that Fil American has erroneously calculated any

alleged overcharges pointing out that Rule 36 5 provides that the actual

weight or measurement of the pallet as defined in this Rule shall be

excluded when computing freight charges and terminal receiving charges

but such exclusion shall not exceed ten percent 10 of the total gross

weight when cargo is freighted on a weight basis or the total gross
FIL AMERICAN TRADING CO INC V THE MAERSK LINE 147

STEAMSHIP COMPANY

measurement of the unit when cargo is freighted on a measurement basis

Fil American totally disregarded this 10 cap in calculating its claim for

overcharges

As examples the respondent referred to Bills of Lading Nos

No of

skids

10 of No of

Total Skids

Meas x 189

SFOF 60930 dated July 8 1983 2 2469 378

SFOF 61401 dated July IS 1983 2 2710 378

SFO F62051 dated July 30 1983 2 2993 378

Respondent says that in all three instances the measurement of the

pallets in the shipment 2 pallets x 189 378 exceeds 10 of the

measurement of the shipment Pursuant to Rule 36 5 the allowance in

each of those instances would be limited to that 10 cap Thus says

the respondent the complainant has grossly misstated the amount of any

overcharges

Fil American in its July 26 1984 letter states it is willing and able

to re evaluate the claim and also readily concedes that the Bills of Lading

submitted in support of its claim were not prepared properly for the

then application of the Unitized Rule This was error

Complainant is too late to make further amendments to its complaint

or restate its case It cannot be allowed because it would be unfair to

the respondent and would ignore that litigation after a reasonable time

should be completed That is the situation here The Presiding Administrative

Law Judge upon review of Rule 36 of Tariff No FMC 23 and the record

herein finds and concludes that the respondent s position is well taken

and adopts it

In an addendum to Paragraph IV of the complaint the complainant wrote

It is presumed that an established and experienced carrier such as Maersk

Line was aware that shipments were being delivered incorrectly classed

and therefore had the obligation to cause corrections to be instituted This

was not done This failure on the part of Maersk Line is the direct cause

of the overcharges payments for which Maersk Line accepted right along

FiI American claimed in its letter of June 19 1984 This company

has been a loyal client of Maersk Line for over thirty years and has

delivered skids for shipment in proper form for application of the unitized

rule for many years Maersk Line is under as much obligation to

correct overcharges as undercharges We find it difficult to envision that

the line would accept a bill of lading with the application of the unitized

rule if the skids were not in proper condition And in its letter of

July 26 1984 the complainant submitted that Maersk Line accepted

the incorrectly classed skids over a long period of time without initiating

any corrective or suggestive measures We deem Maersk Line morally

responsible to have discovered this error rather than ourselves
148 FEDERAL MARITIME COMMISSION

The 103 bills of lading submitted by the complainant contain the name

of the forwarding agent and on each bill of lading the forwarding agent

is the same Query does the claimant deem that forwarding agent to have

any responsibility or as much responsibility as complainant would place

on the respondent in such a situation as here presented

A moral obligation has been defined as a duty which one owes and

which he ought to perform but which he is not legally bound to fulfill

Black s Law Dictionary defines moral obligation as a duty which is valid

and binding in conscience and according to natural justice but is not

recognized by the law as adequate to set in motion the machinery of

justice that is one which rests upon ethical considerations alone and

is not imposed or enforced by positive law A duty which would be

enforceable by law were it not for some positive rule which with a

view to general benefit exempts the party in that particular instance from

legal liability Thus it is clear that the complainant cannot be served

by the claim of moral obligation

PH American in its July 26 1984 letter announced it is willing and

able to re evaluate the claim applying 10 reduction or reduction on the

basis of 189M3 as pertinent And called its July 26 1984 letter a restate

ment of its case However it did not change its basic case Today amend

ments to complaints are rather freely permitted Complainant did amend

the complaint once but further amendment under the circumstances is not

to be entertained

Upon consideration of the above and the record herein the Presiding

Administrative Law Judge finds and concludes in addition to the findings

and conclusions hereinabove that the complainant has not proved by a

preponderence of the evidence that he should recover in this case

Wherefore it is ordered

A Recovery is denied

B Proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge
FEDERAL MARITIME COMMISSION

DOCKET NO 83 50

JACKSONVILLE MARITIME ASSOCIATION INC AMOCO

TRANSPORT COMPANY AND McGlFFIN COMPANY INC

v

THE CITY OF JACKSONVILLE

ORDER DISMISSING COMPLAINT

October 31 1984

By complaint filed against the City of Jacksonville Florida Respondent

Jacksonville Maritime Association Inc Amoco Transport Company and

McGiffin Company Inc Complainants alleged that the establishment

of an ordinance providing for a User Fee on vessels anchored in storage

on the Saint John s River and the assessment of that Fee on five tankers

laid up in storage in the Saint John s River violated section 17 of the

Shipping Act 1916 the Act 46 U S C 816 1 The Commission s Bureau

of Hearing Counsel Delta Steamship Lines Inc Trailer Marine Transport

Corporation and Crowley Towing and Transportation Co intervened in

the proceeding

Administrative Law Judge Charles E Morgan issued an Initial Decision

in which he dismissed the complaint with respect to the five tankers

but retained jurisdiction over the Respondent under sections 1 and 17

of the Act until Respondent amended its User Fee ordinance to preclude

its application on common carriers by water anchored in the river while

engaged in the transportation of property

The proceeding is before the Commission on Exceptions of Hearing

Counsel

BACKGROUND

Five tankers the AMOCO MILFORD HA VEN owned by Complainant

Amoco Transport Company Inc the OLYMPIC GATE the OLYMPIC

GAMES the OLYMPIC GRACE and the OLYMPIC DESTINy the own

ers of which were represented by Complainant McGiffin Company were

1 Section 17 provides inrelevant part that

E very other person subject to this Act shall establish observe and enforce just and reasonable

regulations and practices relating to or connected with the receiving handling storing or delivering

of property 46 V S c 816

The Shipping Act of 1984 46 V S c

app 1701 generally superseded the Shipping Act 19 6 46 V S C

801 as it applies to the ocean foreign commerce Section lO d 1 of the 1984 Act 46 V S C app

1709 d 1 contains substantially the same provisions as section 17 of the 9 6Act

27 F M C 149
150 FEDERAL MARITIME COMMISSION

anchored and resting on the bottom in ballast in the Saint John s River

from about December 3 1981 through December 15 1983

In May 1982 Respondent enacted an ordinance providing for the assess

ment of a User Fee on vessels of more than 100 feet primarily used

for the transportation of goods and passengers anchored in storage in

the Saint John s River for more than 48 hours Excluded are ships anchored

for repairs or being repaired at a shipyard The fee amounts to fifty cents

per foot per day with a maximum charge of two hundred and fifty dollars

per day A fine of five hundred dollars per day is provided for non

payment after collection is attempted 2 Respondent collected approximately

five hundred thousand dollars in User Fees from the owners of the five

tankers in question

The Jacksonville Maritime Association Inc and others challenged the

reasonableness of the ordinance in a civil action filed in the United States

District Court for the Middle District of Florida The Court deferred the

matter to the primary jurisdiction of the Commission and dismissed the

case without prejudice 3 Thereupon on October 13 1983 Complainants

filed their complaint with the Commission

DISCUSSION

The threshold issue to be determined in this proceeding is whether Re

spondent the City of Jacksonville through its User Fee ordinance is

furnishing terminal facilities to common carriers by water so as to be

subject to regulation as an other person subject to the Act within the

meaning of section 1 thereof Section I defines the term other person

as any person not included in the term common carrier by water carrying

on the business of furnishing terminal facilities in connection

with a common carrier by water 46 U S C 801

No party to this proceeding argues that anchorage in the river is of

itself a terminal operation or that the lay up of vessels in the river is

the form of storage recognized to be a terminal facility 4

The Commission

has by rule defined a terminal facility as

one or more structures comprising a terminal unit and include

wharves warehouses covered andor open storage spaces

cold storage plants grain elevators andor bulk cargo loading and

or unloading structures landings and receiving stations used for

2Qrdinance No 82419 162 amending Chapter 310 Ordinance Code of the City of Jacksonville effective

May 19 1982

3

Jacksonville Maritime Association

Inc

et 01 v City of Jacksonville 51 F Supp 1130 M D Fla 1982

Complainants also filed suit in the Circuit Court of Duval County Florida challenging the ordinance as an

invalid tax under the laws of the State of Florida

4

Furnishing of warehouse orother terminal facility has been described as

receipt of custody of property from a common carrier by water or its agent after unloading at

a dock or pier and keeping custody thereof within the geographic confmes of an ocean terminal

facility such as a warehouse adjacent to the dock or pier until custody of the property is relin

quished to an inland carrier or to the consignee Investigation of Storage Practices 6 F M B 301

at 313314 1961

27 F M C
JACKSONVILLE MARITIME ASSOC INC AMOCO TRANSPORT 151

CO McGIFFIN CO INC V CITY OF JACKSONVILLE

the transmission care and convenience of cargo and or passengers

in the interchange of the same between land and water carriers

or between two water carriers 46 CF R 515 6

5

The Presiding Officer based his finding of jurisdiction over the Respond

ent on the premise that the language of the ordinance was susceptible

of being interpreted to include common carriers by water anchored in

the river in the regular course of their business of receiving or delivering

property at terminal facilities This conclusion was reached by a strict

construction of the ordinance requiring that any ambiguity be construed

against the drafter

However the ordinance appears to be more specific than given credit

by the Presiding Officer Although it does not specifically exclude from

its coverage common carriers anchored in the river while awaiting servicing

at a terminal facility the User Fee is applicable not to every vessel anchored

in the river for more than 48 hours but only those anchored in storage

Unless the plain meaning produces unreasonable results ordinary words

ought to be given their conventional meaning especially when such interpre

tation reflects the stated purpose of the statute or ordinance involved In

its ordinary meaning the term anchored in storage refers to vessels

laid up and out of navigation rather than to ships actively engaged in

the transportation of property This interpretation reflects the stated purpose

of the ordinance here that is discouraging the laying up of vessels in

storage in the Saint John s River

Moreover there also is no evidence showing that Respondent used the

ordinance as a means of controlling access to terminal facilities Intervenors

Delta Steamship Lines Inc Trailer Marine Transport Corporation and

Crowley Towing and Transportation Co concede that none of their vessels

which called at the Port of Jacksonville was assessed the User Fee Further

it is noted that the penalty for failure to pay the User Fee is a fine

and not a prohibition against the use of the port s terminal facilities 6

This would distinguish the User Fee here from the matter at issue

in Louis Dreyfus Corp v Plaquemines Port Harbor and Terminal District

25 F MC 59 1982 a decision relied upon by both Complainants and

Intervenors 7

Therefore there is no evidence to support a conclusion that Respondent

is furnishing terminal facilities in connection with common carriers by

water engaged in the transportation of property within the meaning of

section 1 of the Act and consequently no basis on this record for asserting

5

See also 46 C F R 572 104 0

6The authority to collect the fee is conferred upon the City of Jacksonville s Parking Officer rather than

upon the Jacksonville Port Authority

7In the Louis Dreyfus Corp decision the Commission held that an entity which conditions access to termi

nal facilities upon thepayment of a fee is itself deemed to be furnishing terminal facilities

27 F M C
152 FEDERAL MARmME COMMISSION

jurisdiction over the City of Jacksonville s The complaint in this proceeding

will therefore be dismissed for lack of jurisdiction

THEREFORE IT IS ORDERED That the complaint filed in this proceed

ing is dismissed

By the Commission

S FRANCIS C HURNEY

Secretary

I

s

Subsequent to the Commission s meeting of October 3 1984 in this malter the City of Jacksonville by

leller dated October 2 1984 submilled a copy of Ordinance 84994S03 which makes the User Fee inap

plicable to common carriers engaged inthe normal course of business of receiving or delivering commercial

cargoes at terminal facilities of the Pon of JacksonviUe This removes any doubt as to the present intended

scope of Respondent s User Fee ordinance

i

j

I

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PARTS 500505

DOCKET NO 8420 FOR PART 505

FINAL RULES IN SUBCHAPTER A GENERAL AND

ADMINISTRATIVE PROVISIONS

ACTION

SUMMARY

DATE

November 5 1984

Final Rules

The Federal Maritime Commission is making substantive

changes to its standards of conduct for employees in

Part 500 and in section 502 32 and purely technical

non substantive changes to the rest of Subchapter A in

volving general and administrative rules of the agency

The parts affected by this rulemaking are Part 500 Em

ployee Responsibilities and Conduct Part 501 Official

Seal Part 502 Rules of Practice and Procedure Part

503 Public Information Part 504 Procedures for Envi

ronmental Policy Analysis and Part 505 Compromise

Assessment and Settlement of Civil Penalties The new

Part 505 finalizes a previously published proposed rule

Except for Part 507 a new proposed rule involving

handicapped persons employed by the agency and which

will not become final until 1985 the revision of all

of Subchapter A is now completed

Effective December 6 1984

SUPPLEMENTARY INFORMATION

Revisions to all of Subchapter A were previously made by publication

of a final rule on April 23 1984 49 FR 16994 and a proposed rule

completely revising Part 505 compromise of penalties was published on

May 3 1984 49 FR 18874 with a correction on June 1 1984 49 FR

22837

In addition to making necessary substantive changes to Part 500 stand

ards of conduct as well as to parallel provisions in section 502 32 and

finalizing the proposed rule on Part 505 a further review of all regulations

in conjunction with the passage of the Shipping Act of 1984 on March

20 1984 has revealed the necessity for further technical changes These

rules therefore finalize all of subchapter A under the revision program

Le Parts 500505 inclusive and are being set forth here in their entirety

New Part 507 now a proposed rule dealing with handicapped employees

will become final in 1985

l7RUr l i
154 FEDERAL MARITIME COMMISSION

Accordingly extensive changes in form beyond those made in the pre

vious final rules are being made to improve style readability and under

standability No changes in substance however are included except in

Part 500 and its counterpart in section 502 32 Because most of the parts

affected involve purely internal agency matters anellor the changes are mere

ly technical or stylistic the rules are promulgated as final without the

need for comments although their effective date will be 30 days after

publication in the Federal Register

The technical and style changes to all the rules reflect changes in nomen

clature and Commission organization correction of typographical errors

and removal of superfluous verbiage Outdated and obsolete provisions have

also been deleted To assist the user various subdivisions of sections have

been restructured and renumbered to facilitate citation Also changed where

feasible are citations to other laws required by recodifications and other

statutory changes references to the obsolete General Order system Pro

vided howevers and gender specific terms

A part by part analysis of other changes follows

PART 500

EMPLOYEE RESPONSIBILITIES AND CONDUCT

The revisions to Part 500 are being made in order to clarify the Commis

sion s general Standards ofConduct Prior to this revision the Commission s

regulations reflected almost word for word the language used in President

Johnson s Executive Order 11222 of May 8 1965 and the implementing

regulations of the Office of Personnel Management at 5 CPR Part 735

The precise application of some of these regulations to the Commission

has not always been clear Thus this revision constitutes a clarification

of existing policy and in some respects substantive changes It also imple

ments certain requirements of the Ethics in Government Act

The revisions of Part 500 are deemed necessary in order to ensure

the integrity of the agency and its individual employees to conform to

the spirit of the Executive Order and to provide maximum guidance to

Commission employees

PART 501

OFFICIAL SEAL OF THE FEDERAL MARITIME COMMISSION

The only changes made to this part are statutory citations to reflect

changes in law

PART 502

RULES OF PRACTICE AND PROCEDURE

The major changes to this part reflect the changes to Part 500 involving

practice by former Commission employees before the F M C in section

502 32 which tracks the new restrictions in section 500 12 as well as
FINAL RULES IN SUBCHAPTER A GENERAL AND 155

ADMINISTRATIVE PROVISIONS

structural changes to among others Subparts S and T to accommodate

the policy of the Shipping Act of 1984 to allow claims or complaints

against any person who may have violated the provisions of the new

statute

Otherwise changes to this part clarify existing regulations as well as

reflect new provisions of the Shipping Act of 1984 and style and technical

changes referred to above Some forms have been revised to reflect some

of the changes in procedure occasioned by the Shipping Act of 1984

PART 503

PUBLIC INFORMATION

In addition to style and technical changes described above section 503 91

containing a table of OMB control numbers under the Paperwork Reduction

Act for all parts in Chapter IV is being deleted because such numbers

will now appear in the final section for each individual part affected

PART 504 PREVIOUSLY PART 547

PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS

In this part no changes other than technical and style changes described

above are being made

PART 505

COMPROMISE ASSESSMENT SETTLEMENT AND COLLECTION OF

CIVIL PENALTIES

This part was the subject of proposed rulemaking in Docket No 84

20 published in the Federal Register on May 3 1984 49 FR 18874

with comments invited The only comment received was from the National

Maritime Council which stated that the proposed rule if finalized

should allow a more expeditious and fair handling of penalty claims

Accordingly no substantive changes are being made A note has been

added at the end of the rule indicating that the part is not subject to

review by the Office of Management and Budget under the Paperwork

Reduction Act

The Federal Maritime Commission has determined that these rules are

not major rules as defined in Executive Order 12291 dated February

17 1981 because none of them will result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

7PMr
156 FEDERAL MARITIME COMMISSION

The Chairman of the Federal Maritime Commission certifies that none

of these rules will have a significant economic impact on a substantial

number of small entities including small businesses small organizational

units and small governmental jurisdictions

List of subjects in Subchapter A General and Administrative Provi

sions

46 CFR Part 500

Conduct standards Government employees

46 CFR Part 501

Seals and insignias

46 CFR Part 502

Administrative practice and procedure Reporting and recordkeeping re

quirements

46 CFR Part 503

Classified information Freedom of Information Privacy Sunshine Act

46 CFR Part 504

Energy conservation Environmental protection Reporting and record

keeping requirements

46 CFR Part 505

Fines and penalties

CORRECTIONS

These final rules are subject to review and editing of form before

publication in the Code of Federal Regulations Users are requested

to notify the Commission of any omissions and typographical

type errors in order that corrections can be made before the Com

mission s CFR book goes to press in January 1985

Therefore for the reasons discussed in the preamble and pursuant to

the authority set forth in the Authority Citation for each part Title 46

Code of Federal Regulations Parts 500 501 502 503 504 and 505 are

revised to read as follows

27 F M C
Sec

500 101

500 102

500 103

50014

50015

500 106

500 1 07

500 1 08

500 109

500 201

500 202

50023

500 204

500 205

500 206

500 207

500 208

500 209

50021

500 211

500 212

FEDERAL MARITIME COMMISSION

46 CFR PART 500

EMPLOYEE RESPONSIBILITIES AND CONDUCT

SUBPART AGENERAL PROVISIONS

Purpose

Definitions

Reserved

Reserved

Interpretation and advisory service

Reviewing statements and reporting conflicts of interest

Disciplinary and other remedial action

Conflicts of interest

Rereading the Standards of Conduct

SUBPART B GENERAL STANDARDS OF CONDUCT

Proscribed actions

Gifts entertainment and favors

Outside employment and other activity

Financial interests

Use of Government property

Misuse of information

Indebtedness

Gambling betting and lotteries

General conduct prejudicial to the Government

Miscellaneous statutory provisions

Release of confidential or nonpublic information

Post employment conflict of interest restriction of activities of

certain Federal employees procedures

SUBPART C SPECIAL GOVERNMENT EMPLOYEES STANDARDS

OF CONDUCT

500 301

50032

500 303

50034

50035

Application to special Government employees

Special Government employees Use of Government employ

ment

Special Government employees Use of inside information

Special Government employees Coercion

Special Government employees Gifts

27 F M C 157
158 FEDERAL MARITIME COMMISSION

SUBPART DSTATEMENTS OF EMPLOYMENT AND FINANCIAL

INTERESTS EXECUTIVE PERSONNEL FINANCIAL DISCLOSURE

REPORTS

Sec

500 401 Reserved

500 402 Reserved

500 403 Persons required to submit Statements of Employment and Finan

cial Interests

500 404 Reserved

1

500 405 Time and place for submission of Statements of Employment

I and Financial Interests

500 406 Annual Statements and Termination Reports

500 407 Interests to be reported in Statements of Financial Interests and

Annual Statements

500 408 Information not known by the person reporting

500 409 Information exempted

50041 Confidentiality of Statements

500411 Conduct employment or holdings otherwise prohibited and re

porting otherwise required by law

1

500412 Executive Personnel Financial Disclosure Reports SF 278

AUTHORITY 46 U S C app 1111 18 V S C 207 208 5 CPR Part

735 E O 11222 of May 8 1965 30 PR 6469 3 CPR 1965 Supp

SUBPART AGENERAL PROVISIONS

5oo 101 Purpose

The maintenance of unusually high standards of honesty integrity impar

tiality and conduct by Government employees and special Government

employees is essential to assure the proper performance of the Government

business and the maintenance of confidence by citizens in their Government

The avoidance of misconduct and conflicts ofinterest on the part of Govern

ment employees and special Government employees through informed judg

ment is indispensable to the maintenance of these standards Reorganization

Plan No 7 of 1961 which established the Federal Maritime Commission

and section 201 b of the Merchant Marine Act of 1936 46 VS C app

1111 b provide that officials or employees of the Commission are prohib

ited from employment with or to bave any pecuniary interest in or hold

any official relationship with carriers by water shipbuilder contractors

or other persons firms associations or corporations with whom the Commis

sion may have business relations The following sections of this part are

in accordance with the requirements of the Office of Personnel Manage

ment s

regulations 5 CPR Part 735 under Executive Order 11222 dated

May 8 1965

500 102 Definitions

I

27 F M C
EMPLOYEE RESPONSIBILITIES AND CONDUCT 159

For the purposes of this part

a Commission means the Federal Maritime Commission unless other

wise designated

b Employee means an employee of the Commission but does not

include a special Government employee

c Executive Order means Executive Order 11222 of May 8 1965

d OPM means the United States Office of Personnel Management

e Person means an individual a corporation a

company an associa

tion a firm a partnership a society a joint stock company a foreign

government or any other organization or institution

f Special Government employee means a special Government em

ployee as defined in section 202 of Title 18 United States Code who

is employed in the executive branch but does not include a member of

the uniformed services as defined in section 2101 of Title 5 United States

Code

500 103 Reserved

500 104 Reserved

500 105 Interpretation and advisory service

a The Chairman of the Commission shall designate an employee with

the appropriate legal experience and in whom he or she has complete

personal confidence to be the Counselor for the Commission on matters

in connection with the regulations in this part The Counselor shall also

serve as the Commission s designee to OPM on matters covered by the

regulations in this part The Counselor shall exercise responsibility for

effectuation and coordination of the Commission s

regulations and provide

counseling and interpretations on questions of conflicts of interest and other

matters covered by the regulations in this part

b The Chairman of the Commission shall designate one or more Deputy

Counselors who shall be qualified and in a position to give authoritative

advice and guidance on questions of conflicts of interest and on other

matters covered by this part

c Employees and special Government employees shall be notified of

the availability of counseling services and of how and where these services

are available This notification shall be made within ninety 90 days after

approval of the regulations in this part and periodically thereafter In the

case of a new employee or special Government employee appointed after

this notification notification shall be made at the time of his or her entrance

on duty

500 106 Reviewing statements and reporting conflicts ofinterest

a There is hereby established a system for the review of Statements

of Employment and Financial Interests Annual Statements and Executive

Personnel Financial Disclosure Reports submitted under Subpart D of this

part This system of review is designed to disclose conflicts of interest

or apparent conflicts of interest on the part of employees or special Govern

ment employees

27 F M C
I

1

160 FEDERAL MARITIME COMMISSION

b The Counselor or Deputy Counselor shall review each such Statement

and Report Whenever it appears to the Counselor that a Statement or

Report contains evidence of a conflict of interest he or she shall notify

the person signing that statement and shall discuss with him or her the

information which gives rise to the apparent or real conflict and offer

him or her an opportunity to explain the conflict or appearance of conflict

Ifthe conflict or appearance of conflict is not resolved after this discussion

the information concerning the conflict or appearance of conflict shall be

reported to the Chairman ofthe Commission by the Counselor

500 107 Disciplinary and other remedial action

a A violation of the regulations in this part by an employee or special

Government employee may be cause for an appropriate disciplinary action

which may be in addition to any penalty prescribed by law

b If after consideration of the explanation of the employee as provided

in 500 106 and the Chairman decides that remedial action is required

the Chairman shall take immediate action to end the conflicts or appearance

of conflicts of interest Remedial action whether disciplinary or otherwise

shall be effected in accordance with any applicable laws executive orders

and regulations and may include but is not limited to

1 Changes in assigned duties

2 Divestment by the employee or special Government employee of

his or her conflicting interest

3 Disciplinary action or

4 Disqualification for a particular assignment

500 108 Conflicts ofinterest

A Commission employee s or special Government employee s financial

or pecuniary interest in an entity regulated by the Commission such as

e gocean common carriers ocean freight forwarders and marine terminal

operators including their parent companies shall be deemed to create

a conflict ofinterest A Commission employee or special Government em

ployee shall also be deemed to have a conflict of interest if a member

of his or her immediate household is employed by an entity regulated

by the Commission and his or her professional duties or assignments relate

to or involve that family member s employer

500 109 Rereading the Standards of Conduct

It is the responsibility ofevery Commission employee and special Govern

ment employee to become familiar with the Commission s Standards of

Conduct and to reread them at least once a

year

SUBPART BGENERAL STANDARDS OF CONDUCT

500 201 Proscribed actions

An employee shall avoid any action whether or not specifically prohibited

by this subpart which might result in or create the appearance of

a Using public office for private gain

27 F M C
EMPLOYEE RESPONSIBILITIES AND CONDUCT 161

b Giving preferential treatment to any person

c

Impeding Government efficiency or economy

d Losing complete independence or impartiality

e Making a Government decision outside official channels or

f Affecting adversely the confidence of the public in the integrity

of the Government

500 202 Gifts entertainment and favors

a Except as provided in paragraphs b and e of this section an

employee shall not solicit or accept directly or indirectly any gift gratuity

favor entertainment loan or any other thing of monetary value from

a person who

1 Has or is seeking to obtain contractual or other business or financial

relations with the Commission

2 Conducts operations or activities that are regulated by the Commis

sion or

3 Has interests that may be substantially affected by the performance

or nonperformance of the employee s official duty

b Exceptions to paragraph a of this section are as follows

1 This section shall not be construed to proscribe conduct involving

obvious family or personal relationships such as those between the parents

children or spouse of the employee and the employee when the cir

cumstances make it clear that it is those relationships rather than the busi

ness of the persons concerned which are the motivating factors

2 Under this section Commission employees are permitted to accept

food and refreshments of nominal value on infrequent occasions in the

ordinary course of a luncheon or dinner meeting or other meeting or on

an inspection tour where an employee may properly be in attendance

3 Under this section employees are permitted to accept loans from

banks or other financial institutions on customary terms to finance proper

and usual activities of employees such as home mortgage loans

4 Under this section employees shall be permitted to accept unsolicited

advertising or promotional material such as pens pencils note pads cal

endars and other items of nominal intrinsic value

c An employee shall not solicit contributions from another employee

for a gift to an official superior make a donation as a gift to an official

supervisor or accept a gift from an employee receiving less pay than

himself or herself 5 U S C 7351 except that this paragraph does not

prohibit the use of a completely voluntary gift of nominal value or donation

in a nominal amount made on a special occasion such as marriage illness

or retirement

d An employee shall not accept a gift present decoration or other

thing from a foreign government unless authorized by Congress as provided

by the Constitution and by section 7342 of Title 5 United States Code

e Neither this section or 500 203 precludes an employee from receipt

of bona fide reimbursement unless prohibited by law for expenses of

7FMC
162 FEDERAL MARITIME COMMISSION

travel and such other necessary subsistence as is compatible with this

part for which no Government payment or reimbursement is made However

this paragraph does not allow an employee to be reimbursed or payment

to be made on his behalf for excessive personal living expenses gifts

entertainment or other personal benefits nor does it allow an employee

to be reimbursed by a

person for travel on official business under agency

orders when reimbursement is proscribed by Decision B 128527 of the

Comptroller General dated March 7 1967 46 Compo Gen 689

500 203 Outside employment and other activity

a An employee shall not engage in outside employment or other outside

activity not compatible with the full and proper discharge of the duties

and responsibilities of his or her Government employment Incompatible

activities include but are not limited to

l Acceptance of a fee compensation gift payment of expenses or

any other thing of monetary value in circumstances in which acceptance

may result in or create the appearance of conflicts of interest or

2 Outside employment which tends to impair the employee s mental

or physical capacity to perform his or her Government duties and respon

sibilities in an acceptable manner

b An employee shall not receive any salary or anything of monetary

value from a private source as compensation for his or her services to

the Government 18 U S C 209 This paragraph does not apply to special

Government employees

c Employees are encouraged to engage in teaching lecturing and writ

ing that is not prohibited by law the Executive Order or the regulations

in this part However an employee shall not either for or without com

pensation engage in teaching lecturing and writing including teaching

lecturing or writing for the purpose of the special preparation of a person

or class of persons for an examination of OPM or Board of Examiners

for the Foreign Service that is dependent on information obtained as

a result of the employee s Government employment except when that infor

mation has been made available to the general public or will be made

available on request or when the Chairman gives written authorization

for the use of nonpublic information on the basis that the use is in the

public interest In addition an employee who is a Presidential appointee

covered by section 401 a of the Executive Order shall not receive com

pensation or anything ofmonetary value for any consultation lecture discus

sion writing or appearance the subject matter of which is devoted substan

tially to the responsibilities programs or operations of the Commission

or which draws substantially on official data or ideas which have not

become part of the body ofpublic information

d Reserved

e This section does not preclude an employee from

1 Participation in the activities of national or State political parties

not proscribed by law or

711Uf
EMPLOYEE RESPONSIBILITIES AND CONDUCT 163

2 Participation in the affairs of or acceptance of an award for a meritori

ous public contribution or achievement given by a charitable religious

professional social fraternal nonprofit educational and recreational public

service or civic organization

500 204 Financial interests

a An employee shall not

1 Have a direct or indirect financial interest in an entity regulated

by the Commission as set forth in 500 108

2 Have a direct or indirect financial interest that conflicts substantially

or appears to conflict substantially with his or her Government duties

and responsibilities or

3 Engage in directly or indirectly a financial transaction as a result

of or primarily relying on information obtained through his or her Govern

ment employment

b This section does not preclude an employee from having a financial

interest or engaging in financial transactions to the same extent as a private

citizen not employed by the Government so long as it is not prohibited

by law the Executive Order the regulations contained in 5 CFR Part

735 or the regulations in this part

500 205 Use of Government property

An employee shall not directly or indirectly use or allow the use of

Government property of any kind including property leased to the Govern

ment for other than officially approved activities An employee has a

positive duty to protect and conserve Government property including equip

ment supplies and other property entrusted or issued to him or her

500 206 Misuse of information

For the purpose of furthering a private interest an employee shall not

except as provided in 500 203 c directly or indirectly use or allow

the use of official information obtained through or in connection with

his or her Government employment which has not been made available

to the general public

500 207 Indebtedness

An employee shall pay each just financial obligation in a proper and

timely manner especially one imposed by law such as Federal State

or local taxes For the purpose of this section a just financial obligation

means one acknowledged by the employee or reduced to judgment by

a court or one imposed by law such as Federal State or local taxes

and in a proper and timely manner means in a manner which the

Commission determines does not under the circumstances reflect adversely

on the Government as his or her employer In the event of dispute between

an employee and an alleged creditor this section does not require the

Commission to determine the validity or amount of the disputed debt

27 EMC
164 FEDERAL MARITIME COMMISSION

500 208 Gambling betting and lotteries

An employee shall not participate while on Government owned or leased

property or while on duty for the Government in any gambling activity

including the operation of a gambling device in conducting a lottery or

pool in a game for money or property or in selling or purchasing a

numbers slip or ticket However this section does not preclude activities

a Necessitated by an employee s law enforcement duties or

b Under section 3 of Executive Order 10927 or similar Commission

approved activities

500 209 General conduct prejudicial to the Government

An employee shall not engage in criminal infamous dishonest immoral

or notoriously disgraceful conduct or other conduct prejudicial to the Gov

ernment

1 500 210 Miscellaneous statutory provisions

Each employee shall acquaint himself or herself with each statute that

relates to his or her ethical and other conduct as an employee of this

Commission and of the Government The attention of Commission employ

ees is directed to the outside employment restriction in 46 U S C app

1111 b and the following statutory provisions relating to ethical and other

conduct

a House Concurrent Resolution 175 85th Congress 2d Session 72A

Stat B12 Code ofEthics for Government Service

b Chapter 11 of title 18 United States Code relating to bribery graft

and conflicts of interest as appropriate to the employees concerned

c The prohibition against lobbying with appropriated funds 18 U S C

1913

d The prohibitions against disloyalty and striking 5 U S C 7311 18

U S C 1918

e The prohibition against the employment of a member of a Communist

organization 50 U S C 784

f The prohibition against 1 the disclosure of classified information

18 U S C 798 50 U S C 783 and 2 the disclosure of confidential

information 18 U S C 1905

g

The provision relating to the habitual use of intoxicants to excess

5 U S C 7352

h The prohibition against the misuse of a Government vehicle 31

U S C 638a c

i The prohibition against the misuse of the franking privilege 18 U S C

1719

j

The prohibition against the use of deceit in an examination or person

nel action in connection with Government employment 18 U S C 1917

k The prohibition against fraud or false statements in a Government

J1atter 18 U S C 101

1 The prohibition against mutilating or destroying a public record 18

U S C 2071

27 F M C
EMPLOYEE RESPONSIBILITIES AND CONDUCT 165

m The prohibition against counterfeiting and forging transportation re

quests 18 U S C 508

n The prohibition against 1 embezzlement of Government money or

property 18 U S c 641 2failing to account for public money 18

U S C 643 and 3 embezzlement of the money or property of another

person in the possession of an employee by reason of his orher employment

18 U S C 654

0 The prohibition against unauthorized use of documents relating to

claims from or by the Government 18 U S C 285

p

The prohibition against certain political activities in Subchapter III

of Chapter 73 of Title 5 US c and 18 U S C 602 603 607 and 608

q

The prohibition against an employee acting as the agent of a foreign

principal registered under the Foreign Agents Registration Act 18 US c

219

5oo 211 Release of confidential or nonpublic information

An employee shall not divulge to any unauthorized person any nonpublic

or confidential Commission document or information including the results

of portions of Commission meetings closed to the public pursuant to 46

CPR 503 Subpart H and comments made information divulged or memo

randa prepared incidental to such closed meetings except pursuant to the

procedure of 5 U S C 552 552a and 552b and 46 CPR 503 or as specifi

cally directed by the Commission Employees are also reminded of the

provisions of 555 and 555 6 of this Chapter which relate to confiden

tiality of information obtained in the course of official Commission audits

and which provide for penalties for disclosure of confidential information

500 212 Post employment conflict of interest restriction of activities

of certain Federal employees procedures

Title V of the Ethics in Government Act proscribes certain actIVItIes

by certain former federal employees 18 U S C 207 The full text of

the statute OPM regulations and examples of how the restrictions and

basic procedures apply are available from the Ethics Counselor In summary

as applied to former Commission employees the restrictions and basic

procedures are as follows

a Restrictions

1 No former Commission employee may represent in any formal or

informal appearance or make any oral or written communication with intent

to influence a U S Government agency in a particular matter involving

a specific party or parties in which the employee participated personally

and substantially while with the Commission

2 No former Commission employee may within two years of terminat

ing Commission employment act as arepresentative in the manner described

in paragraph a of this section as to a particular matter which was actually

pending under the employee s official responsibility within one year prior

to termination of the employment

27 F M C
166 FEDERAL MARITIME COMMISSION

3 Former senior Commission employees defined as Commissioners

and members of the Senior Executive Service as designated by the Office

of Government Ethics under 18 U S C 207 d 1 may not for two years

after terminating Commission employment assist in representing a person

by personal presence at an appearance before the Government on a matter

in which the former employee had participated personally and substantially

while at the Commission

4 Former senior Commission employees as defined in paragraph c

of this section are barred for one year from representing parties before

the Commission or communicating with intent to influence the Commission

regardless ofprior involvement in the particular proceeding

b Prior consentfor appearance

1 Prior to making any appearance representation or communication

described in paragraph a of this section and in addition to the require

ments of Subpart B of the Commission s Rules of Practice 502 21

502 32 of this chapter every former employee must apply for and obtain

prior written consent of the Commission for each proceeding or matter

in which such appearance representation or communication is contemplated

Such consent will be given only if the Commission determines that the

appearance representation or communication is not prohibited by the Act

this section or other provisions of this chapter

2 To facilitate the Commission s determination that the intended activity

is not prohibited applications for written consent shall

i

Be directed to the Commission state the former connection of the

applicant with the Commission and date of termination of employment

and identify the matter in which the applicant desires to appear and

ii Be accompanied by an affidavit to the effect that the matter for

which consent is requested is not amatter in which the applicant participated

personally and substantially while at the Commission and as made applica

ble by paragraph a of this section that the particular matter as to which

consent is requested was not pending under the applicant s official respon

sibility within one year prior to termination of employment and that the

matter was not one in which the former employee had participated person

ally and substantially while at the Commission The statements contained

in the affidavit shall not be sufficient if disproved by an examination

of the files and records of the case

3 The applicant shall be promptly advised as to his or her privilege

to appear represent or communicate in the particular matter and the applica

tion affidavit and consent or refusal to consent shall be filed by the

Commission in its records relative thereto

c Basic procedures for possible violations The following basic guide

lines for administrative enforcement of restrictions on post employment

activities are designed to expedite consultation with the Director of the

Office of Government Ethics as required pursuant to section 207 j

of

Title 18 United States Code

27 F M C
EMPLOYEE RESPONSIBILITIES AND CONDUCT 167

1 Delegation The Chairman may delegate his or her authority under

this subpart

2 Initiation of administrative disciplinary hearing

i On receipt of information regarding a possible violation of 18 U S C

207 and after determining that such information appears substantiated the

Chairman shall expeditiously provide such information along with any

comments or agency regulations to the Director of the Office of Govern

ment Ethics and to the Criminal Division Department of Justice The

Commission shall coordinate any investigation or administrative action with

the Department of Justice to avoid prejudicing criminal proceedings unless

the Department of Justice communicates to the Commission that it does

not intend to initiate criminal prosecution

ii Whenever the Commission has determined after appropriate review

that there is reasonable cause to believe that a former Commission employee

has violated any provision of paragraph a of this section or 18 U S C

207 a b or c it may initiate an administrative disciplinary proceeding

by providing the former Commission employee with notice as defined in

paragraph c 3 of this section

3 Adequate notice

i The Commission shall provide a former Commission employee with

adequate notice of an intention to institute a proceeding and an opportunity

for a hearing

ii Notice to the former Commission employee must include

A A statement of allegations and the basis thereof sufficiently detailed

to enable the former Commission employee to prepare an adequate defense

B Notification of the right to a hearing and

C An explanation of the method by which a hearing may be requested

4 Presiding official

i

The presiding official at a proceeding under this section shall be

an individual to whom the Chairman has delegated authority to make an

initial decision hereinafter referred to as examiner

ii The examiner must be a Commissioner other than the Chairman

an administrative law judge or an attorney employed by the Commission

and shall be provided with appropriate administrative and secretarial support

by the Commission

iii The presiding official shall be impartial No individual who has

participated in any manner in the decision to initiate a proceeding may

serve as an examiner in that proceeding

5 Time date and place

i The hearing shall be conducted at a reasonable time date and place

ii In setting a hearing date the presiding official shall give due regard

to the former Commission employee s need for

A Adequate time to prepare a defense properly and

B An expeditious resolution of allegations that may be damaging to

his or her reputation

27 F M C
168 FEDERAL MARITIME COMMISSION

6 Hearing rights A hearing shall include at a minimum the following

rights

i To represent oneself or to be represented by counsel

ii To introduce and examine witnesses and to submit physical evidence

Hi To confront and cross examine adverse witnesses

iv To present oral argument and

v To receive a transcript or recording of the proceedings on request

7 Burden ofproof In any hearing under this subpart the Commission

has the burden of proof and must establish substantial evidence of a viola

tion

8 Initial decision

i The examiner shall make a determination on matters exclusively of

record in the proceeding and shall set forth in the decision all findings

of fact and conclusions of law relevant to the matters at issue

ii Within a reasonable period of the date of an initial decision as

set by the Commission either PartY may appeal the decision solely on

the record to the Chairman The Chairman shall base his or her decision

solely on the record of the proceedings or those portions thereof cited

by the parties to limit the issues

Hi If the Chairman modifies or reverses the initial decision he or

she shall specify such findings of fact and conclusions of law as are

different from those of the examiner

9 Administrative sanctions The Chairman may take appropriate action

in the case of any individual who was found in violation of 18 U S C

207 a b or c or the provisions of paragraph a of this section

after a final administrative decision or who failed to reque5t a hearing

after receiving adequate notice by

i Prohibiting the individual from making on behalf of any other person

except the United States any formal or informal appearance before or

with the intent to influence any oral or written communication to the

Commission on any matter of business for a period not to exceed five

5 years which may be accomplished by directing Commission employees

to refuse to participate in any such appearance or to accept any such

communication or

ii Taking other appropriate disciplinary action

10 Judicial review Any person found to have participated in a violation

of 18 U S C 207 a b or c or the provisions of paragraph a of

this section may seek judicial review of the administrative determination

11 Consultation and review The procedures for administrative enforce

ment set forth in this section have been reviewed by the Director of

the Office of Government Ethics

27 FM C
EMPLOYEE RESPONSIBILITIES AND CONDUCT 169

SUBPART C SPECIAL GOVERNMENT EMPLOYEES STANDARDS

OF CONDUCT

500 301 Application to special Government employees

Unless specifically excepted by rule or by the Chairman of the Commis

sion the General Standards of Conduct contained in subpart B hereof

500 201 to 500 212 apply to special Government employees Each

special Government employee shall acquaint himself or herself with the

General Standards with each statute that relates to his or her ethical and

other conduct as a special Government employee of the Commission and

the Government and with the following minimum standards of this subpart

governing the ethical and other conduct of special Government employees

500 302 Special Government employees Use of Government employ

ment

A

special Government employee shaH not use his or her Government

employment for a purpose that is or gives the appearance of being moti

vated by the desire for private gain for himself herself or another person

particularly one with whom he or she has family business or financial

ties

50033 Special Government employees Use of inside information

Except as provided in 500 203 c a special Government employee shall

not use inside information obtained as a result of his or her Government

employment for private gain for himself herself or another person either

by direct action on his or her part or by counsel recommendation or

suggestion to another person particularly one with whom he or she has

family business or financial ties For the purpose of this paragraph inside

information means information obtained under Government authority which

has not become part of the body of the public information

500 304 Special Government employees Coercion

A special Government employee shall not use his or her Government

employment to coerce or give the appearance of coercing a

person to

provide financial benefit to himself herself or another person particularly

one with whom he or she has family business or financial ties

50035 Special Government employees Gifts

Except as provided in 500 203 b a special Government employee

while so employed or in connection with his or her employment shall

not receive or solicit from a person having business with the Commission

anything of value as a gift gratuity loan entertainment or favor for

himself herself or another person particularly one with whom he or she

has family business or financial ties

27 F M C
i

I

J

I

i

i

170 FEDERAL MARITIME COMMISSION

SUBPART DSTATEMENTS OF EMPLOYMENT AND FINANCIAL

INTERESTS EXECUTIVE PERSONNEL FINANCIAL DISCLOSURE

REPORTS

500 401 Reserved

500 402 Reserved

500 403 Persons required to submit Statement of Employment and Finan

cial Interests

a The Chairman the Commissioners and all employees and special

Government employees of the Commission without exception shall file

Statements of Employment and Financial Interests and Annual Statements

b Any employee or special Government employee who thinks his or

her position has been improperly included under these regulations as one

requiring the submission of a Statement ofEmployment and Financial Inter

ests and Annual Statements is entitled to a revi w of this determination

500 404 Reserved

500 405 Time and place for submission of Statements of Employment

and Financial Interests

All Statements of Employment and Financial Interests shall be submitted

to the Counselor designated under 500 105 within thirty 30 days of

the effective date of the employee s appointment except that special Gov

ernment employees shall submit such Statements on or prior to the effective

date oftheir appointment

500 406 Annual Statements and Termination Reports

a Changes in or additions to employment and financial interests shall

be reported in an Annual Statement to be filed no later than May 15

of each year the reporting period being the previous calendar year except

that special Government employees shall submit such Annual Statements

no later than fifteen 15 calendar days following any change in or addition

to their employment or financial interests

b Notwithstanding the filing of the Annual Statement required by this

section each employee and special Government employee shall at all times

avoid acquiring a financial interest that could result or taking an action

that would result in a violation of the conflict ofinterest provisions of

section 208 of Title 18 United States Code or Subpart B of this part

c A Termination Report must also be filed upon an employee s termi

nation of employment the reporting period being the time whicti has not

been covered by the previous initial or supplementary statement

500 401 Interests to be reported in Statements of Financial Interests and

Annual Statements

Each Statement of Employment and Financial Interests and each Annual

Statement shall include all the employment and financial interests of the

person reporting as well as all employment and financial interests of such

person s

spouse minor child or other member of the immediate household

For the purpose of this section members of the immediate household

27 F M C
EMPLOYEE RESPONSIBILITIES AND CONDUCT 171

means those blood relatives of the person reporting who are residents

of the person s household With respect to each position or financial interest

reported in the Statement of Employment and Financial Interests and the

Annual Statements the person reporting shall specify whether such position

or financial interest is held by a the person reporting b the spouse

c aminor child or d a blood relative residing in the household

50048 Information not known by the person reporting

If any information required to be included in a Statement of Employment

and Financial Interests or an Annual Statement including holdings placed

in trust is not known to the person reporting but is known to another

person the person reporting shall request such other person to submit

information on his or her behalf

50049 Information exempted

The regulations in this subpart do not require a person to submit any

information in an Annual Statement of Employment and Financial Interests

or in an Annual Statement relating to any connection with or interest

in a professional society or a charitable religious social fraternal rec

reational public service civic or political organization not conducted as

a business enterprise For the purpose of this section education and other

institutions doing research and development or related work involving grants

of money from or contracts with the Government are deemed business

enterprises and are required to be included in a person s Statement of

Employment and Financial Interests and in the Annual Statement

50041 Confidentiality ofStatements

The Commission shall hold each Statement of Employment and Financial

Interests and each Annual Statement in the strictest confidence The Com

mission shall not disclose any information contained in such Statements

except as provided by law To ensure confidentiality the Counselor author

ized in 500 105 to retain and review the Statements shall be the sole

custodian of the Statements and shall not disclose or authorize disclosure

of information contained therein except to carry out the purposes of this

part

500411 Conduct employment or holdings otherwise prohibited and re

porting otherwise required by law

The submission of a Statement of Employment and Financial Interests

or Annual Statement as required by this subpart does not in any way

excuse the person submitting such Statement from violations of the criminal

provisions of section 208 of Title 18 United States Code the provisions

of section 201 b of the Merchant Marine Act 1936 46 U S C 1111 b

or the provisions of Subpart B of this Part Moreover the submission

of any such Statement is in addition to and not in substitution for or

in derogation of any similar reporting requirement imposed by law order

or regulation

27 F M C
172 FEDERAL MARITIME COMMISSION

500412 Executive Personnel Financial Disclosure Reports SF 278

a Background The Ethics in Government Act of 1978 P L 95 521

the Act prescribes a public financial disclosure reporting requirement

for certain officers and employees in addition to other requirements of

this subpart The requirements and procedures are set forth in detail in

the Act as well as in implementing regulations of the Office of Government

Ethics 5 CPR Part 734 This section will not reiterate these detailed

requirements nor the instructions for filing that are contained in the Execu

tive Personnel Financial Disclosure Report SF 278

b Employees Required to File The following Commission employees

are required to file the Executive Personnel Financial Disclosure Report

1 The five Commissioners

2 Officers and employees including special Government employees

who have served in their position for sixty one 61 days or more during

the preceding calendar year whose positions are classified and paid at

GS 16 or above of the General Schedule or whose basic rate of pay

under other pay schedules is equal to or greater than the rate for GS

16 This category includes employees of the Senior Executive Service as

designated by the Office of Government Ethics under 18 U S C 207 d I

3 Officers or employees in any other position determined by the Director

of the Office of Government Ethics to be of equal classification to GS

16

4 Administrative law judges

5 Employees in the excepted service in positions which are of a con

fidential or policymaking character including confidential assistants to the

Commissioners unless their positions have been excluded by the Director

of the Office of Government Ethics

6 The Designated Agency Ethics Counselor

c Time ofFiling

1 Initial appointment Within five 5 days after transmittal by the

President to the Senate of the nomination to a position described in para

graph b 1 of this section or within thirty 30 days after first assuming

a position described in paragraphs b 2 b 3 b 4 b 5 or b 6

of this section a SF 278 must be filed

2 Incumbents No later than May 15 annually a SF 278 must be

filed by incumbents of any of the positions listed in Paragraph b of

this section

3 Terminations No later than thirty 30 days after an incumbent of

a position listed in Paragraph b of this section terminates that position

the individual shall file a SF 278

d Place of Filing All reports required to be filed by this section

shall be submitted on or before the due date to the designated Agency

Ethics Counselor

27 F M C
EMPLOYEE RESPONSIBILITIES AND CONDUCT 173

e Where to Seek Help To seek assistance in completing the Executive

Personnel Financial Disclosure Report an employee may contact the Com

mission Ethics Counselor or the Deputy Ethics Counselor

f Failure to Submit Report Falsification of or knowing or willful

failure to file or report information required to be reported by section

202 of the Act may subject the individual to a civil penalty and to internal

disciplinary action as well as criminal penalties under 18 D S C 1001

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 501

OFFICIAL SEAL OF THE FEDERAL MARITIME COMMISSION

Sec

501 1 Purpose

501 2 Description

5013 Design

AUTHORITY 46 U S C app 1111 and 1114 Reorganization Plan No

7 of 1961 26 FR 7315 August 12 1961

501 1 Purpose

To prescribe and give notice of the official seal of the Federal Maritime

Commission

501 2 Description

a Pursuant to section 201 c of the Merchant Marine Act 1936 as

amended 46 U S C app 1111 c the Federal Maritime Commission hereby

prescribes its official seal as adopted by the Commission on August 14

1961 the design of which is illustrated below and described as follows

1 A shield argent paly of six gules a chief azure charged with a

fouled anchor or shield and anchor outlined of the third on a wreath

argent and gules an eagle displayed proper all on a gold disc within

a blue border encircled by a gold rope outlined in blue and bearing

in white letters the inscription Federal Maritime Commission in upper

portion and 1961 in lower portion

2 The shield and eagle above it are associated with the United States

of America and denote the national scope of maritime affairs The outer

rope and fouled anchor are symbolic of seamen and waterborne transpor

tation The date 1961 has historical significance indicating the year

in which the Federal Maritime Commission was created

5013 Design

17Ll I auf
Sec

502 1

502 2

502 3

502 4

502 5

502 6

502 7

502 8

502 9

502 10

502 11

502 21

502 22

502 23

502 24

502 25

502 26

502 27

502 28

502 29

502 30

502 31

502 32

FEDERAL MARITIME COMMISSION

46 CFR PART 502

RULES OF PRACTICE AND PROCEDURE

SUBPART AGENERAL INFORMATION

Scope of rules in this part

Mailing address hours filing of documents

Compliance with rules or orders of Commission

Authentication ofrules or orders of Commission

Reserved

Reserved

Documents in foreign languages

Denial ofapplications and notice thereof

Suspension amendment etc of rules in this part

Waiver of rules in this part

Disposition of improperly filed documents and ex parte commu

nications

SUBPART B APPEARANCE AND PRACTICE BEFORE THE

COMMISSION

Appearance

Authority for representation

Notice of appearance written appearance substitutions

Practice before the Commission defined

Presiding officer defined

Attorney at law

Persons not attorneys at law

Firms and corporations

Hearings

Suspension or disbarment

Statement of interest

Former employees

Exhibit No 1 to Subpart B 502 23 502 26 502 27 Notice of

Appearance

502 41

502 42

502 43

502 44

SUBPART C PARTIES

Parties how designated

Hearing Counsel

Substitution of parties

Necessary and proper parties in certain complaint proceedings

17
SUBPART EPROCEEDlNGS PLEADINGS MOTIONS REPLIES

502 61 Proceedings

502 62 Complaints and fee

502 63 Reparation statute of limitations

502 64 Answer to complaint

502 65 Replies to answers not permitted

502 66 Order to show cause

502 67 Proceedings under section 3 a of the Intercoastal Shipping Act

1933

Declaratory orders and fee

Petitionsgeneral and fee

Amendments or supplements to pleadings

Bill of particulars

Petition for leave to intervene

Motions

Replies to pleadings motions applications etc

Proceedings involving assessment agreements

176

I

j

I

Sec

5021

502 52

502 53

502 54

502 55

i

j

i 502 68

502 69

502 70

502 71

502 72

502 73

502 74

502 75

FEDERAL MARITIME COMMISSION

SUBPART RULEMAKING

Petition for issuance amendment or repeal of rule

Notice of proposed rulemaking

Participation in rulemaking

Contents of rules

Effective date ofrules

Exhibit No 1 to Subpart E 502 62 Cotnplaint Form and Information

Checklist

Exhibit No 2 to Subpart E 502 64 Answer to Complaint

Exhibit No 3 to Subpart E 502 72 Petition for Leave to Intervene

502 91

502 92

502 93

502 94

502 95

SUBPART FSETTLEMENT PREHEARING PROCEDURE

Opportunity for informal settlement

Special docket applications and fee

Satisfaction ofcomplaint

Preheating conference

Preheating statements

Exhibit No I to Subpart F 502 92 Application for Refund of or Waiver

for Freight Changes due to TariffError

27 F M C
Sec

502 10 I

502 102

502 103

502 104

502 105

RULES OF PRACTICE AND PROCEDURE 177

SUBPART G TIME

Computation

Enlargement of time to file documents

Reduction oftime to file documents

Postponement of hearing

Waiver of rules governing enlargements of time and postpone

ments ofhearings

SUBPART H FORM EXECUTION AND SERVICE OF DOCUMENTS

502 111 Form and appearance ofdocuments filed with Commission

502 112 Subscription and verification of documents

502 113 Service by the Commission

502 114 Service and filing by parties

502 115 Service on attorney or other representative

502 116 Date of service

502 117 Certificate of service

502 118 Copies ofdocuments for use ofthe Commission

502 131

502 132

502 133

502 134

502 135

502 136

SUBPART I SUBPENAS

Requests issuance

Motions to quash or modify

Attendance and mileage fees

Service of subpenas

Subpena of Commission staff personnel documents or things

Enforcement

SUBPART J HEARINGS PRESIDING OFFICERS EVIDENCE

502 141 Hearings not required by statute

502 142 Hearings required by statute

502 143 Notice ofnature of hearing jurisdiction and issues

502 144 Notice of time and place of hearing

502 145 Presiding officer

502 146 Commencement of functions of Office of Administrative Law

Judges

Functions and powers

Consolidation ofproceedings

Disqualification of presiding or participating officer

Further evidence required by presiding officer during hearing

Exceptions to rulings of presiding officer unnecessary

Offer of proof

Appeal from ruling of presiding officer other than orders of

dismissal in whole or in part

502 147

502 148

502 149

502 150

502 151

502 152

502 153

27 F M C
178

i

I

Sec

502154

502 155

502 156

502157

502 158

502159

502 160

502 161

502 162

502 163

502164

502 165

502166

502167

502 168

502169

502181

50218

i

c

i

502 183

502184

502185

502 186

502 187

FEDERAL MARITIME COMMISSION

Rights of parties as to presentation ofevidence

Burden of proof

Evidence admissible

Written evidence

Documents containing matter not material

Reserved

Records in other proceedings

Commission s files

Stipulations

Receipt of documents after hearing

Oral argument at hearings

Official transcript

Corrections of transcript

Objection to public disclosure of information

Copies of data or evidence

Record of decision

SUBPART K5HORTENED PROCEDURE

Selection of cases for shortened procedure consent required

Complaint and memorandum of facts and arguments and filing

fee

Respondent s answering memorandum

Complainant s memorandum in reply

Service of memoranda upon and by interveners

Contents ofmemoranda

Procedure after filing of memoranda

SUBPART L DEPOSITIONS WRITTEN INTERROGATORIES AND

DISCOVERY

502 201

502 202

502 203

502 204

502 205

I

502 206

I

502 207

502 208

502 209

502 210

General provisions governing discovery

Persons before whom depositions may be taken

Depositions upon oral examination

Depositions upon written interrogatories

Interrogatories to parties

Production of documents and things and entry upon land for

inspection and other purposes

Requests for admission

Use of discovery procedures directed to Commission staff person

nel

Use of depositions at hearings

Refusal to comply with orders to answer or produce documents

sanctions enforcement

27 F MC
Sec

502 221

502 222

502 223

502 224

502 225

502 226

502 227

502 228

502 229

502 230

502 241

502 242

502 243

502 251

502 252

502 253

RULES OF PRACTICE AND PROCEDURE 179

SUBPART M BRIEFS REQUESTS FOR FINDINGS DECISIONS

EXCEPTIONS

Briefs requests for findings

Requests for enlargement oftime for filing briefs

Decisions administrative law judges

Separation of functions

Decisions contents and service

Decision based on official notice public documents

Exceptions to decisions or orders of dismissal of administrative

law judges replies thereto and review of decisions or orders

of dismissal by Commission

Request for enlargement of time for filing exceptions and replies

thereto

Certification of record by presiding or other officer

Reopening by presiding officer or Commission

SUBPART NQRAL ARGUMENT SUBMISSION FOR FINAL

DECISION

Oral argument

Submission to Commission for final decision

Participation of absent Commissioner

SUBPART OREPARATION

Proof on award of reparation

Reparation statements

Interest and attorney s fees in reparation proceedings

Exhibit No 1 to Subpart OReparation Statement to be Filed Pursuant

to Rule 252

502 261

502 262

SUBPART P RECONSIDERATION OF PROCEEDINGS

Petitions for reconsideration and stay

Reply

SUBPART QSCHEDULES AND FORMS

502 271 Schedule of information for presentation in regulatory cases

502 281

502 282

502 283

SUBPART R NONADJUDICATORY INVESTIGATIONS

Investigational policy

Initiation ofinvestigations

Order of investigation

27 F M C
180

Sec

502 284

502 285

502 286

502 287

502 288

502 289

502 290

502 291

FEDERAL MARITIME COMMISSION

By whom conducted

Investigational hearings

Compulsory process

Depositions

Reports

Noncompliance with investigational process

Rights ofwitness

Nonpublic proceedings

SUBPART S INFORMAL PROCEDURE FOR ADJUDICATION OF

SMALL CLAIMS

502 301 Statement of Policy

502 302 Limitations of actions

502 303 Reserved

502 304 Procedure and filing fee

502 305 Applicability of other rules of this part

Exhibit No 1 to Subpart S 50234 a Small Claim Form for Informal

Adjudication and Information Checklist

Exhibit No 2 to Subpart S Respondent s Consent Form for Informal

Adjudication 502 304 e

SUBPART T FORMAL PROCEDURE FOR ADJUDICATION OF

SMALL CLAIMS

502 311

502 312

502 313

502 314

502 315

502 316

502 317

502 318

502 319

502 320

502 321

502 401

502420

502 403

502 404

502 405

Applicability

Answer to complaint

Reply of complainant

Additional information

Request for oral hearing

Intervention

Oral argument

Decision

Date of service and computation of time

Service

Applicability of other rules ofthis part

SUBPART UCONCILIATlON SERVICE

Definitions

Policy

Persons eligible for service

Procedure and fee

Assignment of conciliator

27 F M C
RULES OF PRACTICE AND PROCEDURE

Sec

502 406 Advisory opinion

SUBPART V PAPERWORK REDUCTION ACT

502 991 OMB control numbers assigned pursuant to the Paperwork Re

duction Act

AUTHORITY 5 U S C 552 553 559 18 U S c 207 sees 18 20

22 27 and 43 of the Shipping Act 1916 46 U S C app 817 820

821 826 841 a sees 6 8 9 10 11 12 14 15 16 and 17 of the

Shipping Act of 1984 46 U S c app 1705 1707 1711 1713 1716 sec

204 b of the Merchant Marine Act 1936 46 U S C app 1114 b and

E O 11222 of May 8 1965 30 FR 6469

SUBPART AGENERAL INFORMATION

502 1 Scope of rules in this part

The rules in this part govern procedure before the Federal Maritime

Commission hereinafter referred to as the Commission under the Ship

ping Act 1916 Merchant Marine Act 1920 Intercoastal Shipping Act

1933 Merchant Marine Act 1936 Shipping Act of 1984 Administrative

Procedure Act and related acts except that Subpart R of this part does

not apply to proceedings subject to sections 7 and 8 of the Administrative

Procedure Act which are to be governed only by Subparts A to Q inclusive

of this part They shall be construed to secure the just speedy and inexpen

sive determination of every proceeding Rule 1

502 2 Mailing address hours filing of documents

a Documents required to be filed in and correspondence relating to

proceedings governed by this part should be addressed to Federal Maritime

Commission Washington D C 20573 The hours of the Commission

are from 8 30 am to 5 pm Monday to Friday inclusive unless otherwise

provided by statute or executive order

b Documents relating to matters pending before the Commission are

to be filed with the Office of the Secretary unless otherwise required

by 502 118 b 4 in the case of exhibits in formal proceedings Pleadings

correspondence or other documents relating to pending matters should not

be submitted to the offices of individual Commissioners Distribution to

Commissioners and other agency personnel is handled by the Office of

the Secretary to ensure that persons in decision making and advisory posi

tions receive in a uniform and impersonal manner identical copies of submis

sions and to avoid the possibility of ex parte communications within the

meaning of 502 11 b These considerations apply to informal and oral

communications as well such as requests for expedited consideration

Rule 2

502 3 Compliance with rules or orders of Commission

27 F M C

181
182 FEDERAL MARITIME COMMISSION

Persons named in a rule or order shall notify the Commission during

business hours on or before the day on which such rule or order becomes

effective whether they have complied therewith and if so the manner

in which compliance has been made If a change in rates is required

the notification shall specify the tariffs which effect the changes

Rule 3

502 4 Authentication ofrules or orders of Commission

All rules or orders issued by the Commission in any proceeding covered

by this part shall unless otherwise specifically provided be signed and

authenticated by seal by the Secretary of the Commission in the name

of the Commission Rule 4

502 5 Reserved

502 6 Reserved

502 7 Documents in foreign languages

Every document exhibit or other paper written in a language other

than English and filed with the Commission or offered in evidence in

any proceeding before the Commission under this part or in response to

any rule or order of the Commission pursuant to this part shall be filed

or offered in the language in which it is written and shall be accompanied

by an English translation thereof duly verified under oath to be an accurate

translation Rule 7

502 8 Denial of applications and notice thereof

Except in affirming a prior denial or where the denial is self explanatory

prompt written notice will be given of the denial in whole or in part

of any written application petition or other request made in connection

with any proceeding under this part such notice to be accompanied by

a simple statement of procedural or other grounds for the denial and

of any other or further administrative remedies or recourse applicant may

have where the denial is based on procedural grounds Rule 8

502 9 Suspension amendment etc ofrules in this part

The rules in this part may from time to time be suspended amended

or revoked in whole or in part Notice of any such action will be published

in the Federal Register Rule 9

502 10 Waiver of rules in this part

Except to the extent that such waiver would be inconsistent with any

statute any of the rules in this part except 502 11 and 502 153 may

be waived by the Commission or the presiding officer in any particular

case to prevent undue hardship manifest injustice or if the expeditious

conduct of business so requires Rule 10

502 11 Disposition of improperly filed documents and ex parte commu

nications

27 F M C
RULES OF PRACTICE AND PROCEDURE

a Documents not conforming to rules Any pleading document writing

or other paper submitted for filing which is rejected because it does not

conform to the rules in this part shall be returned to the sender

b Ex parte communications

1 No person who is a party to or an agent of a party to any proceeding

as defined in 502 61 or who directly participates in any such proceeding

and no interested person outside the Commission shall make or knowingly

cause to be made to any Commission member administrative law judge

or Commission employee who is or may reasonably be expected to be

involved in the decisional process of any such proceeding an ex parte

communication relevant to the merits of the proceedings

2 No Commission member administrative law judge or Commission

employee who is or may reasonably be expected to be involved in the

decisional process of any agency proceeding shall make or knowingly

cause to be made to any interested person outside the Commission or

to any party to the proceeding or its agent or to any direct participant

in a proceeding an ex parte communication relevant to the merits of

the proceeding This prohibition shall not be construed to prevent any

action authorized by paragraphs b 5 b 6 and b 7 of this section

3 Ex parte communication means an oral or written communication

not on the public record with respect to which reasonable prior notice

to all parties is not given but it shall not include requests for status

reports or communications regarding purely procedural matters or matters

which the Commission or member thereof administrative law judge or

Commission employee is authorized by law or these rules to dispose of

on an ex parte basis

4 Any Commission member administrative law judge or Commission

employee who is or may reasonably be expected to be involved in the

decisional process of any proceeding who receives or who makes or know

ingly causes to be made an ex parte communication shall promptly transmit

to the Secretary of the Commission

iAll such written communications

ii Memoranda stating the substance of all such oral communications

and

iii All written responses and memoranda stating the substance of all

oral responses to the materials described in paragraphs b 4 i and b 4 ii

of this section

5 The Secretary shall place the materials described in subparagraph

4 of this paragraph in the correspondence part of the public docket of

the proceeding and may take such other action as may be appropriate

under the circumstances

6 Upon receipt of an ex parte communication knowingly made or

knowingly caused to be made by a party to a proceeding the Commission

or the presiding officer may to the extent consistent with the interests

of justice and the policy of the statutes administered by the Commission

27 F M C

183
184 FEDERAL MARITIME COMMISSION

require the party to show cause why his or her claim or interest in the

proceeding should not be dismissed denied disregarded or otherwise ad

versely affected on account of the making of such communication

7 An ex parte communication shall not constitute a part of the record

for decision The Commission or the presiding officer may to the extent

consistent with the interests of justice and the policy of the statutes adminis

tered by the Commission consider a violation of paragraph b of this

section sufficient grounds for a decision adverse to a party who has know

ingly caused such violation to occur and may take such other action as

may be appropriate under the circumstances Rule 11

SUBPART B APPEARANCE AND PRACTICE BEFORE TIIE

COMMISSION

502 21 Appearance

a Parties A party may appear in person or by an officer partner

or regular employee of the party or by or with counselor other duly

qualified representative in any proceeding under the rules in this part

Any party or his or her representative may testify produce and examine

witnesses and be heard upon brief and at oral argument if oral argument

is granted

b Persons not parties One who appears in person before the Commis

sion or a representative thereof either by compulsion from or request

or permission of the Commission shall be accorded the right to be accom

panied represented and advised by counsel

c Special Requirement An appearance may be either general that is

without reservation or it may be special that is confined to a particular

issue or question If a person desires to appear specially he or she must

expressly so state when entering the appearance and at that time shall

also state the questions or issues to which he or she is confining the

appearance otherwise his or her appearance will be considered as general

Rule 21

502 22 Authority for representation

Any individual acting in a

representative capacity in any proceeding

before the Commission may be required to show his or her authority

to act in such capacity Rule 22

502 23 Notice of appearance written appearance substitutions

a Within twenty 20 days after service of an order or complaint institut

ing a proceeding complainants respondents andor petitioners named there

in shall notify the Commission of the name s and address es of the

person or persons who will represent them in the pending proceeding

Each person who appears at a hearing shall deliver a written notice of

appearance to the reporter stating for whom the appearance is made All

appearances shall be noted in the record Petitions for leave to intervene

shall indicate the name s and address es of the person or persons who

27 F M C
RULES OF PRACTICE AND PROCEDURE

will represent the intervenor in the pending proceeding if the petition is

granted If an attorney or other representative of record is superseded

there shall be filed a

stipulation of substitution signed both by the attorney s

or representative s and by the party or a written notice from the client

to the Commission

b A form of Notice of Appearance is set forth in Exhibit No I

to this subpart This form also contains a request and authorization for

counsel to be notified immediately of the service of decisions of the presid

ing officer and the Commission by collect telephone call or telegram

Copies of this form may be obtained from the Office of the Secretary

Rule 23

502 24 Practice before the Commission defined

a Practice before the Commission shall be deemed to comprehend all

matters connected with the presentation of any matter to the Commission

including the preparation and filing of necessary documents and correspond

ence with and communications to the Commission on one s own behalf

or representing another See 503 32

b The term Commission as used in this subpart includes any bureau

division office branch section unit or field office of the Federal Maritime

Commission and any officer or employee of such bureau division office

branch section unit or field office Rule 24

502 25 Presiding officer defined

Presiding officer means and shall include a anyone or more of

the members of the Commission not including the Commission when sitting

as such b one or more administrative law judges or c one or more

officers authorized by the Commission to conduct nonadjudicatory proceed

ings when duly designated to preside at such proceedings See Subpart

J of this part Rule 25

502 26 Attorneys at law

Attorneys at laws who are admitted to practice before the Federal courts

or before the courts of any State or Territory of the United States may

practice before the Commission An attorney s own representation that he

is such in good s anding before any of the courts herein referred to will

be sufficient proof thereof if made in writing and filed with the Secretary

Rule 26

502 27 Persons not attorneys at law

a Any person who is not an attorney at law may be admitted to

practice before the Commission if he or she is a citizen of the United

States and files proof to the satisfaction of the Commission that he or

she possesses the necessary legal technical or other qualifications to render

valuable service before the Commission and is otherwise competent to

advise and assist in the presentation of matters before the Commission

Applications by persons not attorneys at law for admission to practice

before the Commission shall be made on the forms prescribed therefor

27 F M C

185
186 FEDERAL MARITIME COMMISSION

which may be obtained from the Secretary of the Commission and shall

be addressed to the Federal Maritime Commission Washington D C 20573

and shall be accompanied by a fee as required by S03 43h of this

chapter

b No person who is not a attorney at law and whose application

has not been approved shall be permitted to practice before the Commission

c Paragraph b of this section and the provisions of S02 28 502 29

and 502 30 shall not apply however to any person who appears before

the Commission on his or her own behalf or on behalf of any corporation

partnership or association of which he or she is a partner officer or

regular employee Rule 27

502 28 Firms and corporations

Practice before the Commission by firms or corporations on behalf of

others shall not be permitted Rule 28

502 29 Hearings

The Commission in its discretion may call upon the applicant for a

full statement of the nature and extent of his or her qualifications If

the Commission is not satisfied as to the sufficiency of the applicant s

qualifications it will so notify him or her by registered mail whereupon

he or she shall be granted a hearing upon request for the purpose of

showing his or her qualifications Ifthe applicant presents to the Commis

sion no request for such hearing within twenty 20 days after receiving

the notification above referred to his or her application shall be acted

upon without further notice Rule 29

502 30 Suspension of disbarment

The Commission may deny admission to suspend or disbar any person

from practice before the Commission who it finds does not possess the

requisite qualifications to represent others or is lacking in character integ

rity or proper professional conduct Any person who has been admitted

to practice before the Commission may be disbarred from such practice

only after being afforded an opportunity to be heard Rule 30 J

502 31 Statement ofinterest

The Commission may call upon any practitioner for a full statement

of the nature and extent of his or her interest in the subject matter presented

by him or her before the Commission Rule 31 J

502 32 Former employees

Title V of the Ethics in Government Act proscribes certain activities

by certain former federal employees 18 U S C 207 In summary as

applied to former Commission employees the restrictions and basic proce

dures are as follows

a Restrictions

1 No former Commission employee may represent in any formal or

informal appearance or make any oral or written communication with intent

27 P M C
RULES OF PRACTICE AND PROCEDURE

to influence a U S Government agency in a particular matter involving

a specific party or parties in which the employee participated personally

and substantially while with the Commission

2 No fonner Commission employee may within two years of tenninat

ing Commission employment act as a

representative in the mannerdescribed

in paragraph a 1 of this section as to a particular matter which was

actually pending under the employee s official responsibility within one

year prior to tennination of the employment

3 Fonner senior Commission employees defined as Commissioners

and members of the Senior Executive Service as designated by the Office

of Government Ethics under 18 V S C 207 d 1 may not for two years

after tenninating Commission employment assist in representing a person

by personal presence at an appearance before the Government on a matter

in which the fonner employee had participated personally and substantially

while at the Commission

4 Fonner senior Commission employees as defined in paragraph a 3

of this section are barred for one year from representing parties before

the Commission or communicating with intent to influence the Commission

regardless ofprior involvement in the particular proceeding

b Prior consent for appearance

1 Prior to making any appearance representation or communication

described in paragraph a of this section and in addition to other require

ments of this subpart every fonner employee must apply for and obtain

prior written consent of the Commission for each proceeding or matter

in which such appearance representation or communication is contemplated

Such consent will be given only if the Commission detennines that the

appearance representation or communication is not prohibited by the Act

this section or other provisions ofthis chapter

2 To facilitate the Commission s detennination that the intended activity

is not prohibited applications for written consent shall

i Be directed to the Commission state the fonner connection of the

applicant with the Commission and date of tennination of employment

and identify the matter in which the applicant desires to appear and

ii Be accompanied by an affidavit to the effect that the matter for

which consent is requested is not amatter in which the applicant participated

personally and substantially while at the Commission and as made applica

ble by paragraph a of this section that the particular matter as to which

consent is requested was not pending under the applicant s official respon

sibility within one year prior to tennination of employment and that the

matter was not one in which the fonner employee had participated person

ally and substantially while at the Commission The statements contained

in the affidavit shall not be sufficient if disproved by an examination

of the files and records of the case

3 The applicant shall be promptly advised as to his or her privilege

to appear represent or communicate in the particular matter and the applica

27 F M C

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188 FEDERAL MARITIME COMMISSION

tion affidavit and consent or refusal to consent shall be filed by the

Commission in its records relative thereto

c Basic procedures for possible violations The following basic guide

lines for administrative enforcement restrictions on post employment activi

ties are designed to expedite consultation with the Director of the Office

of Government Ethics as required pursuant to section 207 j

of Title 18

United States Code

1 Delegation The Chairman may delegate his or her authority under

this subpart

2 Initiation of administrative disciplinary hearing

i On receipt of information regarding a possible violation of 18 U S C

207 and after determining that such information appears substantiated the

Chairman shall expeditiously provide such information along with any

comments or agency regulations to the Director of the Office of Govern

ment Ethics and to the Criminal Division Department of Justice The

Commission shall coordinate any investigation or administrative action with

the Department of Justice to avoid prejudicing criminal proceedings unless

the Department of Justice communicates to the Commission that it does

not intend to initiate criminal prosecution

ii Whenever the Commission has determined after appropriate review

that there is reasonable cause to believe that a former Commission employee

has violated any provision of paragraph a of this section or 18 U S C

207 a b or c it may initiate an administrative disciplinary proceeding

by providing the former Commission employee with notice as defined in

paragraph c 3 of this section

3 Adequate notice

i The Commission shall provide a former Commission employee with

adequate notice of an intention to institute a proceeding and an opportunity

for a hearing

ii Notice to the former Commission employee must include

A A statement of allegations and the basis thereof sufficiently detailed

to enable the former Commission employee to prepare an adequate defense

B Notification of the right to a hearing and

C An explanation of the method by which a hearing may be requested

4 Presiding official

i The presiding official at a proceeding under this section shall be

an individual to whom the Chairman has delegated authority to make an

initial decision hereinafter referred to as examiner

ii The examiner must be a Commissioner other than the Chairman

an administrative law judge or an attorney employed by the Commission

and shall be provided with appropriate administrative and secretarial support

by the Commission

iii The presiding official shall be impartial No individual who has

participated in any manner in the decision to initiate a proceeding may

serVe as an examiner in that proceeding

27 F M C
RULES OF PRACTICE AND PROCEDURE

5 Time date and place

i

the hearing shall be conducted at a reasonable time date and place

ii In setting a hearing date the presiding official shall give due regard

to the former Commission employee s need for

A Adequate time to prepare a defense properly and

B An expeditious resolution of allegations that may be damaging to

his or her reputation

6 Hearing rights A hearing shall include at a minimum the following

rights

i To represent oneself or to be represented by counsel

ii To introduce and examine witnesses and to submit physical evidence

iii To confront and cross examine adverse witnesses

iv To receive a transcript or recording of the proceedings on request

7 Burden of proof In any hearing under this subpart the Commission

has the burden of proof and must establish substantial evidence of a viola

tion

8 Initial decision

i The examiner shall make a determination on matters exclusively of

record in a proceeding and shall set forth in the decision all findings

of fact and conclusions of law relevant to the matters at issue

ii Within a reasonable period of the date of an initial decision as

set by the Commission either party may appeal the decision solely on

the record to the Chairman The Chairman shall base his or her decision

solely on the record of the proceedings or those portions thereof cited

by the parties to limit the issues

iii If the Chairman modifies or reverses the initial decision he or

she shall specify such findings of fact and conclusions of law as are

different from those of the examiner

9 Administrative sanctions The Chairman may take appropriate action

in the case of any individual who was found in violation of 18 U S

207 a b or c or the provisions of paragraph a of this section

after a final administrative decision or who failed to request a hearing

after receiving adequate notice by

i Prohibiting the individual from making on behalf of any other person

except the United States any formal or informal appearance before or

with the intent to influence any oral or written communication to the

Commission on any matter of business for a period not to exceed five

5 years which may be accomplished by directing Commission employees

to refuse to participate in any such appearance or to accept any such

communication or

ii Taking other appropriate disciplinary action

10 Judicial review Any person found to have participated in a violation

of 18 U S c 207 a b or c or the provisions of paragraph a of

this section may seek judicial review of the administrative determination

27 F M C

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190 FEDERAL MARITIME COMMISSION

11 Consultation and review The procedures for administrative enforce

ment set forth in paragraphs a b and c of this section have been

reviewed by the Director of the Office of Government Ethics

d Partners or associates

1 In any case in which a former member officer or employee of

the Commission is prohibited under this section from practicing appearing

or representing anyone before the Commission in a particular Commission

matter any partner or legal or business associate of such former member

officer or employee shall be prohibited from i utilizing the services

of the disqualified former member officer or employee in connection with

the matter ii discussing the matter in any manner with the disqualified

former member officer or employee and Hi sharing directly or indirectly

with the disqualified former member officer or employee in any fees

or revenues received for services rendered in connection with such matter

2 The Commission may require any practitioner or applicant to become

a practitioner to file an affidavit to the effect that the practitioner or

applicant will not i utilize the service of ii discuss the particular matter

with or Hi share directly or indirectly any fees or revenues received

for services provided in the particular matter with a partner fellow em

ployee or legal or business associate who is a former member officer

or employee of the Commission and who is either permanently or tempo

rarily precluded from practicing appearing or representing anyone before

the Commission in connection with the particular matter and that the

applicant s employment is not prohibited by any law of the United States

or by the regulations of the Commission Rule 32

j

27 F M C
RULES OF PRACTICE AND PROCEDURE

Exhibit No 1 to Subpart B 502 23 502 26 502 27

Notice ofAppearance

FEDERAL MARITIME COMMISSION

Notice ofAppearance

Docket No

Please enter my appearance in this proceeding as counsel for

o I

request to be informed by telephone or telegram of service of the

administrative law judge s initial or recommended decision and of the Com

mission s decision in this proceeding In the event I am not available

when you call appropriate advice left with my office will suffice

Washington area Iunderstand I will be informed by telephone

Outside Washington area I authorize 0 collect telephone call

o collect telegram

o I do not desire the above notice

S

Name

Address

Telephone No

NOTE Must be signed by attorney at law admitted to practice before

the Federal Courts or before the courts of any State or Territory of the

United States or by a person not an attorney at law who has been admitted

to practice before the Commission or by a person appearing on his or

her own behalf or on behalf of any corporation partnership or association

of which he or she is a partner officer or regular employee

27 F M C

191
192 FEDERAL MARITIME COMMISSION

SUBPART C PARTIES

502 41 Parties how designated

The tenn party whenever used in the rules in this part shall include

any natural person corporation association finn partnership trustee re

ceiver agency public or private organization or governmental agency

A party who seeks relief or other affinnative action under 502 62 shall

be designated as complainant A party against whom relief or other

affinnative action is sought in any proceeding commenced under 502 62

502 66 or 502 67 or a party named in an order of investigation issued

by the Commission shall be designated as respondent except that in

investigations instituted under section 15 of the Shipping Act 1916 or

section 11 c of the Shipping Act of 1984 the parties to the agreement

shall be designated as proponents and the parties protesting the agreement

shall be designated as protestants A person who has been pennitted

to intervene under 502 nshall be designated as intervenor All persons

or parties designated in this section shall become parties to the proceeding

involved without further pleadings and no person other than a party or

its representative may introduce evidence or examine witnesses at hearings

Rule 41

502 42 Hearing Counsel

The Director Bureau of Hearing Counsel shall be a party to all proceed

ings governed by the rules in this part except that in complaint proceedings

under 502 62 the Director may become a party only upon leave to inter

vene granted pursuant to 502 n and in rulemaking proceedings the Direc

tor may become a party by designation if the Commission detennines

that the circumstances of the proceeding warrant such participation The

Director or the Director s

representative shall be designated as Hearing

Counsel and shall be served with copies of all papers pleadings and

documents in every proceeding in which Hearing Counsel is a party Hearing

Counsel shall actively participate in any proceeding to which the Director

is a party to the extent required in the public interest subject to the

separation of functions required by section 5 c of the Administrative Proce

dure Act See 502 224 Rule 42

502 43 Substitution of parties

In appropriate circumstances the Commission or presiding officer may

order an appropriate substitution ofparties Rule 43

502 44 Necessary and proper parties in certain complaint proceedings

a If a complaint relates to through transportation by continuous carriage

or transshipment all carriers participating in such through transportation

shall be joined as respondents

b If the complaint related to more than one carrier or other person

subject to the shipping acts all carriers or other persons against whom

a rule or order is sought shall be made respondents

27 F M C
RULES OF PRACTICE AND PROCEDURE

c If complaint is made with respect to an agreement filed under section

15 of the Shipping Act 1916 or section 5 a of the Shipping Act of

1984 the parties to the agreement shall be made respondents Rule 44

SUBPART DRULEMAKING

502 51 Petition for issuance amendment or repeal of rule

Any interested party may file with the Commission a petition for the

issuance amendment or repeal of a rule designed to implement interpret

or prescribe law policy organization procedure or practice requirements

of the Commission The petition shall set forth the interest of petitioner

and the nature of the relief desired shall include any facts views argu

ments and data deemed relevant by petitioner and shall be verified If

such petition is for the amendment or repeal of a rule it shall be accom

panied by proof of service on all persons if any specifically named in

such rule and shall conform in other aspects to Subpart H of this part

Replies to such petition shall conform to the requirements of 502 74

Rule 51

5022 Notice of proposed rulemaking

a General notice of proposed rulemaking including the information

specified in 502 143 shall be published in the Federal Register unless

all persons subject thereto are named and either are personally served

or otherwise have actual notice thereof in accordance with law

b Except where notice of hearing is required by statute this section

shall not apply to interpretative rules general statements of policy organiza

tion rules procedure or practice of the Commission or any situation in

which the Commission for good cause finds and incorporates such findings

in such rule that notice and public procedure are impracticable unnecessary

or contrary to the public interest Rule 52

502 53 Participation in rulemaking

a Interested persons will be afforded an opportunity to partICIpate in

rulemaking through submission of written data views or arguments with

or without opportunity to present the same orally in any manner No replies

to the written submissions will be allowed unless because of the nature

of the proceeding the Commission indicates that replies would be necessary

or desirable for the formulation of a just and reasonable rule except that

where the proposed rules are such as are required by statute to be made

on the record after opportunity for a hearing such hearing shall be con

ducted pursuant to 5 V S C 556 and 557 and the procedure shall be

the same as stated in Subpart J ofthis part

b In those proceedings in which respondents are named interested

persons who wish to participate shall file a petition to intervene in accord

ance with the provisions of 502 72 Rule 53

5024 Contents ofrules

27 F M C

193
i

194 FEDERAL MARITIME COMMISSION

The Commission will incorporate in any rules adopted a concise general

statement oftheir basis and purpose Rule 54

502 55 Effective date of rules

The publication or service of any substantive rule shall be made not

less than thirty 30 days prior to its effective date except a as otherwise

provided by the Commission for good cause found and published in the

Federal Register or b in the case of rules granting or recognizing exemp

tion or relieving restriction interpretative rules or statements of policy

Rule 55

SUBPART E PROCEEDINGS PLEADINGS MOTIONS REPLIES

502 61 Proceedings

a Proceedings are commenced by the filing of a complaint or by

order of the Commission upon petition or upon its own motion or by

reference by the Commission to the formal docket of a petition for a

declaratory order

b In proceedings referred to the Office of Administrative Law Judges

the Commission shall specify a date on or before which hearing shall

commence which date shall be no more than six months from the date

of publication in the Federal Register of the Commission s order instituting

the proceedings or notice ofcomplaint filed Hearing dates may be deferred

by the presiding judge only to prevent substantial delay expense detriment

to the public interest or undue prejudice to a party

c In the order instituting a

proceeding or in the notice of filing of

complaint and assignment the Commission shall establish dates by which

the initial decision and the final Commission decision will be issued These

dates may be extended by order of the Commission for good cause shown

Rule 61

502 62 Complaints and fee

a The complaint shall contain the name and address of each complain

ant the name and address of each complainant s attorney or agent the

name and address of each person against whom complaint is made a

concise statement of the cause of action and a request for the relief

or other affirmative action sought

b Where reparation is sought and the nature of the proceeding so

requires the complaint shall set forth the ports of origin and destination

of the shipments consignees or real parties in interest where shipments

are on order bill of lading consignors date of receipt by carrier or

tender of delivery to carrier names of vessels bill of lading number and

other identifying reference description of commodities weights measure

ment rates charges made or collected when where by whom and to

whom rates and charges were paid by whom the rates and charges were

borne the amount of damage and the relief sought Except under unusual

circumstances and for good cause shown reparation will not be awarded

upon a complaint in which it is not specifically asked for nor upon a

Z7 F M C
RULES OF PRACTICE AND PROCEDURE

new complaint by or for the same complainant which is based upon a

finding in the original proceeding Wherever a rate fare charge rule

regulation classification or practice is involved appropriate reference to

the tariff should be made if possible

c If the complaint fails to indicate the sections of the acts alleged

to have been violated or clearly to state facts which support the allegations

the Commission may on its own initiative require the complaint to be

amended to supply such further particulars as it deems necessary

d The complaint should designate the place at which hearing is desired

e A form of complaint is set forth in Exhibit No 1 to this subpart

f The complaint shall be accompanied by remittance of a 50 filing

fee

g

For special types of cases see 502 92 in Subpart F Special Docket

applications for refund or waiver Subpart K Shortened Procedure and

Subpart S Small Claims Rule 62

502 63 Reparation statute of limitations

a Complaints seeking reparation pursuant to section 22 of the Shipping

Act 1916 shall be filed within two 2 years after the cause of action

accrues

b Complaints seeking reparation pursuant to section 11 of the Shipping

Act of 1984 shall be filed within three years after the cause of action

accrues

c The Commission will consider as in substantial compliance with

a statute of limitations a complaint in which complainant alleges that the

matters complained of if continued in the future will constitute violations

of the shipping acts in the particulars and to the extent indicated and

in which complainant prays for reparation accordingly for injuries which

may be sustained as a result of such violations See 502 251 502 253

and Exhibit No 1 to Subpart 0

d Notification to the Commission that a

complaint mayor will be

filed for the recovery of reparation will not constitute a filing within the

applicable statutory period

e A complaint is deemed filed on the date it is received by the Commis

sion Rule 63

502 64 Answer to complaint

a Respondent shall file with the Commission an answer to the complaint

and shall serve it on complainant as provided in Subpart H of this part

within twenty 20 days after the date of service of the complaint by

the Commission or within thirty 30 days if such respondent resides in

Alaska or beyond the Continental United States unless such periods have

been extended under 502 71 or 502 102 or reduced under 502 103

or unless motion is filed to withdraw or dismiss the complaint in which

latter case answer shall be made within ten 10 days after service of

an order denying such motion Such answer shall give notice of issues

controverted in fact or law Recitals of material and relevant facts in a

27 F M C

195
1

j

1

j

I

196 FEDERAL MARITIME COMMISSION

complaint amended complaint or bill of particulars unless specifically

denied in the answer thereto shall be deemed admitted as true but if

request is seasonably made a competent witness shall be made available

for cross examination on such evidence

b In the event that respondent should fail to file and serve the answer

within the time provided the presiding officer may enter such rule or

order as may be just or may in any case require such proof as he or

she may deem proper except that the presiding officer may permit the

filing of a delayed answer after the time for filing the answer has expired

for good cause shown

c A form of answer to complaint is set forth in Exhibit No 2 to

this subpart Rule 64

502 65 Replies to answers not permitted

Replies to answers will not be permitted New matters set forth in re

spondent s answer will be deemed to be controverted Rule 65

502 66 Order to show cause

The Commission may institute a proceeding by order to show cause

The order shall be served upon all persons named therein shall include

the information specified in 502 143 may require the person named therein

to answer and shall require such person to appear at a specified time

and place and present evidence upon the matters specified Rule 66

502 67 Proceedings under section 3 a of the Intercoastal Shipping Act

1933

a li The term general rate increase means any change in rates

fares or charges which will A result in an increase in not less than

50 per centum of the total rate fare or char ge items in the tariffs per

trade of any common carrier by water in intercoastal commerce and B

directly result in an increase in gross revenue of such carrier for the

particular trade of not less than 3 per centum

ii The term general rate decrease means any change in rates fares

or charges which will A result in a decrease in not less than 50 per

centum of the total rate fare or charge items in tariffs per trade of

any common carrier by water in the intercoastal commerce and B directly

result in a decrease in gross revenue of such carrier for the particular

trade of not less than 3 per centum

2 No general rate increase or decrease shall take effect before the

close of the sixtieth day after the day it is posted and filed with the

Commission A vessel operating common carrier VOCC shall file under

oath concurrently with any general rate increase or decrease testimony

and exhibits of such composition scope and format that they will serve

as the VOCe s entire direct case in the event the matter is set for formal

investigation together with all underlying workpapers used in the prepara

tion of the testimony and exhibits The VOCC shall also certify that copies

oftestimony and exhibits and underlying workpapers have been filed simul

27 F M C
RULES OF PRACTICE AND PROCEDURE 197

taneously with the attorney general of every noncontiguous State Common

wealth possession or Territory having ports in the relevant trade that are

served by the VOCC The contents of underlying workpapers served on

attorneys general pursuant to this paragraph are to be considered confidential

and are not to be disclosed to members of the public except to the extent

specifically authorized by an order of the Commission or a presiding officer

A copy of the testimony and exhibits shall be made available at every

port in the trade at the offices of the VOCC or its agent during usual

business hours for inspection and copying by any person

3 Workpapers underlying financial and operating data filed in connection

with proposed rate changes shall be made available promptly by the carrier

to all persons requesting them for inspection and copying upon the submis

sion of the following certification under oath to the carrier

CERTIFICAnON

I Name and title if applicable of Full name

of company or entity having been duly sworn certify that the underlying

workpapers requested from Name of carrier will be used solely in connec

tion with protests related to and proceedings resulting from Name of

carrier s rate increase decrease scheduled to

become effective Date and that their contents will not

be disclosed to any person who has not signed under oath a certification

in the form prescribed which has been filed with the Carrier unless public

disclosure is specifically authorized by an order of the Commission or

the presiding officer

S

Date

Signed and Sworn to before me this

19

day of

Notary Public

My Commission expires

4 Where a protest contains information obtained in confidence it will

be set out in a separate document clearly marked on the cover page

Contains Confidential Information Failure to observe this procedure will

subject the protest to rejection

5 Failure by the VOCC to meet the service and filing requirements

of paragraph a 2 of this section may result in rejection of the tariff

27 F M C
1

1

198 FEDERAL MARITIME COMMISSION

matter Such rejection will take place within three work days after the

defect is discovered

b 1 Any protest against a proposed general rate increase or decrease

made pursuant to section 3 of the Intercoastal Shipping Act 1933 may

be made by letter and shall be filed with the Director Bureau of Tariffs

and served upon the tariff publishing officer of the carrier pursuant to

Subpart H of this part no later than thirty 30 days prior to the proposed

changes except that if the due date for protests falls on a Saturday

Sunday or national legal holiday such protest must be filed no later than

the last business day preceding the weekend or holiday Persons filing

protests pursuant to this section shall be made parties to any docketed

proceeding involving the matter protested provided that the issues raised

in the protest are pertinent to the issues set forth in the order of investiga

tion Protests shall include

i Identification of the tariff in question

ii Grounds for opposition to the change

Hi Identification of any specific areas ofthe VOCC s

testimony exhibits

or underlying data that are in dispute and a statement of position on

each area in dispute VOCC general rate increases or decreases only

iv Specific reasons why a hearing is necessary to resolve the issues

in dispute

v Any requests for additional carrier data

vi Identification of any witnesses that protestant would produce at a

hearing asummary of their testimony and identification of documents

that protestant would offer in evidence and

vii A subscription and verification

2 Protests against other proposed changes in tariffs made pursuant

to section 3 of the Intercoastal Shipping Act 1933 shall be filed and

served no later than twenty 20 days prior to the proposed effective date

of the change The provision of paragraph b I of this section relating

to the form place and manner of filing protests against a proposed general

rate increase or decrease shall be applicable to prOtests against other pro

posed tariff changes A protest is deemed filed on the date it is received

by the Commission

c Replies to protests shall conform to the requirements of 502 74

d I In the event the general rate increase or decrease of a VOCC

is made subject to a docketed proceeding Hearing Counsel the VOCC

and all protestants shall serve under oath testimony and exhibits constitut

ing their direct case together with underlying workpapers on all parties

pursuant to Subpart H of this part and lodge copies of testimony and

exhibits with the presiding officer no later than seven 7 days after the

tariff matter takes effect or in the case of suspended matter seven 7

days after the matter would have otherwise gone into effect

2 If other proposed tariff changes made pursuant to section 3 of the

Intercoastal Shipping Act 1933 are made subject to a docketed proceeding

27 F M C
RULES OF PRACTICE AND PROCEDURE

the carrier Hearing Counsel and all protestants will simultaneously serve

pursuant to Subpart H of this part on all parties and lodge with the presiding

officer prehearing statements as specified in paragraph f l of this section

no later than seven 7 days after the tariff matter takes effect or in

the case of suspended matter seven 7 days after the matter would have

otherwise gone into effect

e 1 Subsequent to the exchange of prehearing statements by all parties

the presiding officer shall at his or her discretion direct all parties to

attend a prehearing conference to consider

i Simplification ofissues

ii Identification of issues which can be resolved readily on the basis

ofdocuments admissions offact or stipulations

Hi Identification of any issues which require evidentiary hearing

iv Limitation of witnesses and areas of cross examination should an

evidentiary hearing be necessary

v Requests for subpoenas and

vi Other matters which may aid in the disposition of the hearing

including but not limited to the exchange ofwritten testimony and exhibits

2 After considering the procedural recommendations of the parties

the presiding officer shall limit the issues to the extent possible and establish

a procedure for their resolution

3 The presiding officer shall whenever feasible rule orally upon the

record on matters presented before him or her

f1 It shall be the duty of every party to file and serve a prehearing

statement on a date specified by the presiding officer but in any event

no later than the date of the prehearing conference

2 A prehearing statement shall state the name of the party or parties

on whose behalf it is presented and briefly set forth

i

Identification of issues which can be resolved readily on the basis

ofdocuments admissions of fact or stipulations

ii Identification of any issues which require evidentiary hearing together

with the reasons why these issues cannot be resolved readily on the basis

of documents admissions of facts stipulations or an alternative procedure

Hi Requests for cross examination of the direct written testimony of

specified witnesses the subjects of such cross examination and the reasons

why alternatives to cross examination are not feasible

iv Requests for additional specified witnesses and documents together

with the reasons why the record would be deficient in the absence of

this evidence and

v Procedural suggestions that would aid in the timely disposition to

the proceeding

g

The provisions of this section are designed to enable the presiding

officer to complete a hearing within sixty 60 days after the proposed

effective date of the tariff changes and submit an initial decision to the

Commission within one hundred twenty 120 days pursuant to section

27 F M C

199
200 FEDERAL MARITIME COMMISSION

3b of the Intercoastal Shipping Act 1933 The presiding officer may

employ any other provision of the Commission s Rules of Practice and

Procedure not inconsistent with this section in order to meet this objective

Exceptions to the decision of the presiding officer filed pursuant to

502 227 shall be served no later than fifteen 15 days after date of

service of the initial decision Replies thereto shall be served no later

than ten 10 days after the date of service of exceptions In the absence

of exceptions the decision of the presiding officer shall be final within

30 days from the date of service unless within that period a determination

to review is made in accordance with the procedures outlined in 502 227

h Intervention by persons other than protestants ordinarily shall not

be granted In the event intervention of such persons is granted the presiding

officer of the Commission may attach such conditions or limitations as

are deemed necessary to effectuate the purpose of this section Rule 67

502 68 Declaratory orders and fee

a 1 The Commission may in its discretion issue a declaratory order

to terminate a controversy or to remove uncertainty

2 Petitions for the issuance thereof shall state clearly and concisely

the controversy or uncertainty name the persons and cite the statutory

authority involved include a complete statement of the facts and grounds

prompting the petition together with full disclosure of petitioner s interest

be served upon all parties named therein and conform to the requirements

of Subpart H of this part

3 Petitions shall be accompanied by remittance of a 50 filing fee

b Petitions under this section shall be limited to matters involving

conduct or activity regulated by the Commission under statutes administered

by the Commission The procedures of this section shall be invoked solely

for the purpose of obtaining declaratory rulings which will allow persons

to act without peril upon their own view Controversies involving an allega

tion of violation by another person of statutes administered by the Commis

sion for which coercive rulings such as payment of reparation or cease

and desist orders are sought are not proper subjects of petitions under

this section Such matters must be adjudicated either by filing of a complaint

under section 22 of the Shipping Act 1916 or section 11 of the Shipping

Act of 1984 and 502 62 or by filing of a petition for investigation

under 502 69

c Petitions under this section shall be accompanied by the complete

factual and legal presentation of petitioner as to the desired resolution

of the controversy or uncertainty or a detailed explanation why such can

only be developed through discovery or evidentiary hearing

d Replies to the petition shall contain the complete factual and legal

presentation of the replying party as to the desired resolution or a detailed

explanation why such can only be developed through discovery or evi

dentiary hearing Replies shall conform to the requirements of 502 74

and shall be served pursuant to Subpart H of this part

27 F M C
RULES OF PRACTICE AND PROCEDURE

e No additional submissions will be permitted unless ordered or re

quested by the Commission or the presiding officer If discovery or evi

dentiary hearing on the petition is deemed necessary by the parties such

must be requested in the petition or replies Requests shall state in detail

the facts to be developed their relevance to the issues and why discovery

or hearing procedures are necessary to develop such facts

f1 A notice of filing of any petition which meets the requirements

of this section shall be published in the Federal Register The notice

will indicate the time for filing of replies to the petition Ifthe controversy

or uncertainty is one of general public interest and not limited to specifi

cally named persons opportunity for reply will be given to all interested

persons including the Commission s Bureau of Hearing Counsel

2 In the case of petitions involving a matter limited to specifically

named persons participation by persons not named therein will be permitted

only upon grant of intervention by the Commission pursuant to 502 72

3 Petitions for leave to intervene shall be submitted on or before

the reply date and shall be accompanied by intervenor s complete reply

including its factual and legal presentation in the matter

g Petitions for declaratory order which conform to the requirements

of this section will be referred to a formal docket Referral to a formal

docket is not to be construed as the exercise by the Commission of its

discretion to issue an order on the merits of the petition Rule 68

502 69 Petitions general and fee

a Except when submitted in connection with a formal proceeding all

claims for relief or other affirmative action by the Commission except

as otherwise provided herein shall be by written petition which shall

state clearly and concisely the petitioner s grounds of interests in the subject

matter the facts relied upon and the relief sought shall cite by appropriate

reference the statutory provisions or other authority relied upon for relief

shall be served upon all parties named therein and shall conform otherwise

to the requirements of Subpart H of this part Replies thereto shall conform

to the requirements of 502 74

b Petitions shall be accompanied by remittance of a 50 filing fee

Rule 69

502 70 Amendments or supplements to pleadings

a Amendments or supplements to any pleadings will be permitted or

rejected either in the discretion of the Commission if the case has not

been assigned to a presiding officer for hearing or otherwise in the discre

tion of the officer designated to conduct the hearing except that after

a case is assigned for hearing no amendment shall be allowed which

would broaden the issues without opportunity to reply to such amended

pleading and to prepare for the broadened issues The presiding officer

may direct a party to state its case more fully and in more detail by

way ofamendment

27 F M C

201
202 FEDERAL MARITIME COMMISSION

b A response to an amended pleading must be filed and served in

conformity with the requirements of Subpart H of this part and 502 74

unless the Commission or the presiding officer directs otherwise Amend

ments or supplements allowed prior to hearing will be served in the same

manner as the original pleading

c Whenever by the roles in this part a pleading is required to be

verified the amendment or supplement shall also be verified Rule 70

502 71 Bill of particulars

Within fifteen 15 days after date of service ofthe complaint respondent

may file with the Commission and serve upon complainant pursuant to

Subpart H of this part a motion for a bill of particulars Within ten 10

days after date of service of such motion complainant shall file with

the Commission and serve upon respondent either a the bill of particulars

or b a

reply to such motion made in conformity with the requirements

of 502 74 setting forth the particular matters contained in the motion

which are objected to and the reasons for the objections If the motion

is granted in whole or in part the order granting same shall specify the

date by which the particulars must be furnished A motion may be filed

relative to incomplete compliance with such order In the event of inexcus

able default in furnishing particulars the party in default shall be precluded

from making proof upon the issues with respect to which it has defaulted

in furnishing particulars The time for filing an answer to the complaint

shall be extended to a date ten 10 days after the date of service of

the bill of particulars or of notice of disallowance of the motion thereof

For good case shown motion for a biof particulars also may be filed

after answer is made and within a reasonable time prior to hearing Rule

71

502 72 Petition for leave to intervene

a A petition for leave to intervene may be filed in any proceeding

and shall be served on existing parties by the petitioner pursuant to Subpart

H of this part An additional fifteen 15 copies of the petition shall be

filed with the Secretary for the use of the Commission Upon request

the Commission will furnish a service list to any member of the public

pursuant to Part 503 ofthis chapter The petition shall set forth the grounds

for the proposed intervention and the interest and position of the petitioner

in the proceeding and shall comply with the other applicable provisions

of Subpart H of this part and if affirmative relief is sought the basis

for such relief Such petition shall also indicate the nature and extent

of the participation sought e g

the use of discovery presentation of evi

dence and examination ofwitnesses

b 1 Petitions for leave to intervene as a matter of right will only

be granted upon a clear and convincing showing that

i The petitioner has a substantial interest relating to the matter which

is the subject ofthe proceeding warranting intervention and

27 F M C
RULES OF PRACTICE AND PROCEDURE

ii The proceeding may as a practical matter materially affect the

petitioner s interest and

Hi The interest is not adequately represented by existing parties to

the proceeding

2 Petitions for intervention as a matter of Commission discretion may

be granted only upon a showing that

iA common issue of law or fact exists between the petitioner s interests

and the subject matter of the proceeding and

ii Petitioner s intervention shall not unduly delay or broaden the scope

of the proceeding prejudice the adjudication of the rights of or be duplica

tive of positions of any existing party and

iii The petitioner s participation may reasonably be expected to assist

in the development of a sound record

3 The timeliness of the petition will also be considered in determining

whether a petition will be granted under paragraphs b 1 or b 2 of

this section If filed after hearings have been closed a petition will not

ordinarily be granted

c In the interests of I

restricting irrelevant duplicative or repetitive

discovery evidence or arguments 2 having common interests represented

by a spokesperson and 3 retaining authority to determine priorities and

control the course of the proceeding the presiding officer in his or her

discretion may impose reasonable limitations on an intervenor s participa

tion e gthe filing of amicus briefs presentation of evidence on selected

factual issues or oral argument on some or all of the issues

d Absent good cause shown any intervenor desiring to utilize the

procedures provided by Subpart L must commence doing so no later than

fifteen 15 days after its petition for leave to intervene has been granted

Ifthe petition is filed later than thirty 30 days after the date of publication

in the Federal Register of the Commission s Order instituting the proceeding

or notice of complaint filed petitioner will be deemed to have waived

its right to utilize such procedures unless good cause is shown for the

failure to file the petition within the 30 day period The use of Subpart

L procedures by an intervenor whose petition was filed beyond such 30

day period will in no event be allowed if in the opinion of the presiding

officer such use will result in delaying the proceeding unduly

e If intervention is granted before or at a prehearing conference con

vened for the purpose of considering matters relating to discovery the

intervenor s discovery matters may also be considered at that time and

may be limited under the provisions of paragraph c of this section

0 A form of petition for leave to intervene is set forth in Exhibit

No 3 to this subpart Rule 72

502 73 Motions

a In any docketed proceeding an application or request for an order

or ruling not otherwise specifically provided for in this part shall be by

motion After the assignment of a presiding officer to a proceeding and

27 F M C

203
204 FEDERAL MARITIME COMMISSION

before the issuance of his or her recommended or initial decision all

motions shall be addressed to and ruled upon by the presiding officer

unless the subject matter of the motion is beyond his or her authority

in which event the matter shall be referred to the Commission If the

proceeding is not before the presiding officer motions shall be designated

as petitions and shall be addressed to and passed upon by the Commis

sion

b Motions shall be in writing except that a motion made at a hearing

shall be sufficient if stated orally upon the record unless the presiding

officer directs that it be reduced to writing

c All written motions shall state clearly and concisely the purpose

of and the relief sought by the motion the statutory or principal authority

relied upon and the facts claimed to constitute the grounds requiring the

relief requested and shall conform with the requirements of Subpart H

of this part

d Oral argument upon a written motion may be permitted at the discre

tion of the presiding officer or the Commission as the case may be

e A repetitious motion will not be entertained Rule 73

502 74 Replies to pleadings motions applications etc

a 1 A reply to a

reply is not permitted

2 Except as otherwise provided respecting answers 502 64 shortened

procedure Subpart K of this part briefs 502 221 exceptions 502 227

and the documents specified in paragraph b of this section any party

may file and serve a

reply to any written motion pleading petition applica

tion etc permitted under this part within fifteen 15 days after date

of service thereof unless a shorter period is fixed under 502 103

b When time permits replies also may be filed to protests seeking

suspension of tariffs 502 67 applications for enlargement of time and

postponement of hearing Subpart G of this part and motions to take

depositions 502 201

c Replies shall be in writing shall be verified if verification of original

pleading is required shall be so drawn as to fully and completely advise

the parties and the Commission as to the nature of the defense shall

admit or deny specifically and in detail each material allegation of the

pleading answered shall state clearly and concisely the facts and matters

of law relied upon and shall conform to the requirements of Subpart

H of this part Rule 74

502 75 Proceedings involving assessment agreements

a In complaint proceedings involving assessment agreements filed under

the fifth paragraph of Section 15 of the Shipping Act 1916 or section

5 d of the Shipping Act of 1984 the Notice of Filing of Complaint

and Assignment will specify a date before which the initial decision will

be issued which date will be not more than eight months from the date

the complaint was filed

27 F M C
RULES OF PRACTICE AND PROCEDURE 205

b Any party to a proceeding conducted under this section who desires

to utilize the prehearing discovery procedures provided by Subpart L of

this part shall commence doing so at the time it files its initial pleading

ie complaint answer or petition for leave to intervene Discovery matters

accompanying complaints shall be filed with the Secretary of the Commis

sion for service pursuant to 502 113 Answers or objections to discovery

requests shall be subject to the normal provisions set forth in Subpart

L

c Exceptions to the decision of the presiding officer filed pursuant

to 502 227 shall be filed and served no later than fifteen 15 days

after date of service of the initial decision Replies thereto shall be filed

and served no later than fifteen 15 days after date of service of exceptions

In the absence of exceptions the decision of the presiding officer shall

be final within thirty 30 days from the date of service unless within

that period a determination to review is made in accordance with the

procedures outlined in 502 227 Rule 75

27 F M C
206 FEDERAL MARITIME COMMISSION

Exhibit No I to Subpart E 502 62

Complaint Form and Information Checklist

BEFORE THE FEDERAL MARmME COMMISSION

I

j

I

Complaint

v Insert without abbre

viation exact and complete name of party or parties respondent

IThe complainant is State in this paragraph whether complainant is

an association a corporation firm or partnership and the names of the

individuals composing the same State also the nature and principal place

of business

II The respondent is State in this paragraph whether respondent is

an association a corporation firm or partnership and the names of the

individuals composing the same State also the nature and principal place

of business

III Allegation of jurisdiction State in this paragraph a synopsis of

the statutory basis for claim s

IV That State in this or subsequent paragraphs to be lettered A

B etc the matter or matters complained of If rates are involved

name each rate fare charge classification regulation or practice the law

fulness of which is challenged

V That by reason of the facts stated in the foregoing paragraphs com

plainant has been and is being subject to injury as a direct result of

the violations by respondent of sections State in

this paragraph the casual connection between the alleged illegal acts of

respondent and the claimed injury to complainant with all necessary statu

tory sections relief upon

VI That complainant has been injured in the following manner To

its damages in the sum of

VII Wherefore complainant prays that respondent be required to answer

the charges herein that after due hearing an order be made commanding

said respondent and each of them to cease and desist from the aforesaid

violations of said act s to establish and put in force such practices as

the Commission determines to be lawful and reasonable to pay to said

complainant by way of reparations for the unlawful conduct hereinabove

described the sum of with interest and attorney s

fees or such sum as the Commission may determine to be proper as

an award of reparation and that such other and further order or orders

be made as the Commission determines to be proper in the premises

c

j

j

27 F M C
RULES OF PRACTICE AND PROCEDURE

Dated at this day of

19

S

Complainant ssignature

Office and post office address

S

Signature or agent orattorney of complainant

Post office address

VERIFICAnON See 502 112

State of County of

ss being first duly sworn on oath deposes and

says that he she is The complainant or if a

firm association or corporation state the capacity of the affiant and is

the person who signed the foregoing complaint that he she has read

the complaint and that the facts stated therein upon information received

from others affiant believes to be true

Subscribed and sworn to before me a notary public in and for the

State of County of this

day AD 19

S

Notary Public

My Commission expires

27 F M C

207
208 FEDERAL MARITIME COMMISSION

INFORMAnON TO ASSIST IN FILING FORMAL COMPLAINT

GENERAL

Formal Docket Complaint procedures usually involve an evidentiary hear

ing on disputed facts Where no evidentiary hearing on disputed facts

is necessary and where all parties agree to the use of different procedures

a complaint may be processed under Subpart K Shortened Procedure

or Subpart S Informal Docket for a claim of 10 000 or less An applica

tion for refund or waiver of collection of freight charges due to tariff

error should be filed pursuant to 502 92 and Exhibit No 1 to Subpart

F Consider also the feasibility of filing a Petition for Declaratory Order

under 502 68

Under the Shipping Act of 1984 foreign commerce the complaint must

be filed within three 3 years from the time the cause of action accrues

and may be brought against any person alleged to have violated the 1984

Act to the injury of complainant

Under the Shipping Act 1916 and the Intercoastal Shipping Act 1933

domestic commerce the complaint must be filed within two 2 years

from the time the cause of action accrues and may be brought only against

a person subject to the Act e ga common carrier terminal operator

or freight forwarder

Because of the limitation periods a complaint is deemed to be filed

only when it is physically received at the Commission See 502 114

The format of Exhibit No 1 to Subpart E must be followed and a

verification must be included where the complainant is not represented

by an attorney or other person qualified to practice before the Commission

See 502 21 502 32 and 502 112 The complaint must also fully describe

the alleged violations of the specific section s of the shipping statute s

involved and how complainant is or was directly injured as a result An

original and fifteen copies plus a further number of copies sufficient for

service upon each named respondent must be filed and the Commission

will serve the other parties See 502 113 and 502118

In addition to Subpart E some other important rules are 502 2 mailing

address hours 502 7 documents in foreign language 502 23 Notice

of Appearance 502 41 parties how designated 502 44 necessary and

proper parties to certain complaint proceedings and Subpart H form

execution and service of documents

27 F M C
RULES OF PRACTICE AND PROCEDURE

Checklist of Specific Information

The following checklist sets forth items of information which are pertinent

in cases submitted to the Commission pursuant to the regulatory provisions

of the shipping statutes The list is not intended to be inclusive nor does

it indicate all of the essential allegations which may be material in specific

cases

1 Identify of complainant if an individual complainant s residence

if a partnership name of partners business and principal place thereof

if a corporation name state of incorporation and principal place of busi

ness The same information with respect to respondents interveners or

others who become parties is necessary

2 Description of commodity involved with port of origin destination

port weight consignor and consignee of shipment s date shipped from

loading port and date received at discharge port

3 Rate charged with tariff authority for same and any rule or regulation

applicable thereto the charges collected and from whom

4 Route of shipment including any transshipment bill of lading ref

erence

5 Date of delivery or tender ofdelivery of each shipment

6 Where the rate is challenged and comparisons are made with rates

on other commodities the form packing density susceptibility to damage

tendency to contaminate other freight value volume of movement competi

tive situation and all matters relating to the cost of loading unloading

and otherwise handling of respective commodities

7 If comparisons are made between the challenged rates and rates on

other routes the allegation showing similarity of service should include

at least respective distances volumes of movement cost of handling and

competitive conditions

8 History of rate with reasons for previous increases or decreases of

same

9 When the complaint alleges undue prejudice or preference the com

plaint should indicate what manner of undue prejudice or preference is

involved and whether to a particular person locality or description of

traffic how the preference or discrimination resulted and the manner in

which the respondents are responsible for the same and how complainant

is damaged by the prejudice or preference in loss of sales or otherwise

10 Care should be exercised to differentiate between the measure of

damages required in cases where prejudice or preference is charged where

the illegality of rates is charged and other situations

11 Where a filed agreement or conduct under the agreement is chal

lenged all necessary provisions of the shipping statute involved must be

specifically cited showing in detail how a section was violated and how

the conduct or agreement injuries complainant The complaint should be

thorough and clear as to all relief complainant is requesting

27 F M C

209
210 FEDERAL MARITIME COMMISSION

Exhibit No 2 to Subpart E 502 64

Answer to Complaint

BEFORE THE FEDERAL MARITIME COMMISSION

Answer

Complainant v

Respondent

Docket No

The above named respondent for answer to the complaint in this proceed

ing states

I State in this and subsequent paragraphs to be numbered II III etc

appropriate and responsive admissions denials and averments specifically

answering the complaint paragraph by paragraph

Wherefore respondent prays that the complaint in this proceeding be

dismissed

S

Name ofrespondent

By

Title of Officer

Office and post office address

S

Signature ofattorney or agent

Post office address

Date 19

VERIFICATION

See form for verification of complaint in Exhibit No 1 to this Subpart

and 502 1l2

CERTIFICATE OF SERVICE

See 502 1l4

27 F M C
RULES OF PRACTICE AND PROCEDURE 211

Exhibit No 3 to Subpart E 502 72

Petition for Leave to Intervene

Before the Federal Maritime Commission

Petition for Leave To Intervene

v

Docket No

Yourpetitioner respectfully represents that he she has an interest

inthe matters incontroversy inthe above entitled proceeding and desires to intervene inand

become a party to said proceeding and for grounds ofthe proposed intervention says

I That petitioner is State whether an association corporation firm or

partnership etc as inExhibit No 1 to this subpart and nature and principal place of business

II Here set outspecifically position and interest ofpetitioner inthe

above entitled proceeding and other essential averments in accordance with Rule 72 46 CFR

502 72

Wherefore said requests leaveto intervene and be treated as a

party hereto withthe right to have notice ofand appear at the taking of testimony produce and

cross examine witnesses and be heard inperson or by counsel upon briefand at the oral

argument if oral argument is granted

Ifaffirmative relief is sought insert appropriate request here

Dated at this day of 19

petitioner s signature

Office and post office address

Signature ofagent or attorney ofpetitioner

post office address

Verification and Certificate of Service

See Exhibits Nos 1 and 2 to this subpart

27 F M C
212 FEDERAL MARITIME COMMISSION

SUBPART FSETILEMENT PREHEARING PROCEDURE

502 9l Opportunity for informal settlement

a Where time the nature of the proceeding and the public interest

permit all interested parties shall have the opportunity for the submission

and consideration of facts argument offers of settlement or proposal of

adjustment without prejudice to the rights of the parties

b No stipulation offer or proposal shall be admissible in evidence

over the objection of any party in any hearing on the matter Rule 91

502 92 Special docket applications and fee

a 1 A common carrier by water in foreign commerce which publishes

its own tariff or if the common carrier does not publish its own tariff

the carrier and the conference to which it belongs or a shipper may

file an application for permission to refund or waive collection ofa portion

of freight charges where it appears that there is i an error in a tariff

of a clerical or administrative nature or ii an error due to inadvertence

in failing to file a new tariff Such refund or waiver must not result

in discrimination among shippers

2 The Commission must have received an effective tariff setting forth

the rate on which refund or waiver would be based prior to the filing

of the application

3 i The application for refund or waiver must be filed with the Com

mission within one hundred eighty 180 days from the date of shipment

and served upon other persons involved pursuant to Subpart H of this

part An application is filed when it is placed in the mail delivered to

a courier or if delivered by another method when it is received by

the Commission Filings by mail or courier must include a certification

as to date ofmailing or delivery to the courier

ii The application for refund or waiver must be accompanied by remit

tance of a 25 filing fee

iii Date of shipment shall mean the date of sailing of the vessel from

the port at which the cargo was loaded

4 By filing the applicant s agrees that

i Ifpermission is granted by the Commission

A An appropriate notice will be published in the tariff or

B Other steps will be taken as the Commission may require which

give notice of the rate on which such refund or waiver would be based

and

C Additional refunds or waivers shall be made with respect to other

shipments in the manner prescribed by the Commission s order approving

the application

ii Ifthe application is denied other steps will be taken as the Commis

sion may require

5 a Application for refund or waiver shall be made in accordance

with Exhibit 1 to this subpart Any application which does not furnish

27 F M C
RULES OF PRACTICE AND PROCEDURE

the information required by the prescribed form or otherwise comply with

this rule may be returned to the applicant by the Secretary without prejudice

to resubmission within the 180 day limitation period

b Common carriers by water in interstate or intercoastal commerce

or conferences of such carriers may file application for permission to

refund a portion of freight charges collected from a shipper or waive

collection of a portion of freight charges from a

shipper All such applica

tions shall be filed within the 2

year statutory period referred to in 502 63

and shall be made in accordance with Exhibit No I to this subpart Such

applications will be considered the equivalent of a

complaint and answer

thereto admitting the facts complained of If allowed an order for payment

or waiver will be issued by the Commission

c Applications under paragraphs a and b of this section shall be

submitted in an original and three 3

copies to the Office of the Secretary

Federal Maritime Commission Washington D C 20573 Each application

shall be acknowledged with a reference to the assigned docket number

and referred to the Office of Administrative Law Judges The presiding

officer may in his or her discretion require the submission of additional

information or oral testimony Formal proceedings as described in other

rules of this part need not be conducted The presiding officer shall issue

an initial decision to which the provisions of 502 227 shall be applicable

Rule 92

502 93 Satisfaction of complaint

If a

respondent satisfies a

complaint either before its answer thereto

is due or after answering a statement to that effect setting forth when

and how the complaint has been satisfied and signed and verified by

the opposing parties shall be filed with the Commission and served upon

all parties of record Such a statement which may be by letter shall

show the amount of reparation agreed upon shall contain the data called

for by Exhibit No I to Subpart D insofar as said form is applicable

and shall state that a like adjustment has been or will be made by respondent

with other persons similarly situated Satisfied complaints will be dismissed

in the discretion of the Commission Rule 93

502 94 Prehearing conference

a I Prior to any hearing the Commission or presiding officer may

direct all interested parties by written notice to attend one or more prehear

ing conferences for the purpose of considering any settlement under

502 91 formulating the issues in the proceeding and determining other

matters to aid in its disposition In addition to any offers of settlement

or proposals of adjustment there may be considered the following

i Simplification of the issues

ii The necessity or desirability of amendments to the pleadings

iii The possibility of obtaining admissions of fact and of documents

which will avoid unnecessary proof

iv Limitation on the number of witnesses

27 F M C

213
i

214 FEDERAL MARITIME COMMISSION

v The procedure at the hearing

vi The distribution to the parties prior to the hearing ofwritten testimony

and exhibits

vii Consolidation of the examination of witnesses by counsel

viii Such other matters as may aid in the disposition of the proceeding

2 The presiding officer may require prior to the hearing exchange

of exhibits and any other material which may expedite the hearing He

or she shall assume the responsibility of accomplishing the purposes of

the notice of prehearing conference so far as this may be possible without

prejudice to the rights of any party

3 The presiding officer shall rule upon all matters presented for decision

orally upon the record when feasible or by subsequent ruling in writing

If a party determines that a

ruling made orally does not cover fully the

issue presented or is unclear such party may petition for a further ruling

thereon within ten 10 days after receipt of the transcript

b In any proceeding under the rules in this part the presiding officer

may caU the parties together for an informal conference prior to the taking

of testimony or may recess the hearing for such a conference with a

view to carrying out the purposes ofthis section Rule 94

502 95 Prehearing statements

a Unless waiver is granted by the presiding officer it shall be the

duty of all parties to a proceeding to prepare a statement or statements

at a time and in the manner to be established by the presiding officer

provided that there has been reasonable opportunity for discovery To the

extent possible joint statements should be prepared

b A

prehearing statement shall state the name of the party or parties

on whose behalf it is presented and briefly set forth the following matters

unless otherwise ordered by the presiding officer

1 Issues involved in the proceeding

2 Facts stipulated pursuant to the procedures together with a statement

that the party or parties have communicated or conferred in a good faith

effort to reach stipulation to the fullest extent possible

3 Facts in dispute

4 Witnesses and exhibits by which disputed facts will be litigated

5 Abrief statement ofapplicable law

6 The conclusion to be drawn

7 Suggested time and location of hearing and estimated time required

for presentation of the party s or parties case

8 Any appropriate comments suggestions or information which might

assist the parties in preparing for the hearing or otherwise aid in the

disposition ofthe proceeding

c The presiding officer may for good cause shown permit a party

to introduce facts or argue points of law outside the scope of the facts

and law outlined in the prehearing statement Failure to file a prehearing

statement unless waiver has been granted by the presiding officer may

27 F M C
RULES OF PRACTICE AND PROCEDURE 215

result in dismissal of a party from the proceeding dismissal of a complaint

judgment against respondents or imposition of such other sanctions as

may be appropriate under the circumstances

d Following the submission of prehearing statements the presiding

officer may upon motion or otherwise convene a prehearing conference

for the purpose of further narrowing issues and limiting the scope of

the hearing if in his or her opinion the prehearing statements indicate

lack of dispute of material fact notpreviously acknowledged by the parties

or lack of legitimate need for cross examination and is authorized to issue

appropriate orders consistent with the purposes stated in this section Rule

95

7FMC
216 FEDERAL MARITIME COMMISSION

Exhibit No 1 to Subpart F 502 92

APPLICATION FOR REFUND OF OR WAIVER FOR FREIGHT

CHARGES DUE TO TARIFF ERROR

Federal Maritime Commission Special Docket No

Amount ofFreight Charges involved in request

Application of Name of carrier conference or if under the 1984 Act

shipper for the benefit of Name of person who paid or is responsible

for payment of freight charges

1 SHIPMENT S Here fully describe

a Commodity According to tariff description

b Number of shipments

c Weight or measurement of individual shipment as well as all ship

ments

d Date s of shipment s i e sailing s furnish supporting evidence

and Date s ofDelivery

e Shipper and Place ofOrigin

f Consignee Place of Destination and Routing of Shipment s

g Name of Carrier and Date shown on Bill of Lading furnish legible

copies ofbill s of lading

h Names ofParticipating Ocean Carrieres

i Name s of Vessel s involved in carriage

j

Amount of Freight Charges actually collected furnish legible copies

of rated bill s of lading or freight bill s as appropriate broken down

i per shipment ii in the aggregate Hi by whom paid iv who is

responsible for payment if different and v date s of collection

k Rate applicable at time of shipment furnish legible copies of tariff

page s

I Rate sought to be applied furnish legible copies of tariff page s

m Amount of freight charges at rate sought to be applied per shipment

and in the aggregate

n Amount of freight charges sought to be refunded waived per

shipment and in the aggregate

2 Furnish docket numbers of other special docket applications or decided

or pending formal proceedings involving the same rate situations

3 Furnish any information or evidence as to whether grant of the applica

tion will result in discrimination among ports or carriers

4 State whether there are shipments of other shippers of the same

or similar commodity which i moved via the carrieres or conference

involved in this application during the period of time beginning on the

day the bill s of lading was issued and ending on the day before the

effective date of the conforming tariff and ii moved on the same voyage s

of the vessel s carrying the shipment s described in Number 1 above

27 F M C
RULES OF PRACTICE AND PROCEDURE

5 Fully explain the basis for the application i e the clerical or adminis

trative error or error due to inadvertence or reasons why freight charges

collected are thought to be unlawful domestic commerce showing why

the application should be granted Furnish affidavits if appropriate and

legible copies of all supporting documents If the error is due to inadvert

ence specify the date when the carrier andor conference intended or agreed

to file a new tariff

Here set forth Name of Applicant Signature of Authorized Per

son Typed or Printed Name of Person Title of Person and Date

State of County of ss

I on oath declare that I am of the above

named applicant that I have read this application and know its contents

and that they are true

Subscribed and sworn to before me a notary public in and for the

State of County of this day of

A D 19

SEAL

S

Notary Public

My Commission expires

AFFIDAVIT OF CARRIER S and or CONFERENCE

Here as applicable set forth same type of affidavit s and notari

zation s as set forth on page 2 of this exhibit for carrier for

any other water carrier participating in the transportation under

a joint through rate andor for a conference if a conference rate

is involved

217
218 FEDERAL MARITIME COMMISSION

CERTIFICATE OF MAIliNG

I certify that the date shown below is the date of mailing or date

of delivery to courier of the original and three 3

copies of this application

to the Secretary Federal Maritime Commission Washington D C 20573

Dated at this day of

19

S

For

27 F MC
RULES OF PRACTICE AND PROCEDURE

SUBPART G TIME

502 1 0I Computation

In computing any period of time under the rules in this part the time

begins with the day following the act event or default and includes

the last day of the period unless it is a Saturday Sunday or national

legal holiday in which event the period runs until the end of the next

day which is not a Saturday Sunday or national legal holiday When

the period of time prescribed or allowed is less than seven 7 days

intermediate Saturdays Sundays or national legal holidays shall be excluded

from the computation Rule 101

502 102 Enlargement of time to file documents

Motions for enlargement of time for the filing of any pleading or other

document or in connection with the procedures of Subpart L of this part

shall set forth the reasons for the motion Such motions will be granted

only under exceptional circumstances duly demonstrated in the request

Such motions shall conform to the requirements of Subpart H of this

part except as to service if they show that the parties have received

actual notice of the motion and in relation to briefs exceptions and

replies to exceptions such motions shall conform to the further provisions

of 502 222 and 502 227 Upon motion made after the expiration of

the specified period the filing may be permitted where reasonable grounds

are found for the failure to file Replies to such motions shall conform

to the requirements of 502 74 Rule 102

502 103 Reduction of time to file documents

Except as otherwise provided by law and for good cause the Commission

with respect to matters pending before it and the presiding officer with

respect to matters pending before him or her may reduce any time limit

prescribed in the rules in this part Rule 103

502 104 Postponement of hearing

Motions for postponement of any hearing date shall set forth the reasons

for the motion and shall conform to the requirements of Subpart H of

this part except as to service if they show that parties have received

such actual notice of motion Such motions will be granted only if found

necessary to prevent substantial delay expense detriment to the public

interest or undue prejudice to a party Replies to such motions shall conform

to the requirements of 502 74 Rule 104

50215 Waiver of rules governing enlargements of time and postpone

ments of hearings

The Commission the presiding officer or the Chief Administrative Law

Judge may waive the requirements of 502 102 and 502 104 as to replies

to pleadings etc to motions for enlargement oftime or motions to postpone

a hearing and may rule ex parte on such requests Requests for enlargement

of time or motions to postpone or cancel a prehearing conference or hearing

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must be received whether orally or in writing at least five 5 days

before the scheduled date Except for good cause shown failure to meet

this requirement may result in summary rejection of the request Rule

OS

SUBPART H FORM EXECUTION AND SERVICE OF DOCUMENTS

502111 Form and appearance of documents filed with Commission

All papers to be filed under the rules in this part may be reproduced

by printing or by any other process provided the copies are clear and

legible shall be dated the original signed in ink show the docket descrip

tion and title of the proceeding and show the title if any and address

of the signer If typewritten the impression shall be on only one side

of the paper and shall be double spaced except that quotations shall be

single spaced and indented Documents not printed except correspondence

and exhibits should be on strong durable paper and shall be not more

than 8V2 inches wide and 12 inches long with a left hand margin Ph

inches wide Printed documents shall be printed in clear type never smaller

than small pica or ll point type adequately leaded and the paper shall

be opaque and unglazed Rule 111

502 112 Subscription and verification of documents

a If a party is represented by an attorney or other person qualified

to practice before the Commission under the rules in this part each pleading

document or other paper of such party filed with the Commission shall

be signed by at least one person of record admitted to practice before

the Commission in his or her individual name whose address shall be

stated Except when otherwise specifically provided by rule or statute such

pleading document or paper need not be verified or accompanied by affida

vit The signature of a person admitted or qualified to practice before

the Commission constitutes a certificate by him or her that he or she

has read the pleading document or paper that he or she is authorized

to file it that to the best of his or her knowledge information and belief

there is good ground to support it and that it is not interposed for delay

For a willful violation of this section a person admitted or qualified to

practice before the Commission may be subjected to appropriate disciplinary

action

b If a

party is not represented by a person admitted or qualified to

practice before the Commission each pleading document or other paper

of such party filed with the Commission shall be signed and verified

under oath by the party or by a duly authorized officer or agent of the

party whose address and title shall be stated The form of verification

shall be substantially as set forth in Exhibit No 1 to Subpart E Where

the signature is that of an officer or agent unless in the case of a

corporate party it is signed by the president or a vice president and attested

by the secretary or an assistant secretary under the seal of the corporation

27 F M C
RULES OF PRACTICE AND PROCEDURE

there shall be filed with the Commission an original or certified copy

of the power of attorney or other document authorizing the person to

sign Rule 112

502 113 Service by the Commission

Complaints filed pursuant to 502 62 amendments to complaints and

complainants memoranda filed in shortened procedure cases will be served

by the Commission In addition to and accompanying the original ofevery

document filed with the Commission for service by the Commission there

shall be a sufficient number of copies for use of the Commission see

502118 and for service on each party to the proceeding Rule 113

502 114 Service and filing by parties

a Except as otherwise specifically provided by the rules in this part

all pleadings documents and papers of every kind except requests for

subpenas in proceedings before the Commission under the rules in this

part other than documents served by the Commission under 502 113

and documents submitted at a hearing or prehearing conference shall when

tendered to the Commission or the presiding officer for filing show that

service has been made upon all parties to the proceeding and upon any

other persons required by the rules in this part to be served Such service

shall be made by delivering one copy to each party by hand delivering

in person by mail properly addressed with postage prepaid or by courier

b Except with respect to filing of complaints pursuant to 502 62

and 502 63 protests pursuant to 502 67 and claims pursuant to 5023

the date of filing shall be either the date on which the pleading document

or paper is physically lodged with the Commission by a

party or the

date which a party certifies it to have been deposited in the mail or

delivered to a courier Rule 114

502115 Service on attorney or other representative

When a party has appeared by attorney or other representative service

upon each attorney or other representative of record will be deemed service

upon the party except that if two or more attorneys of record are partners

or associates of the same firm only one of them need be served Rule

115

502 116 Date of service

The date of service of documents served by the Commission shall be

the date shown in the service stamp thereon The date of service of docu

ments served by parties shall be the day when matter served is deposited

in the United States mail delivered to a courier or is delivered in person

as the case may be In computing the time from such dates the provisions

of 502 101 shall apply Rule 116

502 117 Certificate of service

The original of every document filed with the Commission and required

to be served upon all parties to a

proceeding shall be accompanied by

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222 FEDERAL MARITIME COMMISSION

a certificate of service signed by the party making service stating that

such service has been made upon each party to the proceeding Certificates

of service may be in substantially the following form

CERTIFICATE OF SERVICE

I hereby certify that I have this day served the foregoing document

upon aU parties of record or name of person s by mailing delivering

to courier or delivering in person a copy to each such person Dated

at this day of 19

S

For

Rule 117

502 118 Copies of documents for use of the Commission

a Except as otherwise provided in the rules in this part the original

and fifteen 15 copies of every document filed and served in proceedings

before the Commission shall be furnished for the Commission s use If

a certificate of service accompanied the original document a

copy of such

certificate shall be attached to each such copy of the document

b In matters pending before an administrative law judge the following

copy requirements apply

1 An original and fifteen copies shall be filed with the Secretary

of

iAppeals and replies thereto filed pursuant to 502153

ii Memoranda submitted under shortened procedures of Subpart K of

this part

Hi Briefs submitted pursuant to 502 211

iv All motions replies and other filings for which a

request is made

of the administrative law judge for certification to the Commission or

on which it otherwise appears it will be necessary for the Commission

to rule

2 An original and four copies shall be filed with the Secretary of

prehearing statements required by 502 95 stipulations under 502 162

and all other motions petitions or other written communications seeking

a

ruling from the presiding administrative law judge

3 i A

single copy shan be filed with the Secretary of requests for

discovery answers or objections exchanged among the parties under proce

dures of subpart L of this part Such materials will not be part of the

record for decision unless admitted by the presiding officer or Commission

27 F M C
RULES OF PRACTICE AND PROCEDURE

ii Motions filed pursuant to 502 201 are governed by the requirements

of paragraph b 2 of this section and motions involving persons and

documents located in a foreign country are governed by the requirements

ofparagraph b 1 iv of this section

4 One copy of each exhibit shall be furnished to the official reporter

to each of the parties present at the hearing and to the Presiding Officer

unless he or she directs otherwise If submitted other than at a hearing

the reporter s copy of an exhibit shall be furnished to the administrative

law judge for later inclusion in the record if and when admitted

5 Copies of prepared testimony submitted pursuant to 502 67 d and

502 157 are governed by the requirements for exhibits in paragraph b 4

of this section Rule 118

SUBPART I SUBPENAS

502 131 Requests issuance

Subpenas for the attendance of witnesses or the production of evidence

shall be issued upon request of any party without notice to any other

party Requests for subpenas for the attendance of witnesses may be made

orally or in writing requests for subpenas for the production of evidence

shall be in writing The party requesting the subpena shall tender to the

presiding officer an original and at least two copies of such subpena

Where it appears to the presiding officer that the subpena sought may

be unreasonable oppressive excessive in scope or unduly burdensome

he or she may in his or her discretion as a condition precedent to the

issuance of the subpena require the person seeking the subpena to show

the general relevance and reasonable scope of the testimony or other evi

dence sought Rule 131

50213 Motions to quash or modify

a Except when issued at a hearing or in connection with the taking

of a deposition within ten 10 days after service of a subpena for attend

ance of a witness or a subpena for production of evidence but in any

event at or before the time specified in the subpena for compliance there

with the person to whom the subpena is directed may by motion with

notice to the party requesting the subpena petition the presiding officer

to quash or modify the subpena

b If served at the hearing the person to whom the subpena is directed

may by oral application at the hearing within a reasonable time fixed

by the presiding officer petition the presiding officer to revoke or modify

the subpena

c If served in connection with the taking of a deposition pursuant

to 502 203 unless otherwise agreed to by all parties or otherwise ordered

by the presiding officer the party who has requested the subpena shall

arrange that it be served at least twenty 20 days prior to the date specified

in the subpena for compliance therewith the person to whom the subpena

27 F M C

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224 FEDERAL MARITIME COMMISSION

J

j

is directed may move to quash or modify the subpena within ten 10

days after service of the subpena and a

reply to such motion shall be

served within five 5 days thereafter Rule 132

502 133 Attendance and mileage fees

Witnesses summoned by subpena to a hearing are entitled to the same

fees and mileage that are paid to witnesses in courts of the United States

Fees and mileage shall be paid upon request by the party at whose

instance the witness appears Rule 133

502 134 Service of subpenas

If service of a subpena is made by a United States marshal or his

or her deputy or an employee of the Commission such service shall

be evidenced by his or her return thereon If made by any other person

such person shall make affidavit thereto describing the manner in which

service is made and return such affidavit on or with the original subpena

In case of failure to make service the reasons for the failure shall be

stated on the original subpena In making service the original subpena

shall be exhibited to the person served shall be read to him or her if

he or she is unable to read and a

copy thereof shall be left with him

or her The original subpena bearing or accompanied by required return

affidavit or statement shall be returned without delay to the Commission

or if so directed on the subpena to the presiding officer before whom

the person named in the subpena is required to appear Rule 134

502 l35 Subpena of Commission staff personnel documents or things

a A subpena for the attendance of Commission staff personnel or for

the production of documentary materials in the possession of the Commis

sion shall be served upon the Secretary If the subpena is returnable at

hearing a motion to quash may be filed within five 5 days of service

and attendance shall not be required until the presiding officer rules on

said motion Ifthe subpena is served in connection with prehearing deposi

tions the procedure to be followed with respect to motions to quash and

replies thereto will correspond to the procedures established with respect

to motions and replies in 502 132 c

b The General Counsel shall designate an attorney to represent any

Commission staff personnel subpenaed under this section The attorney

so designated shall not thereafter participate in the Commission s decision

making process concerning any issue in the proceeding

c Rulings ofthe presiding officer issued under 502 135 a shall become

final rulings of the Commission unless an appeal is filed within 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 filed within ten

10 days No ruling of the presiding officer shall be effective until twenty

20 days from date of issuance unless the Commission otherwise directs

Rule 135

1F M C
RULES OF PRACTICE AND PROCEDURE

502 136 Enforcement

In the event of failure to comply with any subpena or order issued

in connection therewith the Commission may seek enforcement as provided

in 502 21O b Rule 136

SUBPART J HEARINGS PRESIDING OFFICERS EVIDENCE

502 141 Hearings not required by statute

The Commission may call informal public hearings not required by

statute to be conducted under the rules in this part where applicable

for the purpose of rulemaking or to obtain information necessary or helpful

in the determination of its policies or the carrying out of its duties and

may require the attendance of witnesses and the production of evidence

to the extent permitted by law Rule 141

502 142 Hearings required by statute

In complaint and answer cases investigations on the Commission s own

motion and in other rulemaking and adjudication proceedings in which

a hearing is required by statute formal hearings shall be conducted pursuant

to 5 U S C 554 Rule 142

502 143 Notice ofnature of hearing jurisdiction and issues

Persons entitled to notice of hearings except those notified by complaint

served under 502 133 will be duly and timely informed of a the nature

of the proceeding b the legal authority and jurisdiction under which

the proceeding is conducted and c the terms substance and issues in

volved or the matters of fact and law asserted as the case may be

Such notice shall be published in the Federal Register unless all persons

subject thereto are named and either are personally served or otherwise

have actual notice thereof in accordance with law Rule 143

502144 Notice of time and place of hearing

Notice of hearing will designate the time and place thereof the person

or persons who will preside and the kind of decision to be issued The

date or place of a hearing for which notice has been issued may be

changed when warranted Reasonable notice will be given to the parties

or their representatives of the time and place of the change thereof due

regard being had for the public interest and the convenience and necessity

of the parties or their representatives Notice may be served by mail or

telegraph Rule 144

502 145 Presiding officer

a Definition Presiding officer includes where applicable a member

ofthe Commission or an administrative law judge See 502 25

b Designation of administrative law judge An administrative law judge

will be designated by the Chief of the Commission s Office of Administra

tive Law Judges to preside at hearings required by statute in rotation

so far as practicable unless the Commission or one or more members

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thereof shall preside and will also preside at hearings not required by

statute when designated to do so by the Commission

c Unavailability If the presiding officer assigned to a proceeding be

comes unavailable to the Commission the Commission or Chief Judge

if such presiding officer was an administrative law judge shall designate

a qualified officer to take his or her place Any motion predicated upon

the substitution of a new presiding officer for one originally designated

shall be made within ten 10 days after notice of such substitution Rule

145 J

502 146 Commencement of functions of Office of Administrative Law

Judges

In proceedings handled by the Office of Administrative Law judges

its functions shall attach

a Upon the service by the Commission of a complaint filed pursuant

to 502 62 or

b Upon reference by the Commission of a petition for a declaratory

order pursuant to 502 68 or

c Upon forwarding for assignment by the Office of the Secretary of

a special docket application pursuant to 502 92 or

d Upon the initiation of a proceeding and ordering of hearing before

an administrative law judge Rule 146

502147 Functions and powers

a Of presiding officer The officer designated to hear a case shall

have authority to arrange and give notice of hearing sign and issue subpoe

nas authorized by law take or cause depositions to be taken rule upon

proposed amendments or supplements to pleadings delineate the scope

of a proceeding instituted by order of the Commission by amending modify

ing clarifying or interpreting said order except with regard to that portion

of any order involving the Commission s suspension authority set forth

in Section 3 Intercoastal Shipping Act 1933 hold conferences for the

settlement or simplification of issues by consent of the parties regulate

the course of the hearing prescribe the order in which evidence shall

be presented dispose of procedural requests or similar matters hear and

rule upon motions administer oaths and affIrmations examine witnesses

direct witnesses to testify or produce evidence available to them which

will aid in the determination of any question of fact in issue rule upon

offers of proof and receive relevant material reliable and probative evi

dence act upon petitions to intervene permit submission of facts arguments

offers of settlement and proposals of adjustment hear oral argument at

the close of testimony fIx the time for fIling briefs motions and other

documents to be filed in connection with hearings and the administrative

law judge s decision thereon except as otherwise provided by the rules

in this part act upon petitions for enlargement of time to file such docu

ments including answers to formal complaints and dispose of any other

matter that normally and properly arises in the course of proceedings
RULES OF PRACTICE AND PROCEDURE

The presiding officer or the Commission may exclude any person from

a hearing for disrespectful disorderly or contumacious language or conduct

b All of the functions delegated in Subparts A to Q of this part

inclusive to the Chief Judge presiding officer or administrative law judge

include the functions with respect to hearing determining ordering certify

ing reporting or otherwise acting as to any work business or matter

pursuant to the provisions of section 105 of Reorganization Plan No 7

of 1961 Rule 147

502 148 Consolidation of proceedings

The Commission or the Chief Judge or designee may order two or

more proceedings which involve substantially the same issues consolidated

and heard together Rule 148

502 149 Disqualification of presiding or participating Officer

Any presiding or participating officer may at any time withdraw if he

or she deems himself or herself disqualified in which case there will

be designated another presiding officer If a party to a proceeding or

its representative files a timely and sufficient affidavit of personal bias

or disqualification of a presiding or participating officer the Commission

will determine the matter as a part of the record and decision in the

case Rule 149

502 150 Further evidence required by presiding officer during hearing

At any time during the hearing the presiding officer may call for further

evidence upon any issue and require such evidence where available to

be presented by the party or parties concerned either at the hearing or

adjournment thereof Rule 150

502 151 Exceptions to rulings of presiding officer unnecessary

Formal exceptions to rulings of the presiding officer are unnecessary

It is sufficient that a

party at the time the ruling of the presiding officer

is made or sought makes known the action which it desires the presiding

officer to take or its objection to an action taken and its grounds therefor

Rule 151

502 152 Offer of proof

An offer of proof made in connection with an objection taken to any

ruling of the presiding officer rejecting or excluding proffered oral testimony

shall consist of a statement of the substance of the evidence which counsel

contends would be adduced by such testimony and if the excluded evidence

consists of evidence in documentary or written form or of reference to

documents or records a

copy of such evidence shall be marked for identi

fication and shall constitute the offer of proof Rule 152

502 153 Appeal from ruling of presiding officer other than orders of dis

missal in whole or in part

a Rulings of the presiding officer may not be appealed prior to or

during the course of the hearing or subsequent thereto if the proceeding

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228 FEDERAL MARITIME COMMISSION

is still before him or her except where the presiding officer shall find

it necessary to allow an appeal to the Commission to prevent substantial

delay expense or detriment to the public interest or undue prejudice

to a party

b Any part seeking to appeal must file a motion for leave to appeal

no later than fifteen 15 days after written service or oral notice of the

ruling in question unless the presiding officer for good cause shown

enlarges or shortens the time Any such motion shall contain not only

the grounds for leave to appeal but the appeal itself

c Replies to the motion for leave to appeal and the appeal may be

filed within fifteen 15 days after date of service thereof unless the presid

ing officer for good cause shown enlarges or shortens the time If the

motion is granted the presiding officer shall certify the appeal to the

Commission

d Unless otherwise provided the certification of the appeal shall not

operate as a stay of the proceeding before the presiding officer

e The provisions of 502 10 shall not apply to this section Rule

153

502 154 Rights of parties as to presentation of evidence

Every party shall have the right to present its case or defense by oral

or documentary evidence to submit rebuttal evidence and to conduct such

cross examination as may be required for a full and true disclosure of

the facts The presiding officer shall however have the right and duty

to limit the introduction of evidence and the examination and cross examina

tion ofwitnesses when in his or her judgment such evidence or examination

is cumulative or is productive of undue delay in the conduct of the hearing

Rule 154

502 155 Burden ofproof

At any hearing in a suspension proceeding under section 3 of the Inter

coastal Shipping Act 1933 502 67 the burden of proof to show that

the suspended rate fare charge classification regulation or practice is

just and reasonable shall be upon the respondent carrier or carriers In

all other cases the burden shall be on the proponent of the rule or order

Rule 155

502 156 Evidence admissible

In any proceeding under the rules in this part all evidence which is

relevant material reliable and probative and not unduly repetitious or

cumulative shall be admissible All other evidence shall be excluded Unless

inconsistent with the requirements of the Administrative Procedure Act

and these Rules the Federal Rules of Evidence PL 93 595 effective

July 1 1975 will also be applicable Rule 156

502 157 Written evidence

il The use of written statements in lieu of oral testimony shall be

resorted to where the presiding officer in his or her discretion rules that

27 F M C
RULES OF PRACTICE AND PROCEDURE 229

such procedure is appropriate The statements shall be numbered in para

graphs and each party in its rebuttal shall be required to list the paragraphs

to which it objects giving an indication of its reasons for objecting Statis

tical exhibits shall contain a short commentary explaining the conclusions

which the offeror draws from the data Any portion of such testimony

which is argumentative shall be excluded Where written statements are

used copies of the statement and any rebuttal statement shall be furnished

to all parties as shall copies of exhibits The presiding officer shall fix

respective dates for the exchange of such written rebuttal statements and

exhibits in advance of the hearing to enable study by the parties of such

testimony Thereafter the parties shall endeavor to stipulate as many of

the facts set forth in the written testimony as they may be able to agree

upon Oral examination of witnesses shall thereafter be confined to facts

which remain in controversy and a reading of the written statements at

the hearing will be dispensed with unless the presiding officer otherwise

directs

b Where a formal hearing is held in a

rulemaking proceeding interested

persons will be afforded an opportunity to participate through submission

of relevant material reliable and probative written evidence properly veri

fied except that such evidence submitted by persons not present at the

hearing will not be made a part of the record if objected to by any

party on the ground that the person who submits the evidence is not

present for cross examination Rule 157

502 158 Documents containing matter not material

Where written matter offered in evidence is embraced in a document

containing other matter which is not intended to be offered in evidence

the offering party shall present the original document to all parties at

the hearing for their inspection and shall offer a true copy of the matter

which is to be introduced unless the presiding officer determines that

the matter is short enough to be read into the record Opposing parties

shall be afforded an opportunity to introduce in evidence in like manner

other portions of the original document which are material and relevant

Rule 158

502159 Reserved

502 160 Records in other proceedings

When any portion of the record before the Commission in any proceeding

other than the one being heard is offered in evidence a true copy of

such portion shall be presented for the record in the form of an exhibit

unless the parties represented at the hearing stipulate upon the record that

such portion may be incorporated by reference Rule 160

502 161 Commission s files

Where any matter contained in a tariff report or other document on

file with the Commission is offered in evidence such document need not

be produced or marked for identification but the matter so offered shall

be specified in its particularity giving tariff number and page number

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of tariff report or document in such manner as to be readily identified

and may be received in evidence by reference subject to comparison with

the original document on file Rule 161

502 162 Stipulations

The parties may by stipulation agree upon any facts involved in the

proceeding and include them in the record with the consent of the presiding

officer It is desirable that facts be thus agreed upon whenever practicable

Written stipulations shall be subscribed and shall be served upon all parties

of record unless presented at the hearing or prehearing conference A stipula

tion may be proposed even if not subscribed by all parties without prejudice

to any nonsubscribing party s right to cross examine and offer rebuttal

evidence Rule 162

502 163 Receipt of documents after hearing

Documents or other writings to be submitted for the record after the

close ofthe hearing will not be received in evidence except upon permission

of the presiding officer Such documents or other writings when submitted

shall be accompanied by a statement that copies have been served upon

all parties and shall be received except for good cause shown not later

than ten 10 days after the close of the hearing and not less than ten

10 days prior to the date set for filing briefs Exhibit numbers will

not be assigned until such documents are actually received and incorporated

in the record Rule 163

502 164 Oral argument at hearings

Oral argument at the close of testimony may be ordered by the presiding

officer in his or her discretion Rule 164

502 165 Official transcript

a The Commission will designate the official reporter for all hearings

The official transcript of testimony taken together with any exhibits and

any briefs or memoranda of law filed therewith shall be filed with the

Commission Transcripts of testimony will be available in any proceeding

under the rules in this part and will be supplied by the official reporter

to the parties and to the public except when required for good cause

to be held confidential at rates not to exceed the maximum rates fixed

by contract between the Commission and the reporter

b 1 Section 11 of the Federal Advisory Committee Act provides that

except where prohibited by contractual agreements entered into prior to

the effective date of this Act agencies and advisory committees shall make

available to any person at actual cost of duplication copies of transcripts

of agency proceedings or advisory committee meetings As used in this

section agency proceeding means any proceeding as defined in 5 D S C

551 12

2 The Office of Management and Budget has interpreted this provision

as being applicable to proceedings before the Commission and its adminis

trative law judges Guidelines 38 FR 12851 May 16 1973

27 F M C
RULES OF PRACTICE AND PROCEDURE

3 The Commission interprets section 11 and the OMB guidelines as

follows

i Future contracts between the Commission and the successfully bidding

recording firm will provide that any party to a Commission proceeding

or other interested person hereinafter included within the meaning of

party shall be able to obtain a

copy of the transcript of the proceeding

in which it is involved at the actual cost of duplication of the original

transcript which includes a reasonable amount for overhead and profit

except where it requests delivery of copies in a shorter period of time

than is required for delivery by the Commission

ii The Commission wilI bear the full expense of transcribing all of

its administrative proceedings where it requests regular delivery service

as set forth in the Contract In cases where the Commission requests

daily delivery of transcript copies as set forth in the Contract any party

may receive daily delivery service at the actual cost of duplication

iii A Where the Commission does not request daily copy service any

party requesting such service must bear the incremental cost of transcription

above the regular copy transcription cost borne by the Commission in

addition to the actual cost of duplication except that where the party

applies for and properly shows that the furnishing of daily copy is

indispensible to the protection of a vital right or interest in achieving

a fair hearing the presiding officer in the proceeding in which the applica

tion is made shall order that daily copy service be provided the applying

party at the actual cost of duplication with the full cost of transcription

being borne by the Commission

B In the event a request for daily copy is denied by the presiding

officer the requesting party in order to obtain daily copy must pay the

cost of transcription over and above that borne by the Commission Le

the incremental cost between that paid by the Commission when it requests

regular copy and when it requests daily copy

C The decision of the presiding officer in this situation is interpreted

as falling within the scope of the functions and powers of the presiding

officer as defined in 502 147 a Rule 165

502 166 Corrections of transcript

Motions made at the hearing to correct the record wilI be acted upon

by the presiding officer Motions made after the hearing to correct the

record shall be filed with the presiding officer within twenty five 25

days after the last day of hearing or any session thereof unless otherwise

directed by the presiding officer and shall be served on all parties Such

motions may be in the form of a letter If no objections are received

within ten 10 days after date of service the transcript will upon approval

of the presiding officer be changed to reflect such corrections Ifobjections

are received the motion wilI be acted upon with due consideration of

the stenographic record ofthe hearing Rule 166

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502 167 Objection to public disclosure of information

Upon objection to public disclosure of any information sought to be

elicited during a hearing the presiding officer may in his or her discretion

order that the witness shall disclose such information only in the presence

of those designated and sworn to secrecy by the presiding officer The

transcript of testimony shall be held confidential Within five 5 days

after such testimony is given the objecting party shall file with the presiding

officer a verified written motion to withhold such information from public

disclosure setting forth sufficient identification of same and the basis upon

which public disclosure should not be made Copies of said transcript

and motion need be served only upon the parties to whose representatives

the information has been disclosed and upon such other parties as the

presiding officer may designate This rule is subject to the proviso that

any information given pursuant thereto may be used by the presiding

officer or the Commission if they deem it necessary to a correct decision

in the proceeding Rule 167

502 168 Copies of data or evidence

Every person compelled to submit data or evidence shall be entitled

to retain or on payment of proper costs procure a

copy of transcript

thereof Rule 168

502 169 Record ofdecision

The transcript of testimony and exhibits together with all papers and

requests filed in the proceeding shall constitute the exclusive record for

decision Rule 169

SUBPARTESHORTENEDPROCEDURE

502 181 Selection of cases for shortened procedure consent required

By consent of the parties and with approval of the Commission or

presiding officer a complaint proceeding may be conducted under shortened

procedure without oral hearing except that a hearing may be ordered by

the presiding officer at the request of any party or in his or her discretion

Rule 181

50218 Complaint and memorandum of facts and arguments and filing

fee

A complaint filed with the Commission under this subpart shall have

attached a memorandum of the facts subscribed and verified according

to 502 112 and of arguments separately stated upon which it relies

The original of each complaint with memorandum shall be accompanied

by copies for the Commission s use The complaint shall be accompanied

by remittance of a 50 filing fee Rule 182

502 183 Respondent s answering memorandum

Within twenty five 25 days after date of service of the complaint

unless a shorter period is fixed each respondent shall if it consents to

r1ur
RULES OF PRACTICE AND PROCEDURE

the shortened procedure provided in this subpart serve upon complainant

pursuant to subpart H of this part an answering memorandum of the facts

subscribed and verified according to 502 112 and of arguments separately

stated upon which it relies The original of the answering memorandum

shall be accompanied by a certificate of service as provided in 502 114

and shall be accompanied by copies for the Commission s use If the

respondent does not consent to the proceeding being conducted under the

shortened procedure provided in this subpart the matter will be governed

by subpart E of this part and the respondent shall file an answer under

502 64 Rule 183

502 l84 Complainants memorandum in reply

Within fifteen 15 days after the date of service of the answering memo

randum prescribed in 502 183 unless a shorter period is fixed each

complainant may file a memorandum in reply subscribed and verified

according to 502 112 served as provided in 502 114 and accompanied

by copies for the Commission s use This will close the record for decision

unless the presiding officer determines that the record is insufficient and

orders the submission of additional evidentiary materials Rule 184

502 185 Service of memoranda upon and by interveners

Service of all memoranda shall be made upon any interveners Interveners

shall file and serve memoranda in conformity with the provisions relating

to the parties on whose behalf they intervene Rule 185

502 186 Contents of memoranda

The memorandum should contain concise arguments and fact the same

as would be offered if a formal hearing were held and briefs filed If

reparation is sought paid freight bills should accompany complainants

original memorandum Rule 186

502 187 Procedure after filing ofmemoranda

An initial recommended or tentative decision will be served upon the

parties in the same manner as is provided under 502 225 Thereafter

the procedure will be the same as that in respect to proceedings after

formal hearing Rule 187

SUBPART LDEPOSITIONS WRITTEN INTERROGATORIES AND

DISCOVERY

502 20 I General provisions governing discovery

a Applicability The procedures described in this subpart are available

in all adjudicatory proceedings under section 22 of the Shipping Act 1916

and the Shipping Act of 1984 Unless otherwise ordered by the presiding

officer the copy requirements of 502 118 b 3 i shall be observed

b Schedule of use

I Complaint proceedings Any party desiring to use the procedures

provided in this subpart shall commence doing so at the time it files

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234 FEDERAL MARITIME COMMISSION

its initialpleading e g complaint answer or petition for leave to intervene

Discovery matters accompanying complaints shaJl be filed with the Secretary

ofthe Commission for service pursuant to 502 113

2 Commission instituted proceedings All parties desiring to use the

procedures provided in this subpart shall commence to do so within 30

days of the service of the Commission s order initiating the proceeding

3 Commencement ofdiscovery The requirement to commence discovery

under paragraphs b 1 and b 2 of this section 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 com

mencing discovery A schedule for further discovery pursuant to this subpart

shall be established at the conference of the parties pursuant to paragraph

d of this section

c Completion of discovery Discovery shall be completed within 120

days of the service of the complaint or the Commission s order initiating

the proceeding

d Duty of the Parties In all proceedings in which the procedures

of this subpart are used it shall be the duty of the parties to meet or

confer within fifteen 15 days after service of the answer to a complaint

or after service of the discovery requests in a Commission instituted pro

ceeding in order to establish a schedule for the completion of discovery

within the 120 day period prescribed in paragraph c of this section resolve

to the fullest extent possible disputes relating to discovery matters and

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 5 days after the conference Nothing in this

rule should be construed to preclude the parties from meeting or conferring

at an earlier date

e Submission of status reports and requests to alter schedule The

parties shall submit a status report concerning their progress under the

discovery schedule established pursuant to paragraph d of this section

not later than thirty 30 days after submission of such schedule to the

presiding officer and at 30 day intervals thereafter concluding on the final

day ofthe discovery schedule unless the presiding officer otherwise directs

Requests to alter such schedule beyond the 120 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

t 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

27 F M C
RULES OF PRACTICE AND PROCEDURE

is not present and oral rulings are made at a conference held pursuant

to this paragraph or paragraph g

of this section the parties shall submit

to the presiding officer as soon as possible but within three 3 work

days unless the presiding officer grants additional time a joint memorandum

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 awritten 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 on such disputes Such rulings shall be made orally upon

the record when feasible andor 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 comple

tion of discovery

h Scope of examination Persons and parties may be examined regarding

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 docu

ments 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 evi

dence

iProtective Orders

l 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 which justice requires to protect a party or person from annoy

ance embarrassment oppression or undue burden or expense including

one or more of the following i that the discovery not be had ii

that the discovery may be had only on specified terms and conditions

including a designation of the time or place iii that the discovery may

be had only by a method of discovery other than that selected by the

party seeking discovery iv that certain matters not be inquired into

or that the scope of the discovery be limited to certain matters v that

discovery may be conducted with no one present except persons designated

by the presiding officer vi that a deposition after being sealed be opened

only by order of the presiding officer vii that a trade secret or other

confidential research development or commercial information not be dis

closed or be disclosed only in a designated way viii that the parties

simultaneously file specified documents or information enclosed in sealed

envelopes to be opened as directed by the presiding officer

2 If the 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

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that any party or person provide or permit discovery Rulings under this

paragraph shall be issued by the presiding officer at a discovery conference

called under 502 20l tor if circumstances warrant under such other

procedure as the presiding officer may establish

jSupplementation 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 information thereafter

acquired except as follows

1 A party is under a

duty seasonably to supplement responses with

respect to any question directly addressed to i the identity and location

of persons having knowledge of discoverable matters and ii the identity

of each 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 of the testimony

2 A party is under a duty seasonably to amend a

prior response if

the party obtains information upon the basis of which i the party knows

that the response was incorrect when made or ii the party knows that

the response though correct when made is no longer true and the cir

cumstances 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 of the

presiding officer or by agreement of the parties subject to the time limita

tions set forth in paragraph c of this section or established under paragraph

e of this section 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 States deposi

tions shall be taken before an officer authorized to administer 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 commissioned by

the Commission and a person so commissioned shall have the power

by virtue of his or her 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 commis

sion or a letter rogatory that the taking of the deposition in any other

manner is impracticable or inconvenient and both a commission 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

27 F M C
RULES OF PRACTICE AND PROCEDURE

in response to a letter rogatory need not be excluded 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 If the 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

1 A

party desiring to take the deposition of any person upon oral

examination shall give reasonable notice in writing to such person and

to every other party to the action pursuant to subpart H of this part

The notice shall state the time and place for the taking of the deposition

sufficient to identify the person or the particular class or group to which

the person belongs The notice shall also contain a statement of the matters

concerning which each witness will testify

2 The attendance of witnesses may be compelled by subpoena as pro

vided in Subpart I of this part If a subpoena duces tecum is to be served

on the person to be examined the designation of the materials to be

produced as set forth in the subpoena shall be attached to or included

in the notice

3 All errors and irregularities in the notice of subpoena for taking

of a deposition are waived unless written objection is promptly served

upon the party giving the notice

4 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

1 The officer before whom the deposition is to be taken shall put

the witness on oath and shall personally or by someone acting under

the direction and in his or her presence record the testimony of the 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 it or to the evidence presented

or to the conduct of any party and any other objection to the proceedings

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shall be noted by the officer upon the deposition Evidence objected to

shall be taken subject to the objections Objections shall be resolved at

a discovery conference called under 502 201 t or if circumstances war

rant by such other procedure as the presiding officer may establish

2 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

3 The parties may stipulate or the presiding officer may upon motion

order that a deposition be taken by telephone or other reliable device

c Motion to terminate or limit examination At any time during the

taking of the deposition on motion of any party or of the deponent and

upon a showing 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 may order the officer conducting

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 examina

tion it shall be resumed thereafter only upon the order of the presiding

officer Upon demand of the objecting party or deponent the taking of

the 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 tor if cir

cumstances 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 examination

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 of the 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 of the witness or the fact

of the 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 of the deposition in whole or in part

e Certification andfiling 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 endorsed with the title

27 F M C
RULES OF PRACTICE AND PROCEDURE

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 exhibits

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 endorsed transmitted filed or otherwise dealt

with by the officer under this section and 502 204 are waived unless

a motion to suppress the deposition or some part thereof is made within

ten 10 days of filing Rule 203

502 204 Depositions upon written interrogatories

a Serving interrogatories notice A party desiring to take the deposition

of any person upon written interrogatories shall serve them upon every

other party pursuant to subpart H of this part with a notice stating the

name and address of the person who is to answer them and the name

or descriptive title and address of the officer before whom the deposition

is to be taken Within ten 10 days thereafter a

party so served may

serve cross interrogatories upon the party proposing to take the deposition

All errors and irregularities in the notice are waived unless written objection

is promptly served upon the party giving the notice

b Officer to take responses and prepare record A copy of the notice

and copies of all 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 paragraphs b d and e

of 502 203 to take the testimony ofthe witness in response to the interrog

atories and to prepare certify and file or mail the deposition attaching

thereto the copy of the notice and the interrogatories received by him

or her

c Notice of filing 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 Service answers

1 Any party may serve pursuant to Subpart H of this part 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

2 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

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the person making them and the objections signed by the attorney making

them

3 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 proceeding under the schedule established pursuant to 502 201 The

presiding officer for good cause may limit service of answers

b Objections to interrogatories All objections to interrogatories shall

be resolved at the conference or meeting provided for under 502 201 f

or 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 502 201 d is not delayed

c Scope time number and use

1 Interrogatories may relate to any matters which can be inquired

into under 502 201 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

2 Interrogatories may be sought after interrogatories have been an

swered but the presiding officer on motion of the deponent or the party

interrogated may make such protective order as justice may require

3 The number of interrogatories or of sets of interrogatories to be

served is not limited except as justice requires to protect the party from

annoyance expense embarrassment or oppression

4 An interrogatory otherwise proper is not necessarily objectionable

merely because an answer to the interrogatory involves an opinion or conten

tion that relates to fact or the application of law to fact but the presiding

officer may order that such an interrogatory need not be answered until

after designated discovery has been completed or until a prehearing con

ference or other later time

d Option to produce business records Where the answer to an interrog

atory 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 of documents and things and entry upon land for

inspection and other purposes

a Scope Any party may serve pursuant to Subpart H of this part

on any other party a

request 1 to produce and permit the party making

the request or someone acting on its behalf to inspect and copy any

designated documents including writings drawings graphs charts photo
RULES OF PRACTICE AND PROCEDURE

graphs sound or video recordings and other data compilations from which

information can be obtained 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 of inspection

and measuring surveying photographing testing or sampling 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 cat

egory with reasonable particularity The request shall specify a reasonable

time place and manner of making the inspection and performing 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 f

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 only to the extent that the discovery schedule

previously established under 502 201 d is not delayed Rule 206

502 207 Requests for admission

a l

A

party may serve pursuant to Subpart H of this part 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 inspection and copying Any party desiring to serve

a request as provided by this section must comply with the applicable

provisions of 502 201

2 i Each matter ofwhich an admission is requested shall be separately

set forth

ii The matter is admitted unless within thirty 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

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242 FEDERAL MARITIME COMMISSION

why the answering party cannot truthfully admit or deny the matter A

denial shall fairly meet the substance of the requested 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

Hi An answering party may not give lack of information or knowledge

as a reason for failure to admit or deny unless the party states that reason

able inquiry has been made and that the information 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 admissions may request rulings on

the sufficiency of the answers or objections Rulings on such requests

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

of this 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 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 withdrawal

or amendment when the presentation of the merits of the 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 onfailure to admit If a

party fails to admit the genuineness

of any document or the truth of any matter as requested under paragraph

a of this section 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 includ

ing reasonable attorney s fees Such application must be made to the presid

ing officer before issuance of the initial decision in the proceeding The

presiding officer shall make the order unless it is found that I the request

was held objectionable pursuant to paragraph a of this section 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

27 F M C
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on the matter or 4 there was other good reason for the failure to admit

Rule 207 J

502 208 Use of discovery procedures directed to Commission staff per

sonnel

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 produc

tion ofdocuments and other things requests for admissions and any motions

in connection with the foregoing shall be served on the Secretary of

the 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 paragraph a of this

section shall become final rulings of the Commission unless an appeal

is filed within 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 filed 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 ofissuance unless the Commis

sion otherwise directs Rule 208

502 209 Use of depositions 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 provi

sions

1 Any deposition may be used by any party for the purpose of con

tradicting or impeaching the testimony of deponent as a witness

2 The deposition of a party or of anyone who at the time of taking

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 of the United States unless

it appears that the absence of the witness was procured by the party

offering the depositions or iii that the witness is unable to attend or

testify because of age sickness infirmity or imprisonment or iv that

the party offering the deposition has been unable to procure the attendance

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of the witness by subpoena or v upon application and notice that such

exceptional circumstances exist as to make it desirable in the interest

of justice and with due regard to the importance ofpresenting the testimony

of witnesses orally in open hearing to allow the deposition to be used

4 If only part of a deposition is offered in evidence by a party

any other party may require introduction of all of it 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

1 Except as otherwise 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 exclusion of the evidence if the

witness were then present and testifying

2 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 the time

3 Errors and irregularities occurring at the oral examination in the

manner of taking the deposition in the form of the questions or answers

in the oath or affirmation or in the conduct of parties 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 of

the deposition

4 Objections to the form of written interrogatories submitted under

502 204 are waived unless served in writing upon the party propounding

them within the time allowed for serving the succeeding cross interrog

atories

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 paragraph a 3 of this section At the

hearing any party may rebut any relevant evidence contained in a deposition

whether introduced by it or by any other party Rule 209 J

502 210 Refusal to comply with orders to answer or produce documents

sanctions enforcement

27 F M C
RULES OF PRACTICE AND PROCEDURE

a Sanctions for failure 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 are just and among others the following

I

An order that the matters regarding which the order was made or

any other designated facts 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 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 further

proceedings until the order is obeyed or dismissing the action or proceeding

or any party thereto or rendering a judgment by default against the disobe

dient party

b Enforcement of orders and subpenas In the event of refusal to

obey an order or failure to comply with a subpena the Attorney General

at the request of the Commission or any party injured thereby may seek

enforcement by a United States district court having jurisdiction over the

parties Any action with respect to enforcement of subpenas or orders

relating to depositions written interrogatories or other discovery matters

shall be taken within twenty 20 days of the date of refusal to obey

or failure to comply A private party shall advise the Commission five

5 days excluding Saturdays Sundays and legal holidays before applying

to the court of its intent to seek enforcement of such subpenas and discovery

orders

c Persons and documents located in a

foreign country Orders of the

presiding officer directed to persons or documents located in a foreign

country shall become final orders of the Commission unless an appeal

to the Commission is filed within ten 10 days after date of issuance

of such orders 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 filed 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

SUBPARTS M BRIEFS REQUESTS FOR FINDINGS DECISIONS

EXCEPTIONS

502 221 Briefs requests for findings

27 F M C

245
246 FEDERAL MARITIME COMMISSION

a The presiding officer shall fix the time and manner of filing briefs

and any enlargement of time The period of time allowed shall be the

same for all parties unless the presiding officer for good cause shown

directs otherwise

b Briefs shall be served upon all parties pursuant to Subpart H of

this part

c In investigations instituted on the Commission s own motion the

presiding officer may require Hearing Counsel to file a request for fmdings

of fact and conclusions within a reasonable time prior to the filing of

briefs Service of the request shall be in accordance with the provisions

of Subpart H of this part

d Unless otherwise ordered by the presiding officer opening or initial

briefs shall contain the following matters in separately captioned sections

1 introductory section describing the nature and background of the case

2 proposed findings of fact in serially numbered paragraphs with reference

to exhibit numbers and pages of the transcript 3 argument based upon

principles of law with appropriate citations of the authorities relied upon

and 4 conclusions

e All briefs shall contain a subject index or table of contents with

page references and a list of authorities cited

f The presiding officer may limit the number of pages to be contained

in a brief Rule 221

502 222 Requests for enlargement oftime for filing briefs

Requests for enlargement of time within which to file briefs shall conform

to the requirements of 502 102 Except for good cause shown such re

quests shall be filed and served pursuant to Subpart H of this part not

later than five 5 days before the expiration of the time fixed for the

filing ofthe briefs Rule 222

502 223 Decisionsadministrative law judges

To the administrative law judges is delegated the authority to make

and serve initial or recommended decisions Rules 223

502 224 Separation of functions

The separation of functions as required by 5 U S C 554 d shall be

observed in proceedings under Subparts A to Q inclusive of this part

Rule 224

502 225 Decisions contents and service

All initial recommended and final decisions will include a statement

of findings and conclusions as well as the reasons or basis therefor upon

all the material issues of fact law or discretion presented on the record

and the appropriate rule order sanction relief or denial thereof A copy

of each decision when issued shall be served on the parties to the proceed

ing In proceedings involving overcharge claims the presiding officer may

where appropriate require that the carrier publish notice in its tariff of

27 F M C
RULES OF PRACTICE AND PROCEDURE

the substance of the decision This provision shall also apply to decisions

issued pursuant to Subpart T of this part Rule 225

502 226 Decision based on official notice public documents

a Official notice may be taken of such matters as might be judicially

noticed by the courts or of technical or scientific facts within the general

knowledge of the Commission as an expert body provided that where

a decision or part thereof rests on the official notice of a material fact

not appearing in the evidence in the record the fact of official notice

shall be so stated in the decision and any party upon timely request

shall be afforded an opportunity to show the contrary

b Whenever there is offered in evidence in whole or in part a public

document such as an official report decision opinion or published sci

entific or economic statistical data issued by any of the executive depart

ments or their subdivisions legislative agencies or committees or adminis

trative agencies of the Federal Government including Government owned

corporations or a similar document issued by a state or its agencies

and such document or part thereot has been shown by the offeror to

be reasonably available to the public such document need not be produced

or marked for identification but may be offered in evidence as a public

document by specifying the document or relevant part thereof Rule 226

502 227 Exceptions to decisions or orders of dismissal of administrative

law judges replies thereto and review of decisions or orders

of dismissal by Commission

a l Within twenty two 22 days after date of service of the initial

decision unless a shorter period is fixed under 502 103 any party may

file a memorandum excepting to any conclusions findings or statements

contained in such decision and a brief in support of such memorandum

Such exceptions and brief shall constitute one document shall indicate

with particularity alleged errors shall indicate transcript page and exhibit

number when referring to the record and shall be served on all parties

pursuant to Subpart H of this part

2 Any adverse party may file and serve a

reply to such exceptions

within twenty two 22 days after the date of service thereof which shall

contain appropriate transcript and exhibit references

3 Whenever the officer who presided at the reception of the evidence

or other qualified officer makes an initial decision such decision shall

become the decision of the Commission thirty 30 days after date of

service thereof and the Secretary shall so notify the parties unless within

such 30 day period or greater time as enlarged by the Commission for

good cause shown request for review is made in exceptions filed or a

determination to review is made by the Commission on its own initiative

4 Upon the filing of exceptions to or review of an initial decision

such decision shall become inoperative until the Commission determines

the matter

27 F M C

247
248 FEDERAL MARITIME COMMISSION

5 Where exceptions are filed to or the Commission reviews an initial

decision the Commission except as it may limit the issues upon notice

or by rule will have all the powers which it would have in making

the initial decision Whenever the Commission shall determine to review

an initial decision on its own initiative notice of such intention shall

be served upon the parties

6 The time periods for filing exceptions and replies to exceptiofts

prescribed by this section shall not apply to proceedings conducted under

502 67 and 502 75

b l

If an administrative law judge has granted a motion for dismissal

of the proceeding in whole or in part any party desiring to appeal must

file such appeal no later than twenty two 22 days after service of the

ruling on the motion in question

2 Any adverse party may file and serve a

reply to an appeal under

this paragraph within fifteen 15 days after the date the appeal is served

3 The denial of a petition to intervene or withdrawal of a Jfant of

intervention shall be deemed to be a dismissal within the meaning of

this paragraph

c Whenever an administrative law judge orders dismissal of a proceeding

in whole or in part such order in the absence of appeal shall become

the order of the Commission thirty 30 days after date of service of

such order and the Secretary shall so notify the parties unless within

such 30 day period the Commission decides to review such order on its

own motion in which case notice of such intention shall be served upon

the parties

d The Commission shall not on its own initiative review any initial

decision or order of dismissal unless such review is requested by an individ

ual Commissioner Any such request must be transmitted to the Secretary

within thirty 30 days after date of service of the decision or order

Such request shall be sufficient to bring the matter before the Commission

for review Rule 227

502 228 Request for enlargement of time for filing exceptions and replies

thereto

Requests for enlargement of time within which to file exceptions and

briefs in support thereof or replies to exceptions shall conform to the

applicable provisions of 502 102 Requests for extensions of these periods

will be granted only under exceptional circumstances duly demonstrated

in the request Except for good cause shown such requests shall be filed

and served not later than five 5 days before the expiration of the time

fixed for the filing of such documents Any enlargement of time aranted

will automatically extend by the same period the date for the filing of
RULES OF PRACTICE AND PROCEDURE 249

has expired b notice is given by the Commission that the initial decision

will be reviewed on its own initiative or c the Commission requires

the case to be certified to it for initial decision Rule 229

502 230 Reopening by presiding officer or Commission

a Motion to reopen At any time after the conclusion of a hearing

in a proceeding but before issuance by the presiding officer of a rec

ommended or initial decision any party to the proceeding may file with

the presiding officer a motion to reopen the proceeding for the purpose

of receiving additional evidence A motion to reopen shall be served in

conformity with the requirements of Subpart H and shall set forth the

grounds requiring reopening of the proceeding including material changes

of fact or of law alleged to have occurred since the conclusion of the

hearing

b Reply Within ten 10 days following service of a motion to reopen

any party may reply to such motion

c Reopening by presiding officer At any time prior to filing his or

her decision the presiding officer upon his or her own motion may reopen

a proceeding for the reception of further evidence

d Reopening by the Commission Where a decision has been issued

by the presiding officer or where a decision by the presiding officer has

been omitted but before issuance of a Commission decision the Commis

sion may after petition and reply in conformity with paragraphs a and

b of this section or upon its own motion reopen a proceeding for the

purpose of taking further evidence

e Remand by the Commission Nothing contained in this rule shall

preclude the Commission from remanding a proceeding to the presiding

officer for the taking of additional evidence or determining points of law

Rule 230

SUBPART NORAL ARGUMENT SUBMISSION FOR FINAL

DECISION

502 241 Oral Argument

a If oral argument before the Commission is desired on exceptions

to an initial or recommended decision or on a motion petition or applica

tion a request therefor shall be made in writing Any party may make

such request irrespective of its filing exceptions under 502 227 If a brief

on exceptions is filed the request for oral argument shall be incorporated

in such brief Requests for oral argument on any motion petition or applica

tion shall be made in the motion petition or application or in the reply

thereto

b Applications for oral argument will be granted or denied in the

discretion of the Commission and if granted the notice of oral argument

will set forth the order of presentation Upon request the Commission

will notify any party of the amount of time which will be allowed it

1 I r
250 FEDERAL MARITIME COMMISSION

j

i

c Those who appear before the Commission for oral argument shall

confine their argument to points of controlling importance raised on excep

tions or replies thereto Where the facts of a case are adequately and

accurately dealt with in the initial or recommended decision parties should

as far as possible address themselves in argument to the conclusions

d Effort should be made by parties taking the same position to agree

in advance of the argument upon those persons who are to present their

side of the case and the names of such persons and the amount of time

requested sbould be received by the Commission not later than ten 10

days before the date set for the argument The fewer the number of persons

making the argument the more effectively can the parties interests be

presented in the time allotted Rule 241

502 242 Submission to Commission for final decision

A

proceeding will be deemed submitted to the Commission for final

decision as follows a If oral argument is had the date of completion

thereof or if memoranda on points of law are permitted to be filed after

argument the last date of such ming b if oral argument is not had

the last date when exceptions or replies thereto are filed or if exceptions

are not filed the expiration date for such exceptions c in the case

of an initial decision the date of notice of the Commission s intention

to review the decision if such notice is given Rule 242

502 243 Participation of absent Commissioner

Any Commissioner who is not present at oral argument and who is

otherwise authorized to participate in a decision shall participate in making

that decision after reading the transcript of oral argument unless he or

she files in writing an election not to participate Rule 243

SUBPART OREPARATION

502 251 Proof on award ofreparation

If many shipments or points of origin or destination are involved in

a proceeding in wbicb reparation is sougbt See 502 63 the Commission

will determine in its decision the issues as to violations injury to complain

ant and right to reparation If complainant is found entitled to reparation

the parties thereafter will be given an opportunity to agree or make proof

respecting the shipments and pecuniary amount of reparation due before

the order of the Commission awarding reparation is entered In such cases

freight bills and other exhibits bearing on the details of all shipments

and the amount of reparation on each need not be produced at the original

hearing unless called for or needed to develop other pertinent facts Rule

251

502 252 Reparation statements

When the Commission finds that reparation is due but that the amount

cannot be ascertained upon the record before it the complainant shall

immediately prepare a statement in accordance with the approved reparation

27 F M C
RULES OF PRACTICE AND PROCEDURE 251

statement in Exhibit No 1 to this subpart showing details of the shipments

on which reparation is claimed This statement shall not include any ship

ments not covered by the findings of the Commission Complainant shall

forward the statement together with the paid freight bills on the shipments

or true copies thereof to the respondent or other person who collected

the charges for checking and certification as to accuracy Statements so

prepared and certified shall be filed with the Commission for consideration

in determining the amount of reparation due Disputes concerning the accu

racy of amounts may be assigned for conference by the Commission or

in its discretion referred for further hearing Rule 252

502 253 Interest and attorney s fees in reparation proceedings

a Except as to applications for refund or waiver of freight charges

under S 502 92 and claims which are settled by agreement of the parties

and absent fraud or misconduct of a party interest will be granted on

awards of reparation in cases involving the misrating of cargo and arising

under section 1 O b of the Shipping Act of 1984 and section 2 of the

Intercoastal Shipping Act 1933 Interest awarded in reparation proceedings

will accrue from the date of injury to the date specified in the Commission

order awarding reparations Normally the date specified within which pay

ment must be made will be fifteen 15 days subsequent to the date of

service of the Commission Order The rate of interest will be derived

from the average monthly rates on six month U S Treasury bills commenc

ing with the rate for the month that the injury occurred and concluding

with the latest available monthly Treasury bill rate at the date of the

Commission Order awarding reparations Compounding will be daily from

the date of injury to the date specified in the Commission Order awarding

reparations The monthly rates on six month U S Treasury bills for the

reparation period wiIl be summed and divided by the number of months

for which interest rates are available in the reparation period to determine

the average interest rate applicable during the period

b The Commission shaH also award reasonable attorney s fees in repara
252 FEDERAL MARITIME COMMISSION

EXHIBIT NO 1 TO SUBPART 0

502 252

REPARATION STATEMENT TO BE FILED PURSUANT TO RULE 252

Claim of

time Commission in Docket No

under the decision of the Federal Mari

Dute or

De Weight

As charJed Should le

Date delivery Oat Vay Pon

Ilnn

Com

ur

a r n

Charges of orlen charges Vessel age ofori

fJon

Route modi

OIL mea paid by derof paid No gin ly Rat Amoum Ral Amomlt

delivery pon urement

Here insert name of person paying charges in the first instance and state whether as consignor con

signee or in what other capacity

Total amount of reparation

The undersigned hereby certifies that this statement has been checked

against the records of this company and found correct

Date

By

By

Steamship Company Collecting Carrier Respondent

Auditor

Claimant

Attorney

address and date

27 F M C
RULES OF PRACTICE AND PROCEDURE

SUBPART P RECONSIDERATION OF PROCEEDINGS

502 261 Petitions for reconsideration and stay

a Within thirty 30 days after issuance of a final decision or order

by the Commission any party may file a petition for reconsideration Such

petition shaH be served in conformity with the requirements of Subpart

H of this part A

petition will be subject to summary rejection unless

it

1 Specifies that there has been a change in material fact or in applicable

law which change has occurred after issuance of the decision or order

2 Identifies a substantive error in material fact contained in the decision

or order or

3 Addresses a finding conclusion or other matter upon which the

party has not previously had the opportunity to comment or which was

not addressed in the briefs or arguments of any party Petitions which

merely elaborate upon or repeat arguments made prior to the decision

or order will not be received A petition shaH be verified if verification

of the original pleading is required and shaH not operate as a stay of

any rule or order of the Commission

b A petition for stay of a Commission order which directs the dis

continuance of statutory violations will not be received

c The provisions of this section are not applicable to decisions issued

pursuant to Subpart S of this part Rule 261

502 262 Reply

Any party may file a

reply to a petition for reconsideration within fifteen

15 days after the date of service of the petition in accordance with

502 74 The reply shaH be served in conformity with Subpart H Rule

262

SUBPART QSCHEDULES AND FORMS

502 271 Schedule of information for presentation in regulatory cases

The foHowing approved forms and illustrative wording for use in Com

mission proceedings appear in this part as foHows

a Notice of Appearance Exhibit No 1 to Subpart B foHowing

502 32

b Certification Certification of non disclosure by persons requesting

underlying data from carriers filing general rate increase or decrease

502 67 a 3

c Complaint Exhibit No I to Subpart E foHowing 502 75

d Verification See complaint form in Exhibit No 1 to Subpart E

foHowing 502 75

e Answer to Complaint Exhibit No 2 to Subpart E foHowing 502 75

t

Petition for Leave to Intervene Exhibit No 3 to Subpart E foHowing

502 75

27 F M C

253
i

I

254 FEDERAL MARITIME COMMISSION

g Special Docket Application Exhibit No 1 to Subpart F following

502 95

h Certificate of Service 502 117 Subpart H See also 502 320

for small claims

i Reparation Statement Where the Commission finds reparation is due

but that the amount cannot be ascertained Exhibit No 1 to Subpart 0

following 502 253

j

Small Claim Form for Informal Adjudication Exhibit No 1 to Subpart

S following 502 305

k Respondent s Consent Form for Informal Adjudication Exhibit No

2 to Subpart S following 502 305 Rule 271

SUBPART R NONADJUDICATORY INVESTIGATIONS

502 281 Investigational policy

The Commission has extensive regulatory duties under the various acts

it is charged with administering The conduct of investigations is essential

to the proper exercise of the Commission s

regulatory duties It is the

purpose of this subpart to establish procedures for the conduct of such

investigations which will insure protection of the public interest in the

proper and effective administration of the law The Commission encourages

voluntary cooperation in its investigations where such can be effected with

out delay or without prejudice to the public interest The Commission

may in any matter under investigation invoke any or all of the compulsory

processes authorized by law Rule 281

502 282 Initiation ofinvestigations

Commission inquiries and nonadjudicatory investigations are originated

by the Commission upon its own motion when in its discretion the Commis

sion determines that information is required for the purposes of rulemaking

or is necessary or helpful in the determination of itsupolicies or the carrying

out ofits duties including whether to institute formal proceedings directed

toward detenttining whether any ofthe laws which the Commission admin

isters have been violated Rule 282

502 283 Order of investigation

When the Commission has determined that an investigation is necessary

an Order of Investigation shall be issued Rule 283

502 284 By whom conducted

Investigations are conducted by Commission representatives designated

and duly authorized for the purpose See 502 25 Such representatives

are authorized to exercise the duties of their office in accordance with

the laws of the United States and the regulations of the Commission

including the resort to all compulsory processes authorized by law and

the administration of oaths and affirmances in any matters under investiga

tion by the Commission Rule 284

27 F M C
RULES OF PRACTICE AND PROCEDURE

502 285 Investigational hearings

a Investigational hearings as distinguished from hearings in adjudicatory

proceedings may be conducted in the course of any investigation undertaken

by the Commission including inquiries initiated for the purpose of determin

ing whether or not a person is complying with an order of the Commission

b Investigational hearings may be held before the Commission one

or more of its members or a duly designated representative for the purpose

of hearing the testimony of witnesses and receiving documents and other

data relating to any subject under investigation Such hearings shall be

stenographically reported and a transcript thereof shall be made a part

ofthe record of investigation Rule 285

502 286 Compulsory process

The Commission or its designated representative may issue orders or

subpenas directing the person named therein to appear before a designated

representative at a designated time and place to testify or to produce docu

mentary evidence relating to any matter under investigation or both Such

orders and subpenas shall be served in the manner provided in 502 134

Rule 286

502 287 Depositions

The Commission or its duly authorized representative may order testi

mony to be taken by deposition in any investigation at any stage of such

investigation Such depositions may be taken before any person designated

by the Commission having the power to administer oaths Such testimony

shall be reduced to writing by the person taking the deposition or under

his or her direction and shall then be subscribed by the deponent Any

person may be compelled to appear and be deposed and to produce evidence

in the same manner as witnesses may be compelled to appear and testify

and produce documentary evidence as provided in 502 131 Rule 287

502 288 Reports

The Commission may issue an order requiring a person to file a report

or answers in writing to specific questions relating to any matter under

investigation Rule 288

502 289 Noncompliance with investigational process

In case of failure to comply with Commission investigational processes

appropriate action may be initiated by the Commission including actions

for enforcement by the Commission or the Attorney General and forfeiture

of penalties or criminal actions by the Attorney General Rule 289

502 290 Rights ofwitness

Any person required to testify or to submit documentary evidence shall

be entitled to retain or on payment of lawfully prescribed cost procure

a

copy of any document produced by such person and of his or her

own testimony as stenographically reported or in the depositions as reduced

to writing by or under the direction of the person taking the deposition

27 F M C

255
256 FEDERAL MARITIME COMMISSION

Any party compelled to testify or to produce documentary evidence may

be accompanied and advised by counsel but counsel may not as a matter

or right otherwise participate in the investigation Rule 290

502 291 Nonpublic proceedings

Unless otherwise ordered by the Commission all investigatory proceed

ings shall be nonpublic Rule 291

SUBPART S INFORMAL PROCEDURE FOR ADJUDICATION OF

SMALL CLAIMS

502 301 Statement of Policy

a Section l1 a of the Shipping Act of 1984 permits any person to

file a complaint with the Commission claiming a violation occurring in

connection with the foreign commerce of the United States and to seek

reparation for any injury caused by that violation

b Section 22 of the Shipping Act 1916 permits any person to file

a complaint against any common carrier by water in interstate and offshore

domestic commerce or against any other person subject to the Shipping

Act 1916 or the Intercoastal Shipping Act 1933 claiming a violation

ofthose statutes and to seek reparation for that violation

c With the consent of both parties claims filed under this subpart

in the amount of 10 000 or less will be referred to the Commission s

Informal Dockets Activity for adjudication and decision by its Settlement

Officers without the necessity of formal proceedings under the rules of

this part

d Determination of claims under this subpart shall be administratively

final and conclusive Rule 301

502 302 Limitations of Actions

a Claims alleging violations of the Shipping Act of 1984 must be

filed within three years from the time the cause of action accrues

b Claims alleging violations of the Shipping Act 1916 or Intercoastal

Shipping Act 1933 must be filed within two years from the time the

cause of action arises

c A claim is deemed filed on the date it is received by the Commission

Rule 302

502 303 Reserved

502 304 Procedure and filing fee

a A sworn claim under this subpart shall be filed in the form prescribed

in Exhibit No 1 to this subpart Three 3 copies of the claim must

be filed together with the same number of copies of such supporting

documents as may be deemed necessary to establish the claim Copies

of tariff pages need not be filed reference to such tariffs or to pertinent

parts thereof will be sufficient Supporting documents may consist of affida

vits correspondence bills of lading paid freight bills export declarations

dock or wharf receipts or of such other documents as in the judgment

27 F M C
RULES OF PRACTICE AND PROCEDURE

of the claimant tend to establish the claim The Settlement Officer may

if deemed necessary request additional documents or information from

claimants Claimant may attach a memorandum brief or other document

containing discussion argument or legal authority in support of its claim

If a claim filed under this subpart involves any shipment which has been

the subject of a previous claim filed with the Commission formally or

informally full reference to such previous claim must be given

b Claims under this subpart shall be addressed to the Office of the

Secretary Federal Maritime Commission Washington D C 20573 Such

claims shall be accompanied by remittance of a 25 filing fee

c Each claim under this subpart will be acknowledged with a reference

to the Informal Docket Number assigned The number shall consist of

a numeral s followed by capital I in parentheses All further correspond

ence pertaining to such claims must refer to the assigned Informal Docket

Number If the documents filed fail to establish a claim for which relief

may be granted the parties affected will be so notified in writing The

claimant may thereafter but only if the period of limitation has not run

resubmit its claim with such additional proof as may be necessary to

establish the claim In the event a complaint has been amended because

it failed to state a claim upon which relief may be granted it will be

considered as a new complaint

d A copy of each claim filed under this subpart with attachments

shall be served by the Settlement Officer on the respondent involved

e Within twenty five 25 days from the date of service of the claim

the respondent shall serve upon the claimant and file with the Commission

its response to the claim together with an indication in the form prescribed

in Exhibit No 2 to this subpart as to whether the informal procedure

provided in this subpart is consented to Failure of the respondent to indicate

refusal or consent in its response will be conclusively deemed to indicate

such consent The response shall consist of documents arguments legal

authorities or precedents or any other matters considered by the respondent

to be a defense to the claim The Settlement Officer may request the

respondent to furnish such further documents or information as deemed

necessary or he or she may require the claimant to reply to the defenses

raised by the respondent

t If the respondent refuses to consent to the claim being informally

adjudicated pursuant to this subpart the claim will be considered a com

plaint under 502311 and will be adjudicated under Subpart T of this

part

g

Both parties shall promptly be served with the Settlement Officer s

decision which shall state the basis upon which the decision was made

Where appropriate the Settlement Officer may require that the respondent

publish notice in its tariff of the substance of the decision This decision

shall be final unless within thirty 30 days from the date of service

of the decision the Commission exercises its discretionary right to review

7lUr

257
i

258 FEDERAL MARmME COMMISSION

the decision The Commission shall not on its own initiative review any

decision or order of dismissal unless such review is requested by an individ

ual Commissioner Any such request must be transmitted to the Secretary

within thirty 30 days after date of service of the decision or order

Such request shall be sufficient to bring the matter before the Commission

for review

h Within thirty 30 days after service of a final decision by a Settlement

Officer any party may file a petition for reconsideration Such petition

shall be directed to the Settlement Officer and shall act as a stay of

the review period prescribed in paragraph gof this section A petition

will be subject to summary rejection unless it 1 specifies that there

has been a change in material fact or in applicable law which change

has occurred after issuance of the decision or order 2 identifies a sub

stantive error in material fact contained in the decision or order 3 address

es a material matter in the Settlement Officer s decision upon which the

petitioner has not previously had the opportunity to comment Petitions

which merely elaborate upon or repeat arguments made prior to the decision

or order will not be received Upon issuance of a decision or order on

reconsideration by the Settlement Officer the review period prescribed in

paragraph g

ofthis section will recommence Rule 304

50235 Applicability of other rules of this part

Except as specifically provided in this subpart the Rules in Subparts

A through Q inclusive of this part do not apply to situations covered

by this subpart Rule 305

7J1Ur
RULES OF PRACTICE AND PROCEDURE

EXHIBIT NO 1 to SUBPART S

502 304 a

Small Claim Fonn For Infonnal Adjudication And Infonnation Checklist

FEDERAL MARITIME COMMISSION

WASHINGTON D C

INFORMAL DOCKET NO

Claimant vs Respondent

IThe claimant is state in this paragraph whether claimant is an associa

tion corporation finn or partnership and if a finn or partnership the

names of the individuals composing the same State the nature and principal

place of business

II The respondent named above is state in this paragraph whether re

spondent is an association corporation finn or partnership and if a finn

or partnership the names of the individuals composing the same State

the nature and principal place of business

III That state in this and subsequent paragraphs to be lettered A B

etc the matters that gave rise to the claim Name specifically each rate

charge classification regulation or practice which is challenged Refer to

tariffs tariff items or rules or agreement numbers if known If claim

is based on the fact that a finn is a common carrier state where it

is engaged in transportation by water and which statute s it is subject

to under the jurisdiction ofthe Federal Maritime Commission

IV Ifclaim is for overcharges state commodity weight and cube origin

destination bill of lading description bill of lading number and date rate

andor charges assessed date of delivery date of payment by whom paid

rate or charge claimed to be correct and amount claimed as overcharges

Specify tariff item for rate or charge claimed to be proper

V State section of statute claimed to have been violated Not required

if claim is for overcharges

VI State how claimant was injured and amount of damages requested

VII The undersigned authorizes the Settlement Officer to detennine the

above stated claim pursuant to the infonnal procedure outlined in Subpart

S 46 CFR 50231 592 305 of the Commission s infonnal procedure for

adjudication of small claims subject to discretionary Commission review

27 F M C

259
260 FEDERAL MARITIME COMMISSION

1

Attach memorandum or brief in support of etaim Also attach bill of

lading copies of correspondence or other documents in support of claim

Date

S

Claimant s signature

i

l

Claimant s address

S

Signature of agent or attorney

Agent s or attorney s address

j

VERIFICAnON

State of County of ss

being first duly sworn on oath deposes and says

that he or she is

The etaimant or if a firm association or corporation state the capacity

of the affiant and is the person who signed the foregoing etaim that

he or she has read the foregoing and that the facts set forth without

qualification are true and that the facts stated therein upon information

received from others affiant believes to be true

Subscribed and sworn to before me a notary public in and for the

State of County of this

day of 19

SEAL

S

Notary Public

My Commission expires

27 F M C
RULES OF PRACTICE AND PROCEDURE 261

INFORMATION TO ASSIST IN FILING INFORMAL COMPLAINTS

Informal Docket procedures are limited to claims of 10 000 or less

and are appropriate only in instances when an evidentiary hearing on dis

puted facts is not necessary Where however a respondent elects not to

consent to the informal procedures See Exhibit No 2 to Subpart S

the claim will be adjudicated by an administrative law judge under Subpart

T ofPart 502

Under the Shipping Act of 1984 for foreign commerce the claim must

be filed within three 3

years from the time the cause of action accrues

and may be brought against any person alleged to have violated the 1984

Act to the injury of claimant

Under the Shipping Act 1916 and the Intercoastal Shipping Act 1933

domestic commerce the claim must be filed within two 2

years from

the time the cause of action accrues and may only be brought against

a person subject to the Act e g

a common carrier terminal operator

or freight forwarder

A violation of a specific section of a particular shipping statute must

be alleged

The format of Exhibit No I must be followed and a verification must

be included where the claimant is not represented by an attorney or other

person qualified to practice before the Commission See 502 21 502 32

and 502 112 An original and two 2 copies of the claim and all attach

ments including a brief in support of the claim must be submitted

27 F M C
4

262 FEDERAL MARITIME COMMISSION

EXHIBIT NO 2 TO SUBPART S

502 304 e

Respondent s Consent Fonn for Infonnal Adjudication

FEDERAL MARITIME COMMISSION

1

WASHINGTON D C

INFORMAL DOCKET NO

RESPONDENT S AFFIDAVIT

i

c

Iauthorize the Settlement Officer to detennine the above numbered claim

in accordance with Subpart S 46 CPR 502 of the Commission s infonnal

procedure for adjudication of small claims subject to discretionary Commis

sion Review

Date

S

i

Capacity

VERIFICAnON

State of County of ss

being first duly sworn on oath deposes and says

Title or Position and is the

the foregoing and agrees without qualification to its

that he or she is

person who signed

truth

j 27 F M C
RULES OF PRACTICE AND PROCEDURE 263

Subscribed and sworn to before me a notary public in and for the

State of County of this

day of 19

SEAL

S

Notary Public

My Commission expires

CERTIFICATE OF SERVICE

SEE 502 320

7Mr
264 FEDERAL MARITIME COMMISSION

SUBPART T FORMAL PROCEDURE FOR ADJUDICATION OF

SMALL CLAIMS

502 311 Applicability

In the event the respondent elects not to consent to determination of

the claim under Subpart S of this part it shall be adjudicated by the

administrative law judges of the Commission under procedures set forth

in this subpart if timely filed under 502 302 The previously assigned

Docket Number shall be used except that it shall now be followed by

capital F instead of I in parenthesis See 502 304 c The complaint

shall consist of the documents submitted by the claimant under Subpart

S of this part Rule 311

502 312 Answer to complaint

The respondent shall file with the Commission an answer within twenty

five 25 days of service of the complaint and shall serve a

copy of

said answer upon complainant The answer shall admit or deny each matter

set forth in the complaint Matters not specifically denied will be deemed

admitted Where matters are urged in defense the answer shall be accom

plished by appropriate affidavits other documents and memoranda

Rule 312

502 313 Reply to complainant

Complainant may within twenty 20 days of service of the answer

filed by respondent file with the Commission and serve upon the respondent

a

reply memorandum accompanied by appropriate affidavits and supporting

documents Rule 313

502 314 Additional information

The administrative law judge may require submission ofadditional affida

vits documents or memoranda from complainant or respondent Rule 314

503 315 Request for oral hearing

In the usual course of disposition of complaints filed under this subpart

no oral hearing will be held but the administrative law judge in his

or her discretion may order such hearing A request for oral hearing

may be incorporated in the answer or in complainant s

reply to the answer

Requests for oral hearing will not be entertained unless they set forth

in detail the reasons why the filing of affidavits or other documents will

not permit the fair and expeditious disposition of the claim and the precise

nature of the facts sought to be proved at such oral hearing The administra

tive law judge shall rule upon a request for oral hearing within ten 10

days of its receipt In the event an oral hearing is ordered it will be

held in accordance with the rules applicable to other formal proceedings

as set forth in Subparts A through Q of this part Rule 315

503 316 Intervention

Intervention will ordinarily not be permitted Rule 316

502 317 Oral argument

7f1Mf
RULES OF PRACTICE AND PROCEDURE 265

No oral argument will be held unless otherwise directed by the adminis

trative law judge Rule 317

502 318 Decision

The decision of the administrative law judge shall be final unless within

twenty two 22 days from the date of service of the decision either party

requests review of the decision by the Commission asserting as grounds

therefore that a material finding of fact or anecessary legal conclusion

is erroneous or that prejudicial error has occurred or unless within thirty

30 days from the date of service of the decision the Commission exercises

its discretionary right to review the decision The Commission shall not

on its own initiative review any decision or order of dismissal unless

such review is requested by an individual Commissioner Any such request

must be transmitted to the Secretary within thirty 30 days after date

of service of the decision or order Such request shall be sufficient to

bring the matter before the Commission for review Rule 318

502 319 Date of service and computation of time

The date of service of documents served by the Commission shall be

that which is shown in the service stamp thereon The date of service

of documents served by parties shall be the date when the matter served

is mailed or delivered in person as the case may be When the period

of time prescribed or allowed is ten 10 days or less intermediate Satur

days Sundays and holidays shall be excluded from the computation

Rule 319

502320 Service

All claims resubmitted claims petitions to intervene and rulings thereon

notices or oral hearings notices of oral arguments if necessary decisions

of the administrative law judge notices of review and Commission deci

sions shall be served by the administrative law judge or the Commission

All other pleadings documents and filings shall when tendered to the

Commission evidence service upon all parties to the proceeding Such

certificate shall be in substantially the following form

CERTIFICATE OF SERVICE

I hereby certify that I have this day served the foregoing document

upon all parties of record in this proceeding by mailing delivering to

courier or delivering in person a copy to each such person

in sufficient

time to reach such person on the date the document is due to be filed

with the Commission

Dated at this day of

19

S

For

Rule 320

27 F M C
266 FEDERAL MARITIME COMMISSION

502321 Applicability of other rules of this part

Except as specifically provided in this subpart rules in Subparts A

through Q inclusive of this part do not apply to situations covered by

this subpart Rule 321

SUBPART U CONCILIATION SERVICE

502 401 Definitions

For purposes of this subpart

a Disputes means disagreements between two or more parties arising

from the transportation of goods or the performance of services in connec

tion with such transportation in the domestic offshore commerce or the

foreign commerce of the Vnited States a difference of opinion regarding

the interpretation of any tariff rate rule or regulation a disagreement

regarding the performance of any service in connection with such transpor

tation a disagreement with respect to an alleged violation of the shipping

statutes and other disagreement or opposing opinion regarding any matter

connected with transportation of cargoes in the waterborne commerce of

the United States This definition is limited to those disputes which fall

within the jurisdiction of the Federal Maritime Commission

b Shipping statutes means the Shipping Act of 1984 46 V S C

app 1701 1720 Shipping Act 1916 46 U S C app 801 et seq Merchant

Marine Act 1936 46 V S C app 1101 et seq Merchant Marine Act

1920 46 V S C app 861 et seq the Intercoastal Shipping Act 1933

46 V S c

app 843 et seq and amendments of and Acts relating to

the foregoing to the extent of the Federal Maritime Commission s jurisdic

tion under such Acts

c Advisory opinions means non binding conclusions reached by a

conciliator on the basis of oral presentation andor documentary authority

d Domestic offshore commerce means waterborne common carriage

between

1 The Continental United States and Alaska or Hawaii

2 Alaska and Hawaii

3 The Vnited States or the District of Columbia and any territory

commonwealth possession or district excluding the District of Columbia

4 Any territory commonwealth possession or district excluding the

District of Columbia and any other such territory commonwealth posses

sion or district and

5 Places in the same district territory commonwealth or possession

excluding the District of Columbia and which are not solely engaged

in transportation subject to the jurisdiction of the Interstate Commerce

Commission under 49 V S C Chapter 105

27 F M C
RULES OF PRACTICE AND PROCEDURE

e Foreign commerce means waterborne common carriage between

the United States or any of its territories commonwealths districts or

possessions and foreign country Rule 401

502 402 Policy

It is the policy of the Federal Maritime Commission

a To offer its good offices and expertise to parties to disputes involving

matters within its jurisdiction so as to permit resolution of such disputes

with dispatch and without the necessity of costly and time consuming formal

proceedings

b To facilitate and promote the resolution of problems and disputes

by encouraging affected parties to resolve differences through their own

resources

c To create a forum in which grievances interpretations problems

and questions involving the waterborne commerce of the United States

may be aired discussed and hopefully resolved to the mutual advantage

of all concerned parties Rule 402

502 403 Persons eligible for service

Request for conciliation service may be made by any shipper shippers

association merchant carrier conference of carriers freight forwarder ma

rine terminal operator Government agency or any other person affected

by or involved in the transportation of goods by common carrier in the

waterborne domestic offshore or foreign commerce of the United States

Rule 403

502 404 Procedure and fee

a The request for conciliation should be addressed to the Federal Mari

time Commission Conciliation Service Washington D C 20573 and should

contain the details of the dispute names and addresses of all involved

parties the contentions of each party or parties and copies of any documents

that are relevant to the disposition of the issues If the request is made

by anyone party to the dispute the party requesting conciliation should

mail or deliver to the other party or parties to the dispute a

copy of

the letter of request with attachments if any The request shall be accom

panied by remittance of a 25 service fee

b Each matter will be assigned a number prefixed by the letters FMCCS

and assigned to a conciliator for disposition and the involved parties will

be informed of the case number and the name of the conciliator

c While it is preferable that all parties involved in a dispute request

a service jointly a request by a single party for the service will be acted

upon provided all parties agree that the dispute should be conciliated

In the event that the request is made by only one party the conciliator

will contact the other party or parties to the dispute and be advised as

to whether such parties agree to participate in the conciliation Ifthe other

party or parties to the dispute do not agree to the Conciliation Service

27 F M C

267
268 FEDERAL MARITIME COMMISSION

i

1

no further action will be taken by the conciliator and the conciliation

ceases

d The parties will be free to detennine the best procedures to be

used with the qualification that the conciliator may disapprove procedures

that would in his or her opinion be either too time consuming or involve

inordinate expense to the Federal Maritime Commission The parties may

agree to 1 fix a time and place for the oral presentation of each party s

contention and 2 request affidavits Qocuments or other materials that

could help resolve the dispute The conciliator will be in a strictly advisory

capacity There will be no written recard of the conciliation discussions

e Participation in the conciliation of a dispute is purely voluntary at

all stages and the parties involved may withdraw at any time without

prejudice Rule 404

S02 405 Assignment of conciliator

The Secretary of the Commission giving due regard to the type and

complexity of the problem presented and the degree of expertise required

will assign a conciliator to each dispute Rule 405

502 406 Advisory opinion

a The conciliator will write an advisory opinion that must meet the

approval of all parties Ifthe advisory opinion or revision thereof requested

by one or more of the parties is not unanimously agreed upon then

the conciliation will cease without prejudice to any of the parties involved

If unanimity is not reached the conciliator will note in a report to the

Commission which shall be served on all parties that the parties failed

to reach agreement Only if unanimity is reached will the infennal advisory

opinion although not binding be sent to all interested parties and be

made available to the public

b There will be no appeal from or review of such opinions and

any party may pursue any further course of action under any other rule

or statute that it deems advisable Rule 406

SUBPART V PAPERWORK REDUCTION ACT

502 991 OMB control numbers assigned pursuant to the Paperwork Re

duction Act

This section displays the control numbers assigned to infonnation collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget OMB pursuant to the Paperwork Reduction Act of

1980 Pub L 96511 The Commission intends that this part comply with

the Act which requires that agencies display a current control number

assigned by the Director of OMB for each agency infonnation collection

requirement

27 F M C
RULES OF PRACTICE AND PROCEDURE 269

Section

Current

OMB Con

trol No

502 27 Form FMC 12 3072001

27 F M C
FEDERAL MARITIME COMMISSION

46 CPR PART 503

PUBLIC INFORMATION

SUBPART AGENERAL

Sec

503 1 Statement of policy

SUBPART B PUBLICATION IN THE FEDERAL REGISTER

503 11 Materials to be published

503 12 Effect of nonpublication

503 13 Incorporation by reference

1

503 21

503 22

503 23

503 24

503 25

i

1

1

503 31

503 32

503 33

503 34

503 35

503 36

503 41

503 42

503 43

5031

503 52

503 53

503 54

270

SUBPART COMMISSION OPINIONS AND ORDERS

Public records

Current index

Effect of noncompliance

Documents available at the Communications Center

Documents available at the Office of the Secretary

SUBPART D PROCEDURE GOVERNING AVAILABILITY OF

COMMISSION RECORDS

Identification ofrecords

Records generally available

Other records available upon written request

Procedures on requests for documents

Exceptions to availability of records

Commission report of actions

SUBPART E FEES

Policy and services available

Payment of fees and charges

Fees for services

SUBPART F INFORMATION SECURITY PROGRAM

Definitions

Senior agency official

Oversight Committee

Original classification

27 F M C
Sec

503 55

503 56

503 57

503 58

503 59

503 60

503 61

503 62

503 63

503 64

503 65

503 66

503 67

503 68

503 69

PUBLIC INFORMATION 271

Derivative classification

General declassification policy

Mandatory review for declassification

Appeals of denials of mandatory declassification review requests

Safeguarding classified information

SUBPART G ACCESS TO ANY RECORD OF IDENTIFIABLE

PERSONAL INFORMATION

Definitions

Conditions of disclosure

Accounting of disclosures

Request for information

Commission procedure on request for information

Request for access to records

Amendment of a record

Appeals from denial of request for amendment of a record

Exemptions

Fees

SUBPART H PUBLIC OBSERVATION OF FEDERAL MARITIME

COMMISSION MEETINGS AND PUBLIC ACCESS TO INFORMATION

PERTAINING TO COMMISSION MEETINGS

503 70

503 71

503 72

503 73

503 74

503 75

503 76

503 77

503 78

503 79

503 80

503 81

503 82

503 83

503 84

503 85

Policy

Definitions

General rule meetings

Exceptions meetings

Procedures for closing a portion or portions of a meeting or

a portion or portions of a series ofmeetings on agency initiated

requests

Procedures for closing a portion of a meeting on request initiated

by an interested person

Effect of vote to close a portion or portions of a meeting or

series of meetings

Responsibilities of the General Counsel of the agency upon a

request to close any portion of any meeting

General rule information pertaining to meeting

Exceptions information pertaining to meeting

Procedures for withholding information pertaining to meeting

Effect of vote to withhold information pertaining to meeting

Public announcement ofagency meeting

Public announcement of changes in meeting

Reserved

Agency recordkeeping requirements

27 F M C
272 FEDERAL MARITIME COMMISSION

Sec

503 86 Public access to records

503 87 Effect of provisions of this subpart on other subparts

AUTHORITY 5 U S C 552 552a 552b 553 E O 12356 47 FR 14874

15557 3 CPR 1982 Comp p

167

SUBPART AGENERAL

503 1 Statement of policy

a The Chairman of the Federal Maritime Commission is responsible

for the effective administration of the provisions of Pub L 89487 as

amended The Chairman shall carry out this responsibility through the pro

gram and the officials as hereinafter provided in this part

b In addition the Chairman pursuant to his responsibility hereby directs

that every effort be expended to facilitate the maximum expedited service

to the public with respect to the obtaining of information and records

Accordingly members of the public may make requests for information

records decisions or submittals in accordance with the provisions of

503 31

SUBPART B PUBLICATION IN THE FEDERAL REGISTER

503 11 Materials to be published

a The Commission shall separately state and concurrently publish the

following materials in the Federal Register for the guidance of the public

1 Descriptions of its central and field organization and the established

places at which the officers from whom and the methods whereby the

public may secure information make submittals or requests or obtain deci

sions

2 Statements of the general course and method by which its functions

are channeled and determined including the nature and requirement of

all formal and informal procedures available

3 Rules of procedure descriptions of forms available or the places

at which forms may be obtained and instructions as to the scope and

contents of all papers reports or examinations

4 Substantive rules of general applicability adopted as authorized by

law and statements of general policy or interpretations of general applicabil

ity formulated and adopted by the agency

5 Every amendment revision or repeal of the foregoing

b The Commission s publication with respect to paragraph a 1 of

this section has been and shall continue to be by publication in the Federal

Register of the Rules and Regulations Commission Order No I Amended

and amendment and supplements thereto

c The Commission s publications with respect to paragraphs a 2

a 3 and a 4 of this section including amendments revisions and

repeals have been and shall continue to be by publication in the Federal

27 F M C
PUBLIC INFORMATION

Register as part of the Code of Federal Regulations Title 46 Chapter

IV

503 12 Effect of nonpublication

Except to the extent that a person has actual and timely notice of the

terms thereof no person shall in any manner be required to resort to

or be adversely affected by any matter required to be published in the

Federal Register and not so published

503 13 Incorporation by reference

For purposes of this subpart matter which is reasonably available to

the class of persons affected hereby shall be deemed published in the

Federal Register when incorporated by reference therein with the approval

of the Director of the Office of the Federal Register

SUBPART COMMISSION OPINIONS AND ORDERS

503 21 Public records

a The Commission shall in accordance with this part make the follow

ing materials available for public inspection and copying

1 Final opinions including concurring and dissenting opinions and

all orders made in the adjudication of cases

2 Those statements of policy and interpretations which have been adopt

ed by the Commission

3 Administrative staff manuals and instructions to staff that affect any

member of the public

b To prevent unwarranted invasion of personal privacy the Commission

may delete identifying details when it makes available or publishes an

opinion statement of policy interpretation or staff manual or instruction

and shall in each case explain in writing the justification for the deletion

503 22 Current index

The Commission shall maintain and make available for public inspection

and copying a current index providing identifying information for the public

as to any matter which is issued adopted or promulgated and which

is required by Subpart B of this part to be made available or published

The index shall be available at the Office of the Secretary Washington

D C 20573 Publication of such indices has been determined by the Com

mission to be unnecessary and impracticable The indices shall nonetheless

be provided to any member of the public at a cost not in excess of

the direct cost of duplication of any such index upon request therefor

made in accordance with Subpart D of this part

503 23 Effect of noncompliance

No final order opinion statement of policy interpretation or staff manual

or instruction that affects any member of the public will be relied upon

used or cited as precedent by the Commission against any private party

unless it has been indexed and either made available or published as pro

27 F M C

273
274 FEDERAL MARITIME COMMISSION

vided by this subpart or unless that private party shall have actual and

timely notice of the terms thereof

503 24 Documents available at the Communications Center

The following documents have been promulgated by the Commission

and are available for inspection and copying at the Commission s Commu

nications Center 1100 LStreet N W Washington D C 20573

a Rules and regulations of the Commission including general substantive

rules

b Rules ofPractice and Procedure

c Annual reports ofthe Commission

d Shipping Act 1916 Shipping Act of 1984 and related acts

503 25 Documents available at the Office of the Secretary

The following documents are available for inspection and copying at

the Federal Maritime Commission Office of the Secretary Washington

D C 20573

a Proposed rules

b Final rules

c Reports of decisions including concurring and dissenting opinions

orders and notices in all formal proceedings and pertinent correspondence

d Press releases biographies etc

e Pamphlets

f Official docket files transcripts exhibits briefs etc in all formal

proceedings l

g Approved minutes showing fmal votes

h Correspondence to or from the Commission or Administrative Law

Judges concerning docketed proceedings

SUBPART DPROCEDURE GOVERNING AVAILABILITY OF

COMMISSION RECORDS

503 31 Identification ofrecords

A member of the public who requests permission to inspect copy or

be provided with any records described in 503 11 503 21 503 24 and

503 25 shall

a Reasonably describe the record or records sought and

b Submit such request in writing to the Secretary Federal Maritime

Commission Washington D C 20573 Any such request shall be clearly

marked on the exterior with the letters FOIA

503 32 Records generally available

The following records are available for inspection and copying upon

request in writing addressed to the Office of the Secretary

I Copies of transcripts may be purchased from the reponing company contracted for by the Commission

Contact the Office of the Secretary for the name and address of this company

27 F M C
PUBLIC INFORMATION

a Agreements filed and in effect pursuant to section 15 of the Shipping

Act 1916 and sections 5 and 6 of the Shipping Act of 1984

b Agreements filed under section 15 of the Shipping Act 1916 and

section 5 of the Shipping Act of 1984 which have been noticed in the

Federal Register

c Tariffs filed under the provisions of the Shipping Act 1916 the

Intercoastal Shipping Act 1933 and the Shipping Act of 1984

d Terminal tariffs filed pursuant to Part 515 of this chapter

e List of certifications of financial responsibility pertaining to Public

Law 89 777

f List of licensed ocean freight forwarders

503 33 Other records available upon written request

Any written request to the Office of the Secretary Federal Maritime

Commission Washington D C 20573 for records listed in paragraphs a

through e inclusive of this section shall identify the record as provided

in 503 31 The Secretary shall evaluate each request in conjunction with

the official having responsibility for the subject matter area and the General

Counsel and the Secretary shall determine whether or not to grant the

request in accordance with the provisions of 503 34 There follows the

categories ofrecords subject to this provision

a Correspondence

1 General correspondence

2 Correspondence regarding interpretation or applicability of a statute

or rule

3 Correspondence regarding methods of compliance with rules and regu

lations

4 Correspondence and reports on legislation if made public by the

Office Management and Budget and the appropriate Congressional Commit

tee

b Staff reports served on a party at interest

c Filings

1 Reports on self policing

2 Notice of admission and denial of conference membership

3 Procedures and reports regarding shippers requests and complaints

4 Applications for license as ocean freight forwarder with the exceptions

of those portions protected from public disclosure under the Freedom of

Information Act

d Staff records

1 Advisory opinions to the public

2 Nonconfidential records

e Court records in which the Commission is a party

1 Briefs filed in court

2 Court decisions

503 34 Procedures on requests for documents

a Determination of compliance with requests for documents

27 F M C

275
276 FEDERAL MARITIME COMMISSION

1 Upon request by any member of the public for documents made

in accordance with the rules of this part the Commission s Secretary or

his or her delegate in his or her absence shall determine whether or

not such request shall be granted

2 Except as provided in paragraph c of this section such determination

shall be made by the Secretary within ten 10 days excluding Saturdays

Sundays and legal public holidays after receipt of such request

3 The Secretary shall immediately notify the party making such request

of the determination made the reasons therefor and in the case of a

denial of such request shall notify the party of its right to appeal that

determination to the Chairman

b Appeals from adverse determination denial ofrequest

1 Any party whose request for documents or other information pursuant

to this part has been denied in whole or in part by the Secretary may

appeal such determination Any such appeal shall be addressed to Chairman

Federal Maritime Commission Washington D C 20573 and shall be sub

mitted within a reasonable time following receipt by the party of notification

of the initial denial by the Secretary in the case of a total denial of

the request or within a reasonable time following request or within a

reasonable time following receipt of any of the records requested in the

case of a partial denial In no case shall an appeal be filed later than

ten 10 working days following receipt of notification of denial or receipt

of a part of the records requested

2 Upon appeal from any denial or partial denial of a request for

documents by the Secretary the Chairman ofthe Federal Maritime Commis

sion or the Chairman s specific delegate in his or her absence shall make

a determination with respect to that appeal within twenty 20 days except

ing Saturdays Sundays and legal public holidays after receipt of such

appeal except as provided in paragraph c of this section If on appeal

the denial is upheld either in whole or in part the Chairman shall so

notify the party submitting the appeal and shall notify such person of

the provisions of paragraph 4 of subsection a of the FOIA Pub L

93 502 88 Stat 1561 1562 November 21 1974 regarding judicial review

of such determination upholding the denial Notification shall also include

the statement that the determination is that of the Chairman of the Federal

Maritime Commission and the name of the Chairman

c Exception to time limitation In unusual circumstances as specified

in this paragraph the time limits prescribed with respect to initial actions

or actions on appeal may be extended by written notice from the Secretary

of the Commission to the person making such request setting forth the

reasons for such extension and the date on which a determination is expected

to be dispatched No such notice shall specify a date that would result

in an extension for more than ten 10 working days As used in this

paragraph unusual circumstances means but only to the extent reason

ably necessary to the proper processing of the particular request

27 F M C
PUBLIC INFORMATION

1 The need to search for and collect the requested records from field

facilities or other establishments that are separate from the office processing

the request

2 The need to search for collect and appropriately examine a volumi

nous amount of separate and distinct records which are demanded in a

single request or

3 The need for consultation which shall be conducted with all prac

ticable speed with another agency having a substantial interest in the deter

mination of the request or among two or more components of the agency

having substantial subject matter interest therein

d Effect offailure by Commission to meet the time limitation Failure

by the Commission either to deny or grant any request for documents

within the time limits prescribed by FOIA 5 U S C 552 as amended

and these regulations shall be deemed to be an exhaustion of the administra

tive remedies available to the person making the request

503 35 Exceptions to availability ofrecords

a Except as provided in paragraph b of this section the following

records shall not be available

1 Records specifically authorized under criteria established by Executive

Order to be kept secret in the interest of national defense or foreign

policy and which are in fact properly classified pursuant to such Executive

Order Records to which this provision applies shall be deemed by the

Commission to have been properly classified This exception may apply

to records in the custody of the Commission which have been transmitted

to the Commission by another agency which has designated the record

as nonpublic under Executive Order

2 Records related solely to the internal personnel rules and practices

of the Commission Such records relate to those matters which are for

the guidance of Commission personnel with respect to their employment

with the Federal Maritime Commission

3 Records specifically exempted from disclosure by statute

4 Information given in confidence This includes information obtained

by or given to the Commission which constitutes trade secrets confidential

commercial or financial information privileged information or other infor

mation which was given to the Commission in confidence or would not

customarily be released by the person from whom it was obtained

5 Interagency or intraagency memoranda or letters which would not

be available by law to a private party in litigation with the Commission

Such communications include interagency memoranda drafts staff memo

randa transmitted to the Commission written communications between the

Commission the Secretary and the General Counsel regarding the prepara

tion of Commission orders and decisions other documents received or

generated in the process of issuing an order decision or regulation and

reports and other work papers of staff attorneys accountants and investiga

tors

27 F M C

277
I

i

1

i

j

278 FEDERAL MARITIME COMMISSION

6 Personnel and medical files and similar files the disclosure of which

would constitute a clearly unwarranted invasion of privacy This exemption

includes all personnel and medical records and all private personal finan

cial or business information contained in other files which if disclosed

to the public would invade the privacy of any person including members

ofthe family ofthe person to whom the information pertains

7 Investigatory records compiled for law enforcement purposes but

only to the extent that the production of such records would i

interfere

with enforcement proceedings ii deprive a person of a right to a fair

trial or an impartial adjudication iii constitute an unwarranted invasion

of personal privacy iv disclose the identity of a confidential source and

in the case of a record compiled by a criminal law enforcement authority

in the course of a criminal investigation or by any agency conducting

a lawful national security intelligence investigation confidential information

furnished only by the confidential source v disclose investigative tech

niques and procedures or vi endanger the life or physical safety of

law enforcement personnel Any record portions ofwhich are exempt under

the provisions of this section will be provided to any person requesting

such record after the exempt portions thereof have been deleted provided

such nonexempt portions are reasonably segregable

b Nothing in this section authorizes withholding of information or limit

ing the availability of records to the public except as specifically stated

in this part nor shall this part be authority to withhold information from

Congress

503 36 Commission report ofactions

On or before March I of each calendar year the Federal Maritime

Commission shall submit a report of its activities with regard to public

information requests during the preceding calendar year to the Speaker

of the House of Representatives and to the President of the Senate This

report shall include

a The number of determinations made by the Federal Maritime Commis

sion not to comply with requests for records made to the agency under

the provisions of this part and the reasons for each such determination

b The number of appeals made by persons under such provisions

the result of such appeals and the reasons for the action upon each appeal

that results in a denial of information

c The name and title or position of each person responsible for the

denial of records requested under the provisions of this part and the number

of instances of participation for each

d The results of each proceeding conducted pursuant to subsection

a 4 F of FOIA as amended November 21 1974 including a report

of the disciplinary action taken against the officer or employee who was

primarily responsible for improperly withholding records or an explanation

ofwhy disciplinary action was not taken

27 F M C
PUBLIC INFORMATION 279

e A copy of every rule made by the Commission implementing the

provisions of the FOIA as amended November 21 1974

f

A copy of the fee schedule and the total amount of fees collected

by the agency for making records available under this section

g

Such other information as indicates efforts to administer fully the

provisions of the FOIA as amended

SUBPART E FEES

503 41 Policy and services available

Pursuant to policies established by the Congress the Government s costs

for special services furnished to individuals or firms who request such

service are to be recovered by the payment of fees Act of August 31

1951 5 U S c 140

a Upon request the following services are available upon the payment

ofthe fees hereinafter prescribed

1 Copying records documents

2 Certification of copies ofdocuments

3 Records search

b Fees shall also be assessed for the following services provided by

the Commission

1 Subscriptions to Commission publications

2 Placing one s name as an interested party on the mailing list of

a docketed proceeding

3 Processing nonattorney applications to practice before the Commission

503 42 Payment of fees and charges

The fees charged for special services may be paid through the mail

by check draft or postal money order payable to the Federal Maritime

Commission except for charges for transcripts of hearings Transcripts of

hearings testimony and oral argument are furnished by a nongovernmental

contractor and may be purchased directly from the reporting firm

503 43 Fees for services

The basic fees set forth below provide for documents to be mailed

with postage prepaid If copy is to be transmitted by registered certified

air or special delivery mail postage therefor will be added to the basic

fee Also if special handling or packaging is required costs thereof will

be added to the basic fee

a Photo copying of records and documents performed by requesting

party will be available at the rate of five cents per page one side limited

to size 8V2 x 141 4 or smaller

b The certification and validation with Federal Maritime Commission

seal ofdocuments filed with or issued by the Commission will be available

at 5 for each such certification

c To the extent that time can be made available records and information

search andor copying will be performed by Commission personnel for

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reimbursement at the following rates Any such charges are in addition

to a five cent per page charge for copies provided

1 By clerical personnel at a rate of 7 per person per hour

2 By professional personnel at an actual hourly cost basis to be estab

lished prior to search

3 Minimum charge for record and information search 7

4 Minimum charge for copying services performed by Commission

personnel 2 50

d Annual subscriptions to Commission publications for which there

are regular mailing lists are available at the charges indicated below for

calendar year terms Subscriptions for periods of less than a full calendar

year will be prorated on a quarterly basis No provision is made for refund

upon cancellation of subscription by a purchaser

1 Orders notices rulings and decisions initial and final issued by

Administrative Law Judges and by the Commission in all formal docketed

proceedings before the Federal Maritime Commission are available at an

annual subscription rate of 195

2 Final decisions only issued by the Commission in all formal dock

eted proceedings before the Commission are available at an annual subscrip

tion rate of 120

3 General rules and regulations of the Commission are available at

the following rates i

initial set including all current regulations for a

fee of 16 50 and ii an annual subscription rate of 8 25 for all amend

ments to existing regulations and any new regulations issued

4 Exceptions No charge will be made by the Commission for notices

decisions orders etc required by law to be served on a party to any

proceeding or matter before the Commission No charge will be made

for single copies of the above Commission publications individually re

quested in person or by mail In addition a subscription to Commission

mailing lists will be entered without charge when one of the following

conditions is present

i The furnishing of the service without charge is an appropriate courtesy

to a foreign country or international organization

ii The recipient is another governmental agency Federal State or local

concerned with the domestic or foreign commerce by water of the United

States or having a legitimate interest in the proceedings and activities

of the Commission

Hi The recipient is a college or university

iv The recipient does not fall within paragraphs d 4 i d 4 ii

or d 4 iii of this section but is determined by the Commission to be

appropriate in the interest of its programs

e To have one s name and address placed on the mailing list of a

specific docket as an interested party to receive all issuances pertaining

to that docket 3 per proceeding

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f

The FMC guide on the shipping of automobiles entitled Automobile

Manufacturers Measurements is available from the U S Government

Printing Office on a subscription basis

g

Loose leaf reprint of the Commission s complete current Rules of

Practice and Procedure Part 502 of this chapter for an initial fee of

4 25 Future amendments to the reprint are available at an annual subscrip

tion rate of 4

h Applications for admission to practice before the Commission for

persons not attorneys at law must be accompanied by a fee of 13 pursuant

to 502 27 of this chapter

i Upon a determination by the Commission that waiver or reduction

of the fees prescribed in this section is in the public interest because

the information furnished has been determined to be of primary benefit

to the general public such information shall be furnished without charge

or at a reduced charge at the discretion of the Commission

U Additional issuances publications and services of the Commission

may be made available for fees to be determined by the Secretary which

fees shall not exceed the cost to the Commission for providing them

SUBPART F INFORMATION SECURITY PROGRAM

5031 Definitions

a Original Classification means an initial determination that informa

tion requires protection against unauthorized disclosure in the interest of

national security together with a classification designation signifying the

level of protection required

b Derivative Classification means a determination that information

is in substance the same as information currently classified and the applica

tion of the same classification markings

c Declassification date or event means a date or event upon which

classified information is automatically declassified

d Downgrading date or event means a date or event upon which

classified information is automatically downgraded in accordance with ap

propriate downgrading instructions on the classified materials

e National security means the national defense or foreign relations

of the United States

f Foreign government information means either information provided

to the United States by a foreign government or governments an inter

national organization of governments or any element thereof with the expec

tation expressed or implied that the information the source of the informa

tion or both are to be held in confidence or information produced by

the United States pursuant to or as a result of a joint arrangement with

a foreign government or governments an international organization of gov

ernments or any element thereof requiring that the information the arrange

ment or both are to be held in confidence

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1

503 52 Senior agency official

The Chairman of the Commission shall designate a senior agency official

to be the Security Officer for the Commission who shall be responsible

for directing and administering the Commission s information security pro

gram which includes an active oversight and security education program

to ensure effective implementation ofExecutive Order 12356

503 53 Oversight Committee

An Oversight Committee is established under the chairmanship of the

Security Officer with the following responsibilities

a Establish a Commission security education program to familiarize

all personnel who have or may have access to classified information with

the provisions ofExecutive Order 12356 and Information Security Oversight

Office Directive No 1 The program shall include initial refresher and

termination briefings

b Establish controls to ensure that classified information is used proc

essed stored reproduced and transmitted only under conditions that will

provide adequate protection and prevent access by unauthorized persons

c Act on all suggestions and complaints concerning the Commission s

information security program

d Recommend appropriate administrative action to correct abuse or

violations of any provision of Executive Order 12356 and

e Consider and decide other questions concerning classification and

declassification that may be brought before it

503 54 Original classification

a No Commission Member or employee has the authority to classify

any Commission originated information

b If a Commission Member or employee develops infonnation that

appears to require classification or receives any foreign government infor

mation as defined in 503 51 t

the Member or employee shall immediately

notify the Security Officer and appropriately protect the information

c If the Security Officer believes the information warrants classification

it shall be sent to the appropriate agency with original classification authority

over the subject matter or to the Information Security Oversight Office

for review and a classification determination

d Ifthere is reasonable doubt about the need to classify information

it shall be safeguarded as if it were classified pending a determination

by an original classification authority If there is reasonable doubt about

the appropriate level of classification it shall be safeguarded at the higher

level of classification pending a determination by an original classification

authority

503 55 Derivative classification

a Any document that includes paraphrases restatements or summaries

of or incorporates in new form information that is already classified

shall be assigned the same level of classification as the sources unless

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27 F M C
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consultation with originators or instructions contained in authorized classi

fication guides indicate that no classification or a lower classification than

originally assigned should be used

b Persons who apply derivative classification markings shall

l Observe and respect original classification decisions and

2 Carry forward to any newly created documents any assigned author

ized markings The declassification date or event that provides the longest

period of classification shall be used for documents classified on the basis

of multiple sources

c A derivative document that derives its classification from the approved

use of the classification guide of another agency shall bear the declassifica

tion date required by the provisions of that classification guide

d Documents classified derivatively on the basis of source documents

or classification guides shall bear all applicable marking prescribed in Sec

tions 20015 a through 20015 e Information Security Oversight Office

Directive No I

lClassification authority The authority for classification shall be shown

as follows

i Classified by description of source documents or classification

guideor

ii Classified by Multiple Sources if a document is classified on

the basis of more than one source document or classification guide

iii In these cases the derivative classifier shall maintain the identifica

tion of each source with the file or record copy of the derivatively classified

document A document derivatively classified on the basis of a source

document that is marked Classified by Multiple Sources shall cite the

source document in its Classified by line rather than the term Multiple

sources

2 Declassification and downgrading instructions Date or events for

automatic declassification or downgrading or the notation Originating

Agency s Determination Required to indicate that the document is not

to be declassified automatically shall be carried forward from the source

document or as directed by a classification guide and shown on declassify

on line as follows

Declassify on date description of event or

Originating Agency s Determination required OADR

5036 General declassification policy

a The Commission exercises declassification and downgrading authority

in accordance with Section 3 1 of Executive Order 12356 only over that

information originally classified by the Commission under previous Execu

tive Orders Declassification and downgrading authority may be exercised

by the Commission Chairman and the Commission Security Officer and

such others as the Chairman may designate Commission personnel may

not declassify information originally classified by other agencies

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b The Commission does not now have original classification authority

nor does it have in its possession any documents that it originally classified

when it had such authority The Commission has authorized the Archivist

of the United States to automatically declassify information originally classi

fied by the Commission and under its exclusive and final declassification

jurisdiction at the end of 20 years from the date of original classification

503 57 Mandatory review for declassification

a Information originally classified by the Commission shall be subject

to a review for declassification by the Commission if

1 A request is made by a United States citizen or permanent resident

alien a federal agency or a state or local government and

2 A request describes the documents or material containing the informa

tion with sufficient specificity to enable the Commission to locate it with

a reasonable amount of effort Requests with insufficient description of

the material will be returned to the requester for further information

b Requests for mandatory declassification reviews of documents origi

nally classified by the Commission shall be in writing and shall be sent

to the Security Officer Federal Maritime Commission Washington D C

20573

c If the request requires the provision of services by the Commission

fair and equitable fees may be charged under Title 5 of the Independent

Offices Appropriation Act 65 Stat 290 31 U S C 483a

d Requests for mandatory declassification reviews shall be acknowledged

by the Commission within 15 days of the date of receipt of such requests

e If the document was originally classified by the Commission the

Commission Security Officer shall forward the request to the Chairman

of the Commission for a determination of whether the document should

be declassified

f

If the document was derivatively classified by the Commission or

originally classified by another agency the reque t the document and

a recommendation for action shall be forwarded to the agency with the

original classification authority The Commission may after consultation

with the originating agency inform the requester ofthe referral

g

If a document is declassified in its entirety it may be released

to the requester unless withholding is otherwise warranted under applicable

law If a document or any part of it is not declassified the Security

Officer shall furnish the declassified portions to the requester unless with

holding is otherwise warranted under applicable law along with a brief

statement concerning the reasons for the denial of the remainder and the

right to appeal that decision to the Commissioo within 60 days

h If a declassification determination cannot be made within 45 days

the requester shall be advised that additional time is needed to process

the request Final determination shall be made within one year from the

date ofreceipt unless there are unusual circumstances

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i In response to a

request for information under the Freedom of Informa

tion Act the Privacy Act of 1974 or the mandatory review provisions

of Executive Order 12356 the Commission shall refuse to confirm or

deny the existence or non existence of requested information whenever

the fact of its existence or non existence is itself classifiable under Executive

Order 12356

503 58 Appeals of denials of mandatory declassification review requests

a Within 60 days after the receipt of denial of a request for mandatory

declassification review the requester may submit an appeal in writing to

the Commission through the Secretary Federal Maritime Commission

Washington D C 20573 The appeal shall

1 Identify the document in the same manner in which it was identified

in the original request

2 Indicate the dates of the request and denial and the expressed basis

for the denial and

3 State briefly why the document should be declassified

b The Commission shall rule on the appeal within 30 days of receiving

it If additional time is required to make a determination the Commission

shall notify the requester of the additional time needed and provide the

requester with the reason for the extension The Commission shall notify

the requester in writing of the final determination and the reasons for

any denial

c A determination by the Commission under paragraph b of this

section is final and no further administrative appeal will be permitted

However the requester may be informed that suggestions and complaints

concerning the information security program prescribed by Executive Order

12356 may be submitted to the Director Information Security Oversight

Officer GSA AT Washington D C 20540

503 59 Safeguarding classified information

a All classified information shall be afforded a level of protection

against unauthorized disclosure commensurate with its level of classification

b Whenever classified material is removed from a storage facility such

material shall not be left unattended and shall be protected by attaching

an appropriate classified document cover sheet to each classified document

c Classified information being transmitted from one Commission office

to another shall be protected with a classified document cover sheet and

hand delivered by an appropriately cleared person to another appropriately

cleared person

d Classified information shall be made available to a person only when

the possessor of the classified information has determined that the person

seeking the classified information has a valid security clearance at least

commensurate with the level of classification of the information and has

established that access is essential to the accomplishment of authorized

and lawful Government purposes

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286 FEDERAL MARITIME COMMISSION

e The requirement in paragraph d of this section that access to

classified information may be granted only as is essential to the accomplish

ment of authorized and lawful Government purposes may be waived as

provided in paragraph t

of this section for persons who

1 Are engaged in historical research projects or

2 Previously have occupied policy making positions to which they were

appointed by the President

t Waivers under paragraph e of this section may be granted when

the Commission Security Officer

1 Determines in writing that access is consistent with the interest of

national security

2 Takes appropriate steps to protect classified information from unau

thorized disclosure or compromise and ensures that the information is

properly safeguarded and

3 Limits the access granted to former presidential appointees to items

that the person originated reviewed signed or received while serving as

a presidential appointee

g Persons seeking access to classified information in accordance with

paragraphs e and t

of this section must agree in writing

1 To be subject to a national security check

2 To protect the classified information in accordance with the provisions

ofExecutive Order 12356 and

3 Not to publish or otherwise reveal to unauthorized persons any classi

fied information

h Except as provided by directives issued by the President through

the National Security Council classified information that originated in an

other agency may not be disseminated outside the Commission

i Only appropriately cleared personnel may receive transmit and main

tain current access and accountability records for classified material

U Each office which has custody of classified material shall maintain

1 A classified document register or log containing a listing of all

classified holdings and

2 A classified document destruction register or log containing the title

and date of all classified documents that have been destroyed

k An inventory of all documents classified higher than confidential

shall be made at least annually and whenever there is a change in classified

document custodians The Commission Security Officer shall be notified

in writing of the results of each inventory

1 Reproduced copies of classified documents are subject to the same

accountability and controls as the original documents

m Combinations to dial type locks shall be changed only by persons

having an appropriate security clearance and shall be changed whenever

such equipment is placed in use whenever a person knowing the combina

tion no longer requires access to the combination whenever a combination

has been subject to possible compromise whenever the equipment is taken

27 F M C
PUBLIC INFORMATION

out of service and at least once each year Records of combinations shall

be classified no lower than the highest level of classified information to

be stored in the security equipment concerned One copy of the record

of each combination shall be provided to the Commission Security Officer

n Individuals charged with the custody of classified information shall

conduct the necessary inspections within their areas to insure adherence

to procedural safeguards prescribed to protect classified information The

Commission Security Officer shall conduct periodic inspections to determine

if the procedural safeguards prescribed in this subpart are in effect at

all times

0 Whenever classified material is to be transmitted outside the Commis

sion the custodian of the classified material shall contact the Commission

Security Officer for preparation and receipting instructions If the material

is to be hand carried the Security Officer shall ensure that the person

who will carry the material has the appropriate security clearance is knowl

edgeable of safeguarding requirements and is briefed if appropriate con

cerning restrictions with respect to carrying classified material on commer

cial carriers

p Any person having access to and possession of classified information

is responsible for protecting it from persons not authorized access to it

to include securing it in approved equipment or facilities whenever it

is not under the direct supervision of authorized persons

q Employees of the Commission shall be subject to appropriate sanc

tions which may include reprimand suspension without pay removal termi

nation of classification authority loss or denial of access to classified

information or other sanctions in accordance with applicable law and agency

regulation if they

1 Knowingly willfully or negligently disclose to unauthorized persons

information properly classified under Executive Order 12356 or predecessor

orders

2 Knowingly and willfully classify or continue the classification of

information in violation of Executive Order 12356 or any implementing

directive or

3 Knowingly and willfully violate any other provision of Executive

Order 12356 or implementing directive

r Any person who discovers or believes that a classified document

is lost or compromised shall immediately report the circumstances to his

or her supervisor and the Commission Security Officer who shaH conduct

an immediate inquiry into the matter

s Questions with respect to the Commission Information Security Pro

gram particularly those concerning the classification declassification down

grading and safeguarding of classified information shaH be directed to

the Commission Security Officer

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SUPBART G ACCESS TO ANY RECORD OF IDENTIFIABLE

PERSONAL INFORMATION

503 60 Definitions

For the Purpose ofthis subpart

a Agency means each authority of the government of the United

States as defined in 5 U S C 551 1 and shall include any executive depart

ment military department government corporation government controlled

corporation or other establishment in the executive branch ofthe government

including the Executive Office of the President or any independent regu

latory agency

b Commission means the Federal Maritime Commission

c Individual means a citizen of the United States or an alien lawfully

admitted for permanent residence to whom a record pertains

d Maintain includes maintain collect use or disseminate

e Person means any person not an individual and shall include

but is not limited to corporations associations partnerships trustees receiv

ers personal representatives and public or private organizations

f

Record means any item collection or grouping of information

about an individual that is maintained by the Federal Maritime Commission

including but not limited to a person s education financial transactions

medical history and criminal or employment history and that contains

the person s name or the identifying number symbol or other identifying

particular assigned to the individual such as a finger or voice print or

a photograph

g Routine use means with respect to the disclosure of a record

the use of such records for a purpose which is compatible with the purpose

for which it was collected

h Statistical record means a record in a system of records main

tained for statistical research or reporting purposes only and not used in

whole or in part in making any determination about an identifiable individ

ual but shall not include matter pertaining to the Census as defined in

13 U S C 8

i System of records means a group of any records under the control

of the Commission from which information is retrieved by the name of

the individual or by some identifying number symbol or other identifying

particular assigned to the individual

503 6l Conditions of disclosure

a Subject to the conditions of paragraphs b and c of this section

the Commission shall not disclose any record which is contained in a

system of records by any means of communication to any person or

other agency who is not an individual to whom the record pertains

b Upon written request or with prior written consent of the individual

to whom the record pertains the Commission may disclose any such record

to any person or other agency

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PUBLIC INFORMATION

c In the absence of a written consent from the individual to whom

the record pertains the Commission may disclose any such record provided

such disclosure is

1 To those officers and employees of the Commission who have a

need for the record in the performance of their duties

2 Required under the Freedom of Information Act 5 US C 552

3 For a routine use

4 To the Bureau of Census for purposes of planning or carrying out

a census or surveyor related activity under the provisions of Title 13

of the United States Code

5 To a

recipient who has provided the Commission with adequate

advance written assurance that the record will be used solely as a statistical

research or reporting record and the record is to be transferred in a form

that is not individually identifiable

6 To the National Archives of the United States as a record which

has sufficient historical or other value to warrant its continued preservation

by the United States government or for evaluation by the Administrator

of General Services or his designee to determine whether the record has

such value

7 To another agency or to an instrumentality of any governmental

jurisdiction within or under the control of the United States for a civil

or criminal law enforcement activity authorized by law provided the head

of the agency or instrumentality has made a prior written request to the

Secretary of the Commission specifying the particular record and the law

enforcement activity for which it is sought

8 To either House of Congress and to the extent of a matter within

its jurisdiction any committee subcommittee or joint committee of Con

gress

9 To the Comptroller General or any authorized representative thereof

in the course of the performance of the duties of the GAO or

10 Under an order of a court of competent jurisdiction

503 62 Accounting of disclosures

a The Secretary shall make an accounting of each disclosure of any

record contained in a system of records in accordance with 5 U S C

552a c I and 552a c 2

b Except for a disclosure made under 503 61 c 7 the Secretary

shall make the accounting described in paragraph a of this section available

to any individual upon written request made in accordance with 503 63 b

or 503 63 c

c The Secretary shall make reasonable efforts to notify the individual

when any record which pertains to such individual is disclosed to any

person under compulsory legal process when such process becomes amatter

of public record

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503 63 Request for Infonnation

a Upon request in person or by mail made in accordance with the

provisions of paragraph b or c of this section any individual shall

be infonned whether or not any Commission system of records contains

a record pertaining to him or her

b Any individual requesting such infonnation in person shall personally

appear at the Office of the Secretary Federal Maritime Commission 1100

LStreet N W Washington D C 20573 and shall

1 Provide infonnation sufficient in the opinion of the Secretary to

identify the record e g

the individual s own name date of birth place

of birth etc

2 Provide identification acceptable to the Secretary to verify the individ

ual s

identity e g

driver s license employee identification card or medicare

card

3 Complete and sign the appropriate fonn provided by the Secretary

c Any individual requesting such infonnation by mail shall address

such request to the Secretary Federal Maritime Commission 1100 L Street

N W Washington D C 20573 and shall include in such request the follow

ing

1 Infonnation sufficient in the opinion of the Secretary to identify

the record e gthe individual s own name date of birth place of birth

etc

2 A signed notarized statement to verify his or her identity

503 64 Commission procedure on request for infonnation

Upon request for infonnation made in accordance with 503 63 the

Secretary or his or her delegate shall within 10 days excluding Saturdays

Sundays and legal public holidays furnish in writing to the requesting

party notice of the existence or nonexistence of any records described

in such request

503 65 Request for access to records

a General Upon request by any individual made in accordance with

the procedures set forth in paragraph b of this section such individual

shall be granted access to any record pertaining to him or her which

is contained in a Commission system of records However nothing in

this section shall allow an individual access to any infonnation compiled

by the Commission in reasonable anticipation of a civil or criminal action

or proceeding

b

Procedures for requests for access to records Any individual may

request access to a record pertaining to him or her in person or by mail

in accordance with paragraphs b l and b 2 of this section

1 Any individual making such request in person shall do so at the

Office of the Secretary Federal Maritime Commission 1100 L Street N W

Washington D C 20573 and shall

27 F M C
PUBLIC INFORMAnON

i Provide identification acceptable to the Secretary to verify the individ

ual s

identity e g

driver s license employee identification card or medicare

card and

ii Complete and sign the appropriate form provided by the Secretary

2 Any individual making a request for access to records by mail shall

address such request to the Secretary Federal Maritime Commission 1100

L Street N W Washington D C 20573 and shall include therein a signed

notarized statement to verify his or her identity

3 Any individual requesting access to records under this section in

person may be accompanied by a person of his or her own choosing

while reviewing the record requested If an individual elects to be so

accompanied he or she shall notify the Secretary of such election in the

request and shall provide a written statement authorizing disclosure of the

record in the presence of the accompanying person Failure to so notify

the Secretary in a request for access shall be deemed to be a decision

by the individual not to be accompanied

c Commission determination of requests for access

1 Vpon request made in accordance with this section the Secretary

or his or her delegate shall

i

Determine whether or not such request shall be granted

ii Make such determination and provide notification within 10 days

excluding Saturdays Sundays and legal public holidays after receipt of

such request and if such request is granted shall

iii Notify the individual that fees for reproducing copies will be made

in accordance with 503 69

2 If access to a record is denied because such information has been

compiled by the Commission in reasonable anticipation of a civil or criminal

action or proceeding or for any other reason the Secretary shall notify

the individual of such determination and his or her right to judicial appeal

under 5 V S C 552a g

d Manner ofproviding access

1 If access is granted the individual making such request shall notify

the Secretary whether the records requested are to be copied and mailed

to the individual

2 If records are to be made available for personal inspection the

individual shall arrange with the Secretary a mutually agreeable time and

place for inspection of the record

3 Fees for reproducing and mailing copies of records will be made

in accordance with 503 69

503 66 Amendment of a record

a General Any individual may request amendment of a record pertain

ing to him or her according to the procedure in paragraph b of this

section

b Procedures for requesting amendment of a record After inspection

of a record pertaining to him or her an individual may file with the

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Secretary a request in person or by mail far amendment of a record

Such request shall specify the particular portions of the record to be amend

ed the desired amendments and the reasons therefor

c Commission procedures on request for amendment ofa record

1 Not later than ten 10 days excluding Saturdays Sundays and

legal public holidays after the date of receipt of a request made in accord

ance with this section to amend a record in whole or in part the Secretary

or his or her delegate shall

i Make any correction of any portion of the record which the individual

believes is not accurate relevant timely or complete and thereafter inform

the individual of such correction or

ii Inform the individual by certified mail return receipt requested

of refusal to amend the record setting out the reasons therefore and notify

the individual ofhis or her right to appeal that determination to the Chair

man ofthe Commission under 503 67

2 The Secretary shall inform any person or other agency to whom

a record has been disclosed of any correction or notation of dispute made

by the Secretary with respect to such records in accordance with 5 U S C

552a c 4 referring to amendment of a record if an accounting of such

disclosure has been made

503 67 Appeals from denial ofrequest for amendment of a record

a General An individual whose request for amendment of a record

pertaining to him or her is denied may further request a review of such

determination in accordance with paragraph b of this section

b Procedure for appeal Not later than thirty 30 days excluding

Saturdays Sundays and legal public holidays following receipt of notifica

tion of refusal to amend an individual may file an appeal to amend the

record Such appeal shall

1 Be addressed to the Chairman Federal Maritime Commission 1100

LStreet N W Washington D C 20573 and

2 Specify the reasons for which the refusal to amend is challenged

c Commission procedure on appeal

1 Upon appeal from a denial to amend a record the Chairman of

the Commission or the officer designated by the Chairman to act in his

or her absence shall make a determination whether or not to amend the

record and shall notify the individual of that determination by certified

mail return receipt requested not later than thirty 30 days excluding

Saturdays Sundays and legal public holidays after receipt of such appeal

unless extended pursuant to paragraph d of this section

2 The Chairman shall also notify the individual of the provisions of

5 U S C 552a g 1 A regarding judicial review of the Chairman s deter

mination

3 If on appeal the refusal to amend the record is upheld the Commis

sion shall permit the individual to file a statement setting forth the reasons

for disagreement with the Commission s determination

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d The Chairman or his or her delegate in his or her absence may

extend up to thirty 30 days the time period prescribed in paragraph

c l of this section within which to make a determination on appeal

from refusal to amend a record for the reasons that a fair and equitable

review cannot be completed within the prescribed time period

503 68 Exemptions

The Chairman of the Commission reserves the right to promulgate rules

in accordance with the requirements of 5 U S c 553 b l 2 and 3

553 c and 553 e Administrative Procedure Act Rulemaking to exempt

any system of records maintained by the Commission in accordance with

the provisions of 5 U S C 552a k

503 69 Fees

a General The following Commission services are available with re

spect to requests made under the provisions of this subpart for which

fees will be charged as provided in paragraphs b and c of this section

1 Copying records documents

2 Certification of copies of documents

b Fees for services The fees set forth below provide for documents

to be mailed with ordinary first class postage prepaid If a

copy is to

be transmitted by registered certified air or special delivery mail postage

therefor will be added to the basic fee Also if special handling or packag

ing is required costs thereof will be added to the basic fee

1 The copying of records and documents will be available at the

rate of 30 cents per page one side limited to size 814 x 14 or smaller

2 The certification and validation with Federal Maritime Commission

seal ofdocuments filed with or issued by the Commission will be available

at 5 for each certification

c Payment of fees and charges The fees charged for special services

may be paid by check draft or postal money order payable to the Federal

Maritime Commission

SUBPART H PUBLIC OBSERVATION OF FEDERAL MARITIME

COMMISSION MEETINGS AND PUBLIC ACCESS TO INFORMATION

PERTAINING TO COMMISSION MEETINGS

503 70 Policy

It is the policy of the Federal Maritime Commission under the provisions

of the Government in the Sunshine Act 5 U S C 552b September

13 1976 to entitle the public to the fullest practicable information regarding

the decisional processes of the Commission The provisions of this Subpart

set forth the procedural requirements designed to provide the public with

such information while continuing to protect the rights of individuals and

to maintain the capabilities of the Commission in carrying out its respon

sibilities under the shipping statutes administered by this Commission

27 F M C

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1

I

I

j

I

i

294 FEDERAL MARITIME COMMISSION

503 71 Definitions

The following definitions apply for purposes ofthis subpart

a Agency means the Federal Maritime Commission

b Information pertaining to a meeting means but is not limited

to the following the record of any agency vote taken under the provisions

of this subpart and the record of the vote of each member a full written

explanation of any agency action to close any portion of any meeting

under this Subpart lists of persons expected to attend any meeting of

the agency and their affiliation public announcement by the agency under

this subpart of the time place and subject matter of any meeting or

portion of any meeting announcement of whether any meeting or portion

of any meeting shall be open to public observation or be closed any

announcement of any change regarding any meeting or portion of any

meeting and the name and telephone number of the Secretary of the

agency who shall be designated by the agency to respond to requests

for information concerning any meeting or portion of any meeting

c Meeting means the deliberations of at least three of the members

of the agency which determine or result in the joint conduct of disposition

of official agency business but does not include 1 individual member s

consideration of official agency business circulated to the members in writ

ing for disposition on notation 2 deliberations by the agency in determin

ing whether or not to close a portion or portions of a meeting or series

of meetings as provided in 503 74 and 503 75 3 deliberations by

the agency in determining whether or not to withhold from disclosure

information pertaining to a portion or portions of a meeting or series

of meetings as provided in 503 80 or 4 deliberations pertaining to

any change in any meeting or to changes in the public announcement

of such ameeting as provided in 503 83

d Member means each individual Commissioner of the agency

e Person means any individual partnership corporation association

or public or private organization other than an agency as defined in 5

U S C 551 1

t

Series of meetings means more than one meeting involving the

same particular matters and scheduled to be held no more than thirty

30 days after the initial meeting in such series

503 72 General rule meetings

a Except as otherwise provided in 503 73 503 74 503 75 and 503 76

every meeting and every portion of a series of meetings of the agency

shall be open to public observation

b The opening of a portion or portions of a meeting or a portion

or portions of a series of meetings to public observation shall not be

construed to include any participation by the public in any manner in

the meeting Such an attempted participation or participation shall be cause

for removal of any person so engaged at the discretion of the presiding

member of the agency

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PUBLIC INFORMATION

503 73 Exceptions meetings

Except in a case where the agency finds that the public interest requires

otherwise the provisions of 503 72 a shall not apply to any portion

or portions of an agency meeting or portion or portions of a series of

meetings where the agency determined under the provisions of 503 74

or 503 75 that such portion or portions or such meeting or series of

meetings is likely to

a Disclose matters that are 1 specifically authorized under criteria

established by an Executive Order to be kept secret in the interests of

national defense or foreign policy and 2 in fact properly classified pursuant

to such Executive Order

b Relate solely to the internal personnel rules and practices of any

agency

c Disclose matters specifically exempted from disclosure by any statute

other than 5 U S C 552 FOIA provided that such statute 1 requires

that the matter be withheld from the public in such a manner as to leave

no discretion on the issue or 2 establishes particular criteria for withhold

ing or refers to particular types of matters to be withheld

d Disclose trade secrets and commercial or financial information ob

tained from a person and privileged or confidential

e Involve accusing any person of a crime or formally censuring any

person

f Disclose information of a personal nature where disclosure would

constitute a clearly unwarranted invasion of personal privacy

g Disclose investigatory records compiled for law enforcement purposes

or information which if written would be contained in such records but

only to the extent that the production of such records or information would

1 interfere with enforcement proceedings 2 deprive a person of aright

to a fair trial or an impartial adjudication 3 constitute an unwarranted

invasion of personal privacy 4 disclose the identity of a confidential

source and in the case of a record compiled by a criminal law enforcement

authority in the course of a criminal investigation or by an agency conduct

ing a lawful national security intelligence investigation confidential informa

tion furnished only by the confidential source 5 disclose investigative

techniques and procedures or 6 endanger the life or physical safety of

law enforcement personnel

h Disclose information contained in or related to examination operating

or condition reports prepared by on behalf of or for the use of an agency

responsible for the regulation or supervision offinancial institutions

i Disclose information the premature disclosure of which would be

likely to significantly frustrate implementation of a proposed agency action

unless the agency has already disclosed to the public the content or nature

of its proposed action or where the agency is required by law to make

such disclosure on its own initiative prior to taking final agency action

on such proposal or

27 F M C

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296 FEDERAL MARITIME COMMISSION

U Specifically concern the agency s issuance of a subpena or the agen

cy s participation in a civil action or proceeding an action in a foreign

court or international tribunal or an arbitration or the initiation conduct

or disposition by the agency of a particular case of fonnal agency adjudica

tion pursuant to the procedures in 5 U S C 554 or otherwise involving

a detennination on the record after opportunity for a hearing

503 74 Procedures for closing a portion or portions of a meeting or

a portion or portions of a series of meetings on agency initiated

requests

a Any member of the agency or the General Counsel of the agency

may request that any portion or portions of a series of meetings be closed

to public observation for any of the reasons provided in 503 73 by submit

ting such request in writing to the Secretary of the agency in sufficient

time to allow the Secretary to schedule a timely vote on the request

pursuant to paragraph b of this section

b Upon receipt of any request made under paragraph a of this section

the Secretary of the agency shall schedule a time at which the members

of the agency shall vote upon the request which vote shall take place

not later than eight 8 days prior to the scheduled meeting of the agency

c At the time the Secretary schedules a time for an agency vote

as described in paragraph b

of this section he or she shall forward

the request to the General Counsel of the agency who shall act upon

such request as provided in 503 77

d At the time scheduled by the Secretary as provided in paragraph

b of this section the members of the agency upon consideration of

the request submitted under paragraph a of this section and consideration

of the certified opinion of the General Counsel of the agency provided

to the members under 503 77 shall vote upon that request That vote

shall detennine whether or not any portion or portions of a meeting may

be closed to public observation for any of the reasons provided in 503 73

and whether or not the public interest requires that the portion or portions

of the meeting or meetings remain open notwithstanding the applicability

of any of the reasons provided in 503 73 pennitting the closing of any

meeting to public observation

e In the case of a vote on a request under this section to close

to public observation a portion or portions of a meeting no such portion

or portions of any meeting may be closed unless by a vote on the issues

described in paragraph d of this section a majority of the entire member

ship of the agency shall vote to close such portion or portions of a meeting

by recorded vote

f

In the case of a vote on a request under this section to close tocpublic

observation aportion or portions ofaseries ofmeetings as defined in

503 71no such portion or portions ofa series of meetings may be

closed unless by a

vote on the issues described inparagraph d of this

section amajority ofthe entire membership ofthe agency shall vote 27

F M C
PUBLIC INFORMATION

to close such portion or portions of a series of meetings A determination

to close to public observation a portion or portions of a series of meetings

may be accomplished by a single vote on each of the issues described

in paragraph d of this section provided that the vote of each member

of the agency shall be recorded and the vote shall be cast by each member

and not by proxy vote

503 75 Procedures for closing a portion of a meeting on request initiated

by an interested person

a Any person as defined in 503 71 whose interests may be directly

affected by a portion of a meeting of the agency may request that the

agency close that portion of a meeting for the reason that matters in

deliberation at that portion of the meeting are such that public disclosure

of that portion of a meeting is likely to

1 Involve accusing any person of a crime or formally censuring any

person

2 Disclose information of a personal nature where disclosure would

constitute a clearly unwarranted invasion of personal privacy or

3 Disclose investigatory records compiled for law enforcement purposes

or information which if written would be contained in such records but

only to the extent that the production of such records or information would

i Interfere with enforcement proceedings

ii Deprive a person of a

right to a fair trial or an impartial adjudication

iii Constitute an unwarranted invasion of personal privacy

iv Disclose the identity of a confidential source and in the case of

a record compiled by a criminal law enforcement authority in the course

of a criminal investigation or by an agency conducting a lawful national

security intelligence investigation confidential information furnished only

by the confidential source

v Disclose investigative techniques and procedures or

vi Endanger the life or physical safety of law enforcement personnel

b Any person described in paragraph a of this section who submits

a request that a portion of a meeting be closed shall submit an original

and 15 copies of that request to the Secretary Federal Maritime Commis

sion Washington DC 20573 and shall state with particularity that portion

of a meeting sought to be closed and the reasons therefor as described

in paragraph a of this section

c Upon receipt of any request made under paragraphs a and b

of this section the Secretary of the agency shall

1 Furnish a

copy of the request to each member of the agency and

2 Furnish a

copy of the request to the General Counsel of the agency

d Upon receipt of a request made under paragraphs a and b of

this section any member of the agency may request agency action upon

the request to close a portion of a meeting by notifying the Secretary

of the agency of that request for agency action

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298 FEDERAL MARITIME COMMISSION

e Upon receipt of a request for agency action under paragraph d

of this section the Secretary of the agency shall schedule a time for

an agency vote upon the request of the person whose interests may be

directly affected by a portion of a meeting which vote shall take place

prior to the scheduled meeting of the agency

f At the time the Secretary receives a request for agency action and

schedules a time for an agency vote as described in paragraph e of

this section the request of the person whose interests may be directly

affected by a portion of a meeting shall be forwarded to the General

Counsel of the agency who shall act upon such request as provided in

503 77

g At the time scheduled by the Secretary as provided in paragraph

e of this section the members of the agency upon consideration of

the request of the person whose interests may be directly affected by

a portion of a meeting submitted under paragraphs a and b of this

section and consideration of the certified opinion of the General Counsel

of the agency provided to the members under 503 77 shall vote upon

that request That vote shall determine whether or not any portion or

portions of a meeting or portions or portions of a series of meetings

may be closed to public observation for any of the reasons provided in

paragraph a ofthis section and whether or not the public interest requires

that the portion or portions of the meeting or meetings remain open notwith

standing the applicability of any of the reasons provided in paragraph

a of this section permitting the closing of any portion of any meeting

to public observation

h In the case of a vote on a request under this section to close

to public observation a portion of a meeting no such portion of a meeting

may be closed unless by a vote on the issues described in paragraph

g

of this section a majority of the entire membership of the agency

shall vote to close such portion of a meeting by a recorded vote

503 76 Effect of vote to close a portion or portions of a meeting or

series of meetings

a Where the agency votes as provided in 503 74 or 503 75 to

close to public observation a portion or portions of a meeting or a portion

or portions of a series of meetings the portion or portions of a meeting

or the portion or portions of a series of meetings shall be closed

b Except as otherwise provided in 503 80 503 81 and 503 82 not

later than the day following the day on which a vote is taken under

503 74 or 503 75 by which it is determined to close a portion or

portions of a meeting or a portion or portions of a series of meetings

to public observation the Secretary shall make available to the public

1 A written copy of the recorded vote reflecting the vote of each

member of the agency

2 A full written explanation of the agency action closing that portion

or those portions to public observation and

27 F M C
PUBLIC INFORMATION

3 A list of the names and affiliations of all persons expected to attend

the portion or portions of the meeting or the portion or portions of a

series of meetings

c Except as otherwise provided in 503 80 503 81 and 503 82 not

later than the day following the day on which a vote is taken under

503 74 or 503 75 by which it is determined that the portion or portions

of a meeting or the portion or portions of a series of meetings shall

remain open to public observation the Secretary shall make available to

the public a written copy of the recorded vote reflecting the vote of each

member of the agency

503 77 Responsibilities of the General Counsel of the agency upon a

request to close any portion of any meeting

a Upon any request that the agency close a portion or portions of

any meeting or any portion or portions of any series of meetings under

the provisions of 503 74 and 503 75 the General Counsel of the agency

shall certify in writing to the agency prior to an agency vote on that

request whether or not in his or her opinion the closing of any such

portion or portions of a meeting or portion or portions of a series of

meetings is proper under the provisions of this subpart and the terms

of the Government in the Sunshine Act 5 U S C 552b If in the opinion

of the General Counsel the closing of a portion or portions of a meeting

or portion or portions of a series ofmeetings is proper under the provisions

of this subpart and the terms of the Government in the Sunshine Act

5 U S C 552b his or her certification of that opinion shall cite each

applicable particular exemptive provision of that Act and provision of

this subpart

b A copy of the certification of the General Counsel as described

in paragraph a of this section together with a statement of the officer

presiding over the portion or portions of any meeting or the portion or

portions of a series of meetings setting forth the time and place of the

relevant meeting or meetings and the persons present shall be maintained

by the Secretary for public inspection

503 78 General rule information pertaining to meeting

a As defined in 503 71 all information pertaining to a portion or

portions of a meeting or portion or portions of a series of meetings of

the agency shall be disclosed to the public unless excepted from such

disclosure under 503 79 503 80 and 503 81

b All inquiries as to the status of pending matters which were considered

by the Commission in closed session should be directed to the Secretary

of the Commission Commission personnel who attend closed meetings

of the Commission are prohibited from disclosing anything that occurs

during those meetings An employee s failure to respect the confidentiality

of closed meetings constitutes a violation of the Commission s General

Standards of Conduct The Commission can of course determine to make

public the events or decisions occurring in a closed meeting such informa

27 F M C

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300 FEDERAL MARITIME COMMISSION

tion to be disseminated by the Office of the Secretary An inquiry to

the Office of the Secretary as to whether any information has been made

public is not therefore improper However a request of or attempt to

persuade a Commission employee to divulge the contents of a closed meet

ing constitutes a lack of proper professional conduct inappropriate to a

person practicing before this agency and requires that the employee file

a report of such event so that a determination can be made whether discipli

nary action should be initiated pursuant to 502 30 of this chapter

503 79 Exceptionsinformation pertaining to meeting

Except in a case where the agency finds that the public interest requires

otherwise information pertaining to a portion or portions of a meeting

or portion or portions of a series of meetings need not be disclosed by

the agency if the agency determines under the provisions of 503 80

and 503 81 that disclosure of that information is likely to disclose matters

which are

a Specifically authorized under criteria established by an Executive

Order to be kept secret in the interests of national defense or foreign

policy and 2 in fact properly classified pursuant to such Executive Order

b Related solely to the internal personnel rules and practices of an

agency

c Specifically exempted from disclosure by any statute other than 5

V S C 552 FOIA provided that such statute 1 requires that the matters

be withheld from the public in such a manner as to leave no discretion

on the issue or 2 establishes particular criteria for withholding or refers

to particular types of matters to be withheld

d Trade secrets and commercial or financial information obtained from

a person and privileged or confidential

e Involved with accusing any person of a crime or formally censuring

any person

f Of a personal nature where disclosure would constitute a clearly

unwarranted invasion of personal privacy

g Investigatory records compiled for law enforcement purposes or infor

mation which if written would be contained in such records but only

to the extent that the production of such record or information would

1 interfere with enforcement proceedings 2 deprive a person of a right

to a fair trial or an impartial adjudication 3 constitute an unwarranted

invasion of personal privacy 4 disclose the identity of a confidential

source and in the case of a record compiled by a criminal law enforcement

authority in the course of a criminal investigation or by an agency conduct

ing a lawful national security intelligence investigation confidential informa

tion furnished only by the confidential source 5 disclose investigative

techniques and procedures or 6 endanger the life or physical safety of

law enforcement personnel

27 F M C
PUBLIC INFORMATION

h Contained in or related to examination operation or condition reports

prepared by on behalf of or for the use of an agency responsible for

the regulation or supervision of financial institutions

i

Information the premature disclosure of which would be likely to

significantly frustrate implementation of a proposed agency action unless

the agency has already disclosed to the public the content or nature of

its proposed action or where the agency is required by law to make

such disclosure on its own initiative prior to taking final agency action

on such proposal or

jSpecifically concerned with the agency s issuance of a subpena the

agency s participation in a civil action or proceeding an action in a foreign

court or international tribunal or an arbitration or the initiation conduct

or disposition by the agency of a particular case of formal agency adjudica

tion pursuant to the procedures in 5 U S c 554 or otherwise involving

a determination on the record after opportunity for a hearing

503 80 Procedures for withholding information pertaining to meeting

a Any member of the agency or the General Counsel of the agency

may request that information pertaining to a portion or portions of a meeting

or to a portion or portions of a series of meetings be withheld from

public disclosure for any of the reasons set forth in 503 79 by submitting

such request in writing to the Secretary not later than two 2 weeks

prior to the commencement of the first meeting in a series of meetings

b Upon receipt of any request made under paragraph a of this section

the Secretary shall schedule a time at which the members of the agency

shall vote upon the request which vote shall take place not later than

eight 8 days prior to the scheduled meeting of the agency

c At the time scheduled by the Secretary in paragraph b of this

section the Members of the agency upon consideration of the request

submitted under paragraph a of this section shall vote upon that request

That vote shall determine whether or not information pertaining to a meeting

may be withheld from public disclosure for any of the reasons provided

in 503 79 and whether or not the public interest requires that the informa

tion be disclosed notwithstanding the applicability of the reasons provided

in 503 79 permitting the withholding from public disclosure of the informa

tion pertaining to a meeting

d In the case of a vote on a request under this section to withhold

from public disclosure information pertaining to a portion or portions of

a meeting no such information shall be withheld from public disclosure

unless by a vote on the issues described in paragraph c of this section

a majority of the entire membership of the agency shall vote to withhold

such information by recorded vote

e In the case of a vote on a request under this section to withhhold

information pertaining to a portion or portions of a series of meetings

no such information shall be withheld unless by a vote on the issues

described in paragraph c of this section a majority of the entire member

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302 FEDERAL MARITIME COMMISSION

ship of the agency shall vote to withhold such information A determination

to withhold information pertaining to a portion or portions of a series

of meetings from public disclosure may be accomplished by a single vote

on the issues described in paragraph c of this section provided that

the vote of each member of the agency shall be recorded and the vote

shall be cast by each member and not by proxy vote

503 81 Effect of vote to withhold information pertaining to meeting

a Where the agency votes as provided in 503 80 to withhold from

public disclosure information pertaining to a portion or portions of a meeting

or portion or portions of a series of meetings such information shall be

excepted from the requirements of 503 78 503 82 and 503 83

b Where the agency votes as provided in 503 80 to permit public

disclosure of information pertaining to a portion or portions of a meeting

or portion or portions of a series of meetings such information shall be

disclosed to the public as required by 503 78 503 82 and 503 83

c Not later than the day following the date on which a vote is taken

under 503 80 by which the information pertaining to a meeting is deter

mined to be disclosed the Secretary shall make available to the public

a written copy of such vote reflecting the vote of each member of the

agency on the question

503 82 Public announcement of agency meeting

a Except as provided in 503 80 and 503 81 regarding a determination

to withhold from public disclosure any information pertaining to a portion

or portions of a meeting or portion or portions of a series of meetings

or as otherwise provided in paragraph c of this section the Secretary

of the agency shall make public announcement of each meeting of the

agency

b Except as otherwise provided in this section public announcement

of each meeting of the agency shall be accomplished not later than one

week prior to commencement of a meeting or the commencement of the

first meeting in a series of meeting and shall disclose

1 The time of the meeting

2 The place ofthe meeting

3 The subject matter of each portion of each meeting or series of

meetings

4 Whether any portion or portions of any meeting or any portion

or portions of any series of meetings is open or closed to public observation

and

5 The name and telephone number of the Secretary of the agency

who shall respond to requests for information about ameeting

c The announcement described in paragraphs a and b of this section

may be accomplished less than one week prior to the commencement

of any meeting or series of meetings provided the agency determines

by recorded vote that the agency business requires that any such meeting

or series of meetings be held at an earlier date In the event of such

27 F M C
PUBLIC INFORMAnON

a determination by the agency public announcement as described in para

graph b of this section shall be accomplished at the earliest practicable

time

d Immediately following any public announcement accomplished under

the provisions of this section the Secretary of the agency shall submit

a notice for publication in the Federal Register disclosing

1 The time ofthe meeting

2 The place of the meeting

3 The subject matter of each portion of each meeting or series of

meetings

4 Whether any portion or portions of any meeting or any portion

or portions of any series of meetings is open or closed to public observation

and

5 The name and telephone number of the Secretary of the agency

who shall respond to requests for information about ameeting

503 83 Public announcement of changes in meeting

a Except as provided in 503 80 and 503 81 under the provlSlons

of paragraphs b and c of this section the time or place of a meeting

or series of meetings may be changed by the agency following accomplish

ment of the announcement and notice required by 503 82 provided the

Secretary of the agency shall publicly announce such change at the earliest

practicable time

b The subject matter of a portion or portions of a meeting or a portion

or portions of a series of meetings the time and place of such meeting

and the determination that the portion or portions of a series of meetings

shall be open or closed to public observation may be changed following

accomplishment of the announcement required by 503 82 provided

1 The agency by recorded vote of the majority of the entire membership

of the agency determines that agency business so requires and that no

earlier announcement of the change was possible and

2 The Secretary of the agency publicly announces at the earliest prac

ticable time the change made and the vote of each member upon such

change

c Immediately following any public announcement of any change ac

complished under the provisions of this section the Secretary of the agency

shall submit a notice for publication in the Federal Register disclosing

1 The time of the meeting

2 The place of the meeting

3 The subject matter of each portion of each meeting or series of

meetings

4 Whether any portion or portions of any meeting or any portion

or portions of any series of meetings is open or closed to public observation

and

5 Any change in paragraphs c l c 2 c 3 or c 4 of this

section and

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304 FEDERAL MARITIME COMMISSION

6 The name and telephone number of the Secretary of the agency

who shall respond to requests for information about any meeting

503 84 Reserved

503 85 Agency recordkeeping requirements

a In the case of any portion or portions of a meeting or portion

or portions of a series of meetings determined by the agency to be closed

to public observation under the provisions of this subpart the following

records shall be maintained by the Secretary of the agency

1 The certification of the General Counsel of the agency required

by 503 77

2 A statement from the officer presiding over the portion or portions

of the meeting or portion or portions of a series of meetings setting forth

the time and place of the portion or portions of the meeting or portion

or portions of the series of meetings the persons present at those times

and

3 Except as provided in paragraph b of this section a complete

transcript or electronic recording fully recording the proceedings at each

portion of each meeting closed to public observation

b In case the agency determines to close to public observation any

portion or portions of any meeting or portion or portions of any series

of meetings because public observation of such portion or portions of

any meeting is likely to specifically concern the agency s issuance of a

subpena or the agency s participation in a civil action or proceeding an

action in a foreign court or international tribunal or an arbitration or

the initiation conduct or disposition by the agency of a particular case

of formal agency adjudication pursuant to the procedures in 5 U S C 554

or otherwise involving a determination on the record after opportunity for

a hearing the agency may maintain a set of minutes in lieu of the transcript

or recording described in paragraph a 3 of this section Such minutes

shall contain

1

A full and clear description of all matters discussed in the closed

portion of any meeting

2 A full and accurate summary of any action taken on any matter

discussed in the closed portion of any meeting and the reasons therefor

3 A description of each of the views expressed on any matter upon

which action was taken as described in paragraph b 2 of this section

4 The record of any rollcall vote which shall show the vote of each

member on the question and

5 An identification of all documents considered in connection with

any action taken on a matter described in paragraph b 1 of this section

c All records maintained by the agency as described in this section

shall be held by the agency for a period of not less than two 2 years

following any meeting or not less than one 1 year following the conclusion

of any agency proceeding with respect to which that meeting or portion

of ameeting washeld

27 F M C
PUBLIC INFORMATION

503 86 Public access to records

a All transcripts electronic recordings or minutes required to be main

tained by the agency under the provisions of 503 85 a 3 and 503 85 b

shall be promptly made available to the public by the Secretary of the

agency except for any item of discussion or testimony of any witnesses

which the agency determines to contain information which may be withheld

from public disclosure because its disclosure is likely to disclose matters

which are

1 i specifically authorized under criteria established by an Executive

Order to be kept secret in the interests of national defense or foreign

policy and H in fact properly classified pursuant to such Executive Order

2 Related solely to the internal personnel rules and practices of an

agency

3 Specifically exempted from disclosure by any statute other than 5

U S C 552 FOIA provided that such statute i

requires that the matters

be withheld from the public in such a manner as to leave no discretion

on the issue or H establishes particular criteria for withholding or refers

to particular types of matters to be withheld

4 Trade secrets and commercial or financial information obtained from

a person and privileged or confidential

5 Involved with accusing any person of a crime or formally censuring

any person

6 Of a personal nature where disclosure would constitute a clearly

unwarranted invasion of personal privacy

7 Investigatory records compiled for law enforcement purposes or infor

mation which if written would be contained in such records but only

to the extent that the production of such records or information would

i

interfere with enforcement proceedings ii deprive a person of a

right

to a fair trial or an impartial adjudication Hi constitute an unwarranted

invasion of personal privacy iv disclose the identity of a confidential

source and in the case of a record compiled by a criminal law enforcement

authority in the course of a criminal investigation or by an agency conduct

ing a lawful national security intelligence investigation confidential informa

tion furnished only by the confidential source v disclose investigative

techniques and procedures or vi endanger the life or physical safely of

law enforcement personnel

8 Contained in or related to examination operating or condition reports

prepared by on behalf of or for the use of an agency responsible for

the regulation or supervision offinancial institutions

9 Information the premature disclosure of which would be likely to

significantly frustrate implementation of a proposed agency action unless

the agency has already disclosed to the public the content or nature of

its proposed action or where the agency is required by law to make

such disclosure on its own initiative prior to taking final agency action

on such proposal or

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306 FEDERAL MARITIME COMMISSION

10 Specifically concerned with the agency s issuance of a subpena

or the agency s participation in a civil action or proceeding an action

in a foreign court or international tribunal or an arbitration or the initiation

conduct or disposition by the agency of a

particular case of formal agency

adjudication pursuant to the procedures in 5 U S C 554 or otherwise involv

ing a determination on the record after opportunity for a hearing

b Requests for access to the records described in this section shall

be made in accordance with procedures described in 503 31 through

503 36

c Records disclosed to the public under this section shall be furnished

at the expense of the party requesting such access at the actual cost of

duplication oftranscription

503 87 Effect of provisions ofthis subpart on other subparts

a Nothing in this subpart shall limit or expand the ability of any

person to seek access to agency records under Subpart 0 503 31 to

503 36 of this part except that the exceptions of 503 86 shall govern

requests to copy or inspect any portion of any transcript electronic record

ings or minutes required to be kept under this subpart

b Nothing in this subpart shall permit the withholding from any individ

ual to whom a record pertains any record required by this subpart to

be maintained by the agency which record is otherwise available to such

an individual under the provisions ofSubpart G ofthis part

NOTE This part does not contain any collection of information requests

or requirements within the meaning of the Paperwork Reduction Act of

1980 Pub L 96511

27 F M C
Sec

504 1

504 2

504 3

504 4

504

504 6

504 7

504 8

5049

504 10

504 91

FEDERAL MARITIME COMMISSION

46 CPR PART 504

PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS

Purpose and scope

Definitions

General information

Categorical exclusions

Environmental assessments

Finding of no significant impact

Environmental impact statements

Record of decision

Information required by the Commission

Time constraints on final administrative actions

OBM control numbers assigned pursuant to the Paperwork Re

duction Act

AUTHORITY 5 U S C 552 553 Secs 21 and 43 of the Shipping

Act 1916 46 U S C app 820 and 841a secs 13 and 17 of the Shipping

Act of 1984 46 U S C app 1712 and 1716 sec 102 of the National

Environmental Policy Act of 1969 42 U S C 4332 2 b and sec 382 b

of the Energy Policy and Conservation Act of 1975 42 U S C 6362

504 1 Purpose and scope

a This part implements the National Environmental Policy Act of 1969

NEPA and Executive Order 12114 and incorporates and complies with

the Regulations of the Council on Environmental Quality CEQ 40 CPR

1500 et seq

b This part applies to all actions of the Federal Maritime Commission

Commission To the extent possible the Commission shall integrate the

requirements of NEPA with its obligations under section 382 b of the

Energy Policy and Conservation Act of 1975 42 US C 6362

c Information obtained under this part is used by the Commission

to assess potential environmental impacts of proposed Federal Maritime

Commission actions Compliance is voluntary but may be made mandatory

by Commission order to produce the information pursuant to section 21

of the Shipping Act 1916 or section 15 of the Shipping Act of 1984

Penalty for non compliance with a section 21 order is 100 a day for

each day of default penalty for falsification of such a report is a fine

of up to 1 000 or imprisonment up to one year or both Penalty for

violation of a Commission order under section 15 of the Shipping Act

of 1984 may not exceed 5 000 for each violation unless the violation

was willfully and knowingly committed in which case the amount of

the civil penalty may not exceed 25 000 for each violation Each day

of a continuing violation constitutes a separate offense

27 F M C 307
1

308 FEDERAL MARITIME COMMISSION

504 2 Definitions

a Shipping Act 1916 46 U S C app 801 846 means the Shipping

Act 1916 as amended 46 U S C app 801 et seq

b Common carrier means any common carrier by water as defined

in section 3 of the Shipping Act of 1984 or in the Shipping Act 1916

including a conference of such carriers

c Environmental Impact means any alteration of existing environ

mental conditions or creation of a new set of environmental conditions

adverse or beneficial caused or induced by the action under consideration

d Potential Action means the range of possible Commission actions

that may result from a Commission proceeding in which the Commission

has not yet formulated a proposal

e Proposed Action means that stage of activity where the Commis

sion has determined to take a particular course of action and the effects

of that course of action can be meaningfully evaluated

f Environmental Assessment means a concise document that serves

to provide sufficient evidence and analysis for determining whether to

prepare an environmental impact statement or a finding of no significant

impact 40 CPR 1508 9

g Recyclable means any secondary material that can be used as

a raw material in an industrial process in which it is transformed into

a new product replacing the use of a depletable natural resource

h Shipping Act of 1984 means the Shipping Act of 1984 46 U S C

app 1701 1720

i Marine Terminal Operator means a person engaged in the United

States in the business of furnishing wharfage dock warehouse or other

terminal facilities in connection with a common carrier

504 3 General Information

a All comments submitted pursuant to this part shall be addressed

to the Secretary Federal Maritime Commission 1100 L Street N W Wash

ington D C 20573

b A list of Commission actions for which a finding of no significant

impact has been made or for which an environmental impact statement

is being prepared will be maintained by the Commission in the Office

of the Secretary and will be available for public inspection

c Information or status reports on environmental statements and other

elements of the NEPA process can be obtained from the Office of Environ

mental Analysis Federal Maritime Commission 1100 L Street N W Wash

ington D C 20573 telephone 202 523 5835

504 4 Categorical exclusions

a No environmental analyses need be undertaken or environmental docu

ments prepared in connection with actions which do not individually or

cumulatively have asignificant effect on the quality of the human environ

ment because they are purely ministerial actions or because they do not

increase or decrease air water or noise pollution or the use of fossil

27 F M C
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 309

fuels recyclables or energy The following Commission actions and

rulemakings related thereto are therefore excluded

1 Issuance modification denial and revocation of Ocean Freight For

warder licenses

2 Certification of financial responsibility of passenger vessels pursuant

to 46 CFR Part 540

3 Reserved

4 Promulgation of procedural rules pursuant to 46 CFR Part 502

5 Acceptance or rejection of tariff filings in foreign and domestic

commerce

6 Consideration of special permission applications filed pursuant to

46 CFR Parts 550 or 580

7 Receipt of terminal tariffs pursuant to 46 CFR Part 515

8 Suspension of andor decision to investigate tariff schedules pursuant

to section 3 ofthe Intercoastal Shipping Act 1933

9 Consideration of amendments to agreements filed pursuant to section

15 of the Shipping Act 1916 or section 5 of the Shipping Act of 1984

which do not increase the authority set forth in the effective agreement

10 Consideration of agreements between common carriers which solely

affect intraconferene or inter rate agreement relationships or pertain to ad

ministrative matters of conferences or rate agreements

11 Consideration of agreements between common carriers to discuss

propose or plan future action the implementation of which requires filing

a further agreement

12 Consideration of exclusive or non exclusive equipment interchange

or husbanding agreements

13 Receipt of non exclusive transshipment agreements

14 Action relating to collective bargaining agreements

15 Action pursuant to section 9 of the Shipping Act of 1984 concerning

the justness and reasonableness of controlled carriers rates charges classi

fications rules or regulations

16 Receipt of self policing reports or shipper requests and complaints

17 Consideration of financial reports prepared by common carriers in

the domestic offshore trades

18 Consideration of actions solely affecting the environment of a foreign

country

19 Action taken on special docket applications pursuant to 46 CFR

502 92

20 Consideration of matters related solely to the issue of Commission

jurisdiction

21 Investigations conducted pursuant to 46 CFR Part 555

22 Investigatory adjudicatory proceedings the purpose of which is to

ascertain past violations of the Shipping Act 1916 or the Shipping Act

of 1984

23 Reserved

27 F M C
310 FEDERAL MARITIME COMMISSION

24 Action regarding access to public infonnation pursuant to 46 CPR

Part 503

25 Action regarding receipt and retention of minutes of conference

meetings

26 Administrative procurements general supplies

27 Contracts for personal services

28 Personnel actions

29 Requests for appropriations

30 Consideration of all agreements involving marine tenninal facilities

andor services except those requiring substantial levels of construction

dredging land fill energy usage and other activities which may have a

significant environmental effect

31 Consideration of agreements regulating employee wages hours of

work working conditions or labor exchanges

32 Consideration of general agency agreements involving ministerial

duties of a common carrier such as internal management cargo solicitation

booking of cargo or preparation of documents

33 Consideration ofagreements pertaining to credit rules

34 Consideration of agreements involvingperfonnanee bonds to a con

ference from a conference member guaranteeing compliance by the member

with the rules and regulations of the conference

35 Consideration of agreements between members of two or more

conferences or other rate fixing agreements to discuss and agree upon com

mon self policing systems and cargo inspection services

b If interested persons allege that a categorically excluded action will

have a significant environmental effect e g

increased or decreased air

water or noise pollution use of recyclables use of fossil fuels or energy

they shall by written submission to the Commission s Office of Environ

mental Analysis OEA explain in detail their reasons The OEA shall

review these submissions and determine not later than ten 10 days after

receipt whether to prepare an environmental assessment Ifthe OEA deter

mines not to prepare an environmental assessment such persons may peti

tion the Commission for review of the OEA s decision within ten 10

days ofreceipt ofnotice of such detennination

c If the OEA detennines that the individual or cumulative effect of

a particular action otherwise categorically excluded offers a reasonable p0

tential of having a significant environmental impact it shall prepare an

environmental assessment pursuant to 504 5

504 5 Environmental assessments

a Every Commission action not specifically excluded under 504 4

shall be subject to an environmental assessment

b The OEA may publish in the Federal Register a notice of intent

to prepare an environmental assessment briefly describing the nature of

the potential or proposed action and inviting written comments to aid in

the preparation of the environmental assessment and early identification

27 F M C
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 311

of the significant environmental issues Such comments must be received

by the Commission no later than ten 10 days from the date of publication

ofthe notice in the Federal Register

5046 Finding of no significant impact

a If upon completion of an environmental assessment the OEA deter

mines that a potential or proposed action will not have a significant impact

on the quality of the human environment of the United States or of the

global commons a finding of no significant impact shall be prepared and

notice of its availability published in the Federal Register This document

shall include the environmental assessment or a summary of it and shall

briefly present the reasons why the potential or proposed action not other

wise excluded under 504 4 will not have a significant effect on the human

environment and why therefore an environmental impact statement EIS

will not be prepared

b Petitions for review of a finding of no significant impact must be

received by the Commission within ten 10 days from the date of publica

tion ofthe notice of its availability in the Federal Register The Commission

shall review the petitions and either deny them or order the OEA to

prepare an EIS pursuant to 504 7 The Commission shall within ten

10 days of receipt of the petition serve copies of its order upon all

parties who filed comments concerning the potential or proposed action

or who filed petitions for review

504 7 Environmental impact statements

a General

1 An environmental impact statement EIS shall be prepared by the

OEA when the environmental assessment indicates that a potential or pro

posed action may have a significant impact upon the environment of the

United States or the global commons

2 The EIS process will commence

i For adjudicatory proceedings when the Commission issues an order

of investigation or a complaint is filed

ii For rulemaking or legislative proposals upon issuance of the proposal

by the Commission and

iii For other actions the time the action is noticed in the Federal

Register

3 The major decision points in the EIS process are

i

the issuance of an initial decision in those cases assigned to be

heard by an Administrative Law Judge AU and

ii the issuance of the Commission s final decision or report on the

action

4 The EIS shall consider potentially significant impacts upon the quality

of the human environment of the United States and in appropriate cases
312 FEDERAL MARITIME COMMISSION

1 The OEA will initially prepare a draft environmental impact statement

DEIS in accordance with 40 CPR Part 1502

2 The DEIS shall be distributed to every party to a Commission pro

ceeding for which it was prepared There will be no fee charged to such

parties One copy per person will also be provided to interested persons

at their request The fee charged such persons shall be that provided in

503 43 of this chapter

3 Comments on the DEIS must be received by the Commission within

ten 10 days of the date the Environmental Protection Agency EPA

publishes in the Federal Register notice that the DEIS was filed with

it Sixteen copies shall be submitted as provided in 504 3 a Comments

shall be as specific as possible and may address the adequacy of the

DEIS or the merits of the alternatives discussed in it All comments received

will be made available to the public Extensions of time for commenting

on the DEIS may be granted by the Commission for up to ten 10 days

if good cause is shown

c Final environmental impact statements

1 After receipt of comments on the DEIS the OEA will prepare a

final environmental impact statement PElS pursuant to 40 CPR Part 1502

which shall include a discussion of the possible alternative actions to a

potential or proposed action The PElS will be distributed in the same

manner as specified in paragraph b 2 of this section

2 The PElS shall be prepared prior to the Commission s final decision

and shall be filed with the Secretary Federal Maritime Commission Upon

filing it shall become part of the administrative record

3 For any Commission action which has been assigned to an AU

for evidentiary hearing

i The PElS shall be submitted prior to the close of the record and

ii The AU shall consider the environmental impacts and alternatives

contained in the PElS in preparing the initial decision

4 i For all proposed Commission actions any party may by petition

to the Commission within ten 10 days following EPA s notice in the

Federal Register assert that the PElS contains a substantial and material

error of fact which can only be properly resolved by conducting an evi

dentiary hearing and expressly request that such a hearing be held Other

parties may submit replies to the petition within ten 10 days of its

receipt

ii The Commission may delineate the issue s and refer them to an

AU for expedited resolution or may elect to refer the petition to an

AU for consideration

iii The AU shall make findings of fact on the issue s and shall

certify such findings to the Commission as a supplement to the FEIS

To the extent that such findings differ from the PElS it shall be modified

by the supplement

27 F M C
PROCEDURES FOR ENVIRONMENTAL POLICY ANALYSIS 313

iv Discovery may be granted by the AU on a showing of good cause

and if granted shall proceed on an expedited basis

504 8 Record of decision

The Commission shall consider each alternative described in the PElS

in its decisionmaking and review process At the time of its final report

or order the Commission shall prepare a record of decision pursuant to

40 CFR 1505 2

504 9 Information required by the Commission

a Upon request of OEA a person filing a complaint protest petition

or agreement requesting Commission action shall submit to OEA no later

than ten 10 days from the date of the request a statement setting forth

in detail the impact of the requested Commission action on the quality

ofthe human environment if such requested action will

1 Alter cargo routing patterns between ports or change modes of trans

portation

2 Change rates or services for recyclables

3 Change the type capacity or number of vessels employed in a specific

trade or

4 Alter terminal or port facilities

b The statement submitted shall to the fullest extent possible include

1 The probable impact of the requested Commission action on the

environment e

g the use of energy or natural resources the effect on

air noise or water pollution compared to the environmental impact created

by existing uses in the area affected by it

2 Any adverse environmental effects which cannot be avoided if the

Commission were to take or adopt the requested action and

3 Any alternatives to the requested Commission action

c If environmental impacts either adverse or beneficial are alleged

they should be sufficiently identified and quantified to permit meaningful

review Individuals may contact the OEA for informal assistance in prepar

ing this statement The OEA shall independently evaluate the information

submitted and shall be responsible for assuring its accuracy if used by

it in the preparation of an environmental assessment or EIS

d In all cases the OEA may request every common carrier by water

or marine terminal operator or any officer agent or employee thereof

as well as all parties to proceedings before the Commission to submit

within ten 10 days of such request all material information necessary

to comply with NEPA and this part Information not produced in response

to an informal request may be obtained by the Commission pursuant to

section 21 of the Shipping Act 1916 or section 15 of the Shipping Act

of 1984

504 10 Time constraints on final administrative actions

No decision on a proposed action shall be made or recorded by the

Commission until the later of the following dates unless reduced pursuant

27 F M r
314 FEDERAL MARITIME COMMISSION

to 40 CFR 1506 10 d or unless required by a statutorily prescribed deadline

on the Commission action

a Forty 40 days after EPA s publication of the notice described in

504 7 b for a DEIS or

b Ten 10 days after publication ofEPA s notice for an PElS

504 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control number assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980 Pub

L 96511 The Commission intends that this section comply with the

requirements of section 3507 f

of the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

Director ofthe Office of Management and Budget OMB for each agency

information collection requirement

Section

Current

OMB Con

trol No

504 4

through 504 7

504 9

3072035

3072035

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 505

COMPROMISE ASSESSMENT SETTLEMENT AND COLLECTION OF

CIVIL PENALTIES

Sec

505 1 Purpose and scope

505 2 Definitions

505 3 Assessment of civil penalties procedure criteria for determining

amount limitations relation to compromise

505 4 Compromise ofpenalties relation to assessment proceedings

505 5 Payment of penalty method default

Appendix A Example of Compromise Agreement to be used under 46

CFR 505 4

Appendix B Example of Promissory Note to be used under 46 CPR

505 5

AUTHORITY 5 U S C 552 553 secs 32 and 43 of the Shipping

Act 1916 46 U S C app 831 and 841a secs 10 11 13 and 17 of

the Shipping Act of 1984 46 U S c app 1709 1710 1712 and 1716

505 1 Purpose and scope

The purpose of this part is to implement the statutory provisions of

section 32 of the Shipping Act 1916 and section 13 of the Shipping

Act of 1984 by establishing rules and regulations governing the com

promise assessment settlement and collection of civil penalties arising

under certain designated provisions of the Shipping Act 1916 the Inter

coastal Shipping Act 1933 the Shipping Act of 1984 andor any order

rule or regulation except for procedural rules and regulations contained

in part 502 of this chapter issued or made by the Commission in the

exercise of its powers duties and functions under those statutes

505 2 Definitions

For the purposes of this part

a Assessment means the imposition of a civil penalty by order of

the Commission after a formal docketed proceeding

b Commission means the Federal Maritime Commission

c Compromise means the process whereby a civil penalty for a

violation is agreed upon by the respondent and the Commission outside

of a formal docketed proceeding

d Person includes individuals corporations partnerships and associa

tions existing under or authorized by the laws of the United States or

of a foreign country

e Respondent means any person charged with a violation

27 F M C 315
316 FEDERAL MARITIME COMMISSION

f Settlement means the process whereby a civil penalty or other

disposition of the case for a violation is agreed to in a formal docketed

proceeding instituted by order of the Commission

g

Violation includes any violation of sections 14 through 21 except

section 16 First and Third of the Shipping Act 1916 section 2 of the

Intercoastal Shipping Act 1933 any provision of the Shipping Act of

1984 andor any order rule or regulation except for procedural rules

and regulations contained in part 502 of this chapter issued or made

by the Commission in the exercise of its powers duties and functions

under the Shipping Act 1916 the Intercoastal Shipping Act 1933 or

the Shipping Act of 1984

h Words in the plural form shall include the singular and vice versa

and words importing the masculine gender shall include the feminine and

vice versa The terms includes and including do not exclude matters

not listed but which are in the same general class The word and

includes or except where specifically stated or where the context requires

otherwise

505 3 Assessment of civil penalties procedure criteria for determining

amount limitations relation to compromise

a Procedure for assessment of penalty The Commission may assess

a civil penalty only after notice and opportunity for a hearing under section

22 of the Shipping Act 1916 or sections 11 and 13 of the Shipping

Act of 1984 The proceeding including settlement negotiations shall be

governed by the Commission s Rules of Practice and Procedure in Part

502 of this Chapter All settlements must be approved by the Presiding

Officer The full text of any settlement must be included in the final

order of the Commission

b Criteria for determining amount ofpenalty In determining the amount

of any penalties assessed the Commission shall take into account the nature

circumstances extent and gravity of the violation committed and the policies

for deterrence and future compliance with the Commission s rules and

regulations and the applicable statutes The Commission shall also consider

the respondent s degree of culpability history of prior offenses ability

to pay and such other matters as justice requires

c Limitations relation to compromise When the Commission in its

discretion determines that policy justice or other circumstances warrant

a civil penalty assessment proceeding may be instituted at any time for

any violation which occurred within five years prior to the issuance of

the order of investigation A proceeding may also be instituted at any

time after the initiation of informal compromise procedures except where

a compromise agreement for the same violations under the compromise

procedures has become effective under 505 4e

27 F M C
COMPROMISE ASSESSMENT SETTLEMENT AND COLLECTION 317

OF CIVIL PENALTIES

505 4 Compromise of penalties relation to assessment proceedings

a Scope Except in pending assessment proceedings provided for in

505 3 the Commission when it has reason to believe a violation has

occurred may invoke the informal compromise procedures of this section

b Notice When the Commission considers it appropriate to afford an

opportunity for the compromise of a civil penalty it will except where

circumstances render it unnecessary send a

registered or certified demand

letter to the respondent describing specific violation s on which the claim

is based including the particular facts dates and other elements necessary

for the respondent to identify the specific conduct constituting the alleged

violation the amount of the penalty demanded and the names of Commis

sion personnel with whom the demand may be discussed if the person

desires to compromise the penalty The demand shall also include the

deadlines for the institution and completion of compromise negotiations

and the consequences of failure to compromise

c Request for compromise Any person receiving a demand provided

for in paragraph b of this section may within the time specified deny

the violation or submit matters explaining mitigating or showing extenuat

ing circumstances as well as make voluntary disclosures of information

and documents

d Criteria for compromise In addition to the factors set forth in

505 3 b in compromising a penalty claim the Commission may consider

litigative probabilities the cost of collecting the claim and enforcement

policy

e Disposition of claims in compromise procedures

I When the penalty is compromised such compromise will be made

conditional upon the full payment of the compromised amount upon such

terms and conditions as may be allowed

2 When a penalty is compromised and the respondent agrees to settle

for that amount a compromise agreement shall be executed One example

of such a compromise agreement is set forth as Appendix A to this part

This agreement after reciting the nature of the claim will include a state

ment evidencing the respondent s agreement to the compromise of the

Commission s penalty claim for the amount set forth in the agreement

and will also embody an approval and acceptance provision which is to

be signed by the appropriate Commission official Upon compromise of

the penalty in the agreed amount a

copy of the executed agreement shall

be furnished to the respondent

3 Upon completion of the compromise the Commission may issue

a public notice thereof the terms and language of which are not subject

to negotiation

f

Relation to assessment proceedings Except by order of the Commis

sion no compromise procedure shall be initiated or continued after institu

tion of a Commission assessment proceeding directed to the same violations

Any offer of compromise submitted by the respondent pursuant to this

27 F M C
318 FEDERAL MARITIME COMMISSION

section shall be deemed to have been furnished by the respondent without

prejudice and shall not be used against the respondent in any proceeding

g Delegation of compromise authority The compromise authority set

forth in this part is delegated to the Director Bureau of Hearing Counsel

505 5 Payment of penalty method default

a Method Payment of penalties by the respondent shall be made by

I A bank cashier s check or other instrument acceptable to the Commis

sion

2 Regular installments with interest where appropriate by check or

other instrument acceptable to the Commission after the execution of a

promissory note containing a confess judgment agreement Appendix B

or

3 A combination of the above alternatives

b All checks or other instruments submitted in payment of claims

shall be made payable to the Federal Maritime Commission

c Default in payment Where a

respondent fails or refuses to pay

a penalty properly assessed under 505 3 or compromised and agreed

to under 505 4 appropriate collection efforts will be made by the Commis

sion including but not limited to referral to the Department of Justice

for collection Where such a defaulting respondent is a licensed freight

forwarder such a default may also be grounds for revocation or suspension

of the respondent s license after notice and opportunity for hearing unless

such notice and hearing have been waived by the respondent in writing

NOTE This part does not contain any collection of information requests

or requirements within the meaning of the Paperwork Reduction Act of

1980 Pub L 96511

27 F M C
COMPROMISE ASSESSMENT SETTLEMENT AND COLLECTION 319

OF CIVIL PENALTIES

APPENDIX A EXAMPLE OF COMPROMISE AGREEMENT TO BE

USED UNDER 46 CPR 505 4

COMPROMISE AGREEMENT

FMC FILE NO

This Agreement is entered into between

1 The Federal Maritime Commission and

2 hereinafter referred to as respondent

WHEREAS the Commission is considering the institution of an assess

ment proceeding against respondent for the recovery of civil penalties pro

vided under the Act for

alleged violation s ofSection s

WHEREAS this course of action is the result of practices believed

by the Commission to have been engaged in by respondent to wit

WHEREAS Section of the Act

authorizes the Commission to collect and compromise civil

penalties arising from the alleged violation s set forth and described above

and

WHEREAS the respondent has terminated the practices which are the

basis of the alleged violation s set forth herein and has instituted and

indicated its willingness to maintain measures designed to eliminate discour

age and prevent these practices by respondent or its officers employees

and agents

NOW THEREFORE in consideration of the premises herein and in

compromise of all civil penalties arising from the violation s set forth

and described herein that may have occurred between date and date

the undersigned respondent herewith tenders to the Federal Maritime Com

mission a bank cashier s check in the sum of upon the

following terms of settlement

1 Upon acceptance of this agreement of settlement in writing by the

Director of the Bureau ofHearing Counsel of the Federal Maritime Commis

sion this instrument shall forever bar the commencement or institution

of any assessment proceeding or other claims for recovery of civil penalties

from respondent arising from the alleged violations set forth and described

herein that have been disclosed by respondent to the Commission and

that occurred between date and date

2 The undersigned voluntarily signs this instrument and states that no

promises or representations have been made to the respondent other than

the agreements and consideration herein expressed

3 It is expressly understood and agreed that this agreement is not to

be construed as an admission of guilt by undersigned respondent to the

alleged violations set forth above

27 F M C
320 FEDERAL MARITIME COMMISSION

4 Insofar as this agreement may be inconsistent with Commission proce

dures for compromise and settlement of violations the parties hereby waive

application of such procedures

By

Title

Date

Approval and Acceptance

The above Terms and Conditions and Amount of Consideration are hereby

Approved and Accepted

By the Federal Maritime Commission

Hearing Counsel

Director Bureau ofHearing Counsel

Date

27 F M C
COMPROMISE ASSESSMENT SETTLEMENT AND COLLECTION 321

OF CIVIL PENALTIES

APPENDIX B EXAMPLE OF PROMISSORY NOTE TO BE USED

UNDER 46 CFR 505

PROMISSORY NOTE CONTAINING AGREEMENT FOR JUDGMENT

FMC FILE NO

For value received promises to pay to the Fed

eral Maritime Commission the Commission the principal sum of

to be paid at the offices of the Commis

sion in Washington D C by bank cashier s or certified check in the

following installments

within months of execution of

the settlement agreement by the Director of the Bureau ofHearing Counsel

within months of execution

of the agreement

Further payments if necessary

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 of this execution of this Promissory Note by

the Director of the Bureau of Hearing Counsel and be computed at the

rate of r percent per annum

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

of ten 10 days after becoming due and payable the entire unpaid principal

amount ofthis 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

this Promissory Note Respondent does hereby authorize and empower

any U S attorney any of its assistants or any attorney of any court of

record Federal or State to appear for him or her and to enter and confess

judgment against Respondent for the entire unpaid principal amount of

this Promissory Note together with interest in any court of record Federal

or State to waive the issuance and service of process upon Respondent

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

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

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

execution on said judgment

Respondent 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 Respondent

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

27 F M C
322 FEDERAL MARITIME COMMISSION

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

prepayment

By

Title

Date

I

I

I

By the Commission

S FRANCIS C HURNEY

Secretary

1

J

I

I

j

27 F MC
FEDERAL MARITIME COMMISSION

46 CFR PART 580 FORMERLY PART 536

DOCKET NOS 8421 8423 AND 8424

SERVICE CONTRACTS LOYALTY CONTRACTS AND PUBLISHING

AND FILING OF TARIFFS BY COMMON CARRIERS IN THE

FOREIGN COMMERCE OF THE UNITED STATES

ACTION

SUMMARY

November 9 1984

Final Rule

This Final Rule implements those provisions of the Ship

ping Act of 1984 which relate to the areas of 1 service

contracts 2

loyalty contracts and 3 general tariff

filing requirements It amends and supersedes three pre

viously published Interim Rules in these subject areas

and consolidates them into one Final Rule

DATES Effective December 15 1984

SUPPLEMENTARY INFORMATION The Shipping Act of 1984 Public

Law 98 237 98 Stat 67 46 U S c app 1701 1720 the Act or 1984

Act was enacted on March 20 1984 and became effective 90 days later

on June 18 1984 It significantly alters the statutory scheme which pre

viously governed the oceanborne foreign commerce of the United States

the Shipping Act 1916 46 U S C app 801 et seq the 1916 Act

As a result of these changes the Commission determined that it would

be necessary to promulgate rules to implement several provisions of the

Act including inter alia those relating to 1 service contracts and time

volume rates 2

loyalty contracts and 3 general tariff filing requirements

The Commission initially issued three Interim Rules covering these sub

jects pursuant to the authority given it by section 17 of the Act Docket

No 8421 26 F M C 640 service contracts and time volume rates Dock

et No 8423 26 F M C 659 loyalty contracts and Docket No 84

24 26 F MC 663 other foreign tariff regulations These Interim Rules

also requested comments by the public and as a result were commented

on by many diverse interests The Commission is now issuing Final Rules

in these three proceedings However since they all relate to the general

of area of tariffs and are all to be contained in a new Part 580 of the

Code they are consolidated in this Rule and Part 580 is published in

its entirety The comments to the Interim Rules will nonetheless be consid

ered separately and therefore the remainder of this discussion will be

divided as follows

27 F M C 323
324 FEDERAL MARITIME COMMISSION

Part I SERVICE CONTRACTS AND TIMEVOLUME RATES

Sections 580 7 and 580 12

Docket No 8421

Part II LOYALTY CONTRACTS

Section 580 16

Docket No 8423

Part III FOREIGN TARIFF FILING REGULATIONS GENERAL

Sections 580 0 to 580 6 580 8 to 580 11 580 13 to 580 15

Docket No 8424

ISERVICE CONTRACTS AND TIME VOLUME RATES DOCKET NO

84 21 Sections 580 7 and 580 12

The Commission initiated Docket No 8421 on May 3 1984 by publish

ing an Interim Rule 49 F R 18849 to implement certain provisions

of the 1984 Act relating to service contracts and timevolume rates Inter

ested persons were given 90 days to comment on the rule In addition

the Commission indicated that concerned individuals could file comments

prior to the effective date of the Interim Rule June 18 1984 if they

perceived serious difficulties with it The Commission subsequently modified

the Interim Rule on June 14 1984 in response to these emergency com

ments and solicited additional final comments by August 1 1984 49 FR

24701

The Commission received 17 additional final comments on the Interim

Rule Commenting parties or groups of parties are 1 Port of Oakland

2 National Maritime Council 3 Sea Land Service Inc 4 Tobacco

Association of the United States 5 Matson Navigation Company Inc

6 The Journal of Commerce 7 Chemical Manufacturers Association

CMA 8 EIdu Pont de Nemours and Company DuPont 9 United

States Department of Transportation DOT 10 NPS International 11

International Association of NVOCCs IANVOCC 12 Inter American

Freight Conference 13 U S Atlantic Gulf Australia New Zealand Con

ference IberianU S North Atlantic Westbound Freight Conference Greece

U S Atlantic Rate Agreement Italy South France South Spain Portugal

U S Gulf and the Island of Puerto Rico Med Gult conference Mediterra

nean North Pacific Coast Freight Conference the 8900 Lines The West

Coast of Italy Sicilian and Adriatic PortsNorth Atlantic Range Conference

and Marseilles North Atlantic U S A Freight Cdnference North Atlantic

Conferences 14 Pacific Coast European Conference Latin AmericaPa

cific Coast Steamship Conference and Pacific Coast River Plate Brazil

Conference pacific Coast ConferenceS 15 Trans Pacific Freight Con

ference of JapanKorea JapanKorea Atlantic and Gulf Freight Conference

Trans Pacific Freight Conference Trans Pacific Freight Conference Hong

Kong New York Freight Bureau and Philippines North America Con

ference Trans Pacific Conferences 16 Pacific Westbound Conference

Far East Conference Pacific Straits Conference and Pacific Indonesian

j

27 F M C
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Conference Far East Conferences and 17 North Atlantic United King

dom Freight Conference North Atlantic French Atlantic Freight Conference

North Atlantic Continental Freight Conference North Atlantic Baltic Freight

Conference Scandinavia Baltic U S North Atlantic Westbound Freight Con

ference Continental North Atlantic Westbound Freight Conference North

Atlantic Westbound Freight Association United Kingdom U S A Gulf

Westbound Rate Agreement Continental U S Gulf Freight Association

Gulf United Kingdom Conference GulfEuropean Freight Association North

Europe U S South Atlantic Rate Agreement and U S South Atlantic

Europe Rate Agreement North European Conferences or NEC

The following is a section by section summary of the various comments

received and the Commission s disposition of them Any comment not

directly addressed here has nonetheless been fully considered by the Com

mission In addition the Commission has taken this opportunity to make

minor editorial changes in the Final Rule for the sake of greater clarity

I 580 7a Definitions

Section 580 7a l Contract Party

Section 580 7 a l

of the Interim Rule defines contract party as a

party signing a contract as shipper or ocean common carrier and any

related entity who may engage in the shipment of commodities in

the trade covered by the contract The Inter American Freight Conference

believes that only entities who have actually signed a service contract

should be considered contract parties and the North European Conferences

suggest that all entities with any remote interest in the contract or relation

to the contract signatories be specifically named in the contract CMA

suggests revisions which would allow less than the entire membership of

an organization to enter into a contract

The Commission has revised the definition of contract party originally

proposed in part to resolve these comments While the designation of

contract parties is not an essential term subject to public disclosure under

the Act the Commission believes that all parties able to take advantage

of the contract must be named in the contract itself This will allow the

Commission to determine which shipments by a carrier are covered by

a contract and therefore entitled to a contract rate and which must be

charged the tariff rate Without such disclosure it would be virtually impos

sible to enforce the tariff adherence requirements of the Act Accordingly

the Rule has been revised to require that all persons or entities entitled

to receive or authorized to offer the service contracts non tariff rates be

expressly named in the contract as contract parties

The Commission has also taken this opportunity to amend the definition

of contract party to take into account the fluctuating membership which

may occur in a shippers association The revision accomplishes this by

considering any member of a shippers association regardless of whether

27 F M C
326 FEDERAL MARITIME COMMISSION

it joined or left the association during the course of the contract to be

a contract party without having to be specifically named in the contract

Section 580 7a 2 Geographic Area

Section 580 7 a 2 of the Interim Rule defines geographic area as

the general location from which or to which the contract cargo will

move in intermodal service

The Inter American Freight Conference and the North Atlantic Con

ferences contend that the Commission lacks the authority to require the

application of a service contract to any location not actually agreed to

by the contract parties a result which they believe occurs when this defini

tion is applied to the contract filing requirements of section 580 7b The

North European Conferences argue that only the concise statement of essen

tial terms and not the service contract itself is required by statute to

include a reference to geographic areas

The Commission does not believe that anything in these comments re

quires it to alter its definition of geographic area It is taken directly

from language contained in the legislative history to the Act See S Rep

No 3 98th Cong 1st Sess 31 1983 The confusion which has arisen

over its use in the Interim Rule derives from the fact that though it

was only intended to apply to the statement of essential terms it might

also have applied to the contract itself

Section 580 7 b requires service contracts filed with the Commission

to state among other things the essential terms Section 580 7 g

2

requires the essential terms to include the origin and destination

port ranges in the case of port to port movements and the origin and

destination geographic areas in the case of through intermodal movements

Taken together in conjunction with the definition of geographic area

these sections could be read to require a broader statement of scope in

the service contract than had been actually agreed to by the parties To

clarify this situation section 580 7 is amended in paragraph b 3 ii to

provide that in the context of the contract filing requirements the contract

need only reflect the actual locations agreed to by the contract parties

However as indicated above the statement of essential terms must be

set forth in terms of geographic areas for through intermodal movements

The description of the geographic area in the statement of essential terms

may within reason be as broad or as narrow as the parties desire Depend

ing on the circumstances geographic areas might be stated in terms

of counties regions states counties cities or zip codes The propriety

of any particular geographic area description contained in an essential terms

publication in the initial stages of the implementation of this Final Rule

will have to be determined on an ad hoc basis As further experience

is gained in this area section 580 7 may be further amended to reflect

the operational realities of this new commercial practice

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Section 580 7 a 3 Port Range

Comments similar to those discussed above in terms of geographic

area were also received concerning the definition of port range The

commenters again assume that the Commission is attempting to impose

a broader scope on a service contract than that which may be intended

by the contract parties The amendment to section 580 7 b 3 ii discussed

above should alleviate these concerns at least with respect to the contract

filing requirement The Commission continues to believe however that

the statement of essential terms must be in terms of port ranges in

the case of port to port movements and that in certain instances this may

result in a broader scope than that stated in the contract This is nonetheless

consistent with the Congressional intent referenced above

Section 580 7a 4 Service Contract

DuPont proposes that the definition of service contract include a state

ment that they are contract carriage arrangements and not common carriage

The Northern European Conferences suggest that the definition allow for

a fixed portion of a shipper s cargoes and provide antitrust immunity

for such arrangements

The definition of service contract in the Interim Rule is taken directly

from the Act and will not be modified In any event DuPont s suggestion

would not appear to be legally feasible because the Acts service contract

concept appears to contain elements of common carriage

NEC s suggestion would in effect convert a service contract to a loy

alty contract as that term is defined by the Act 46 D S C app 1702 14

It would be inconsistent with Congress treatment of loyalty contracts else

where in the Act 46 D S C app 1709 b 9 and will not therefore be

adopted

Section 580 7 aX5 Shipper

The definition of shipper is also derived directly from the Act and

will be retained We will however accommodate the suggestion of the

inter American Freight Conference and include a definition of shippers

association in the Final Rule for purposes of consistency

Section 580 7a 6 Time Volume Rate

Section 580 7 a 6 of the Interim Rule defines a time volume rate

as a freight rate published in a tariff which must vary with the volume

of cargo offered or freight revenues received over a specified period of

time

The North European Conferences express concern over use of the words

must vary which they interpret as meaning that a time volume rate

must vary internally i e it must be offered on a sliding scale and if

it merely varies from other tariff rates only in that it is based on a

volume of cargo over time it is subject to rejection In addition noting

27 F M C
328 FEDERAL MARITIME COMMISSION

that the word freight is not used in the Act they state that the Commis

sion has not offered any reason for making a distinction between freight

rates and rates The Inter American Freight Conference offers an alter

native definition for time volume rate and also suggests that it and

section 580 71 which relates to the use of time volume rates be moved

to the tariff filing sections of Part 580

The Commission agrees with this latter point and is redesignating Interim

Rule sections 580 7 a 6 and 580 71 as sections 580 12 a and 580 l2 b

respectively in the Final Rule In addition the Commission believes that

the definition proffered by the Inter American Freight Conference may serve

to accommodate NEC s comment and otherwise clarify any ambiguity which

may have been inherent in the Interim rule s defmition of time volume

rate We are therefore adopting it

Section 580 7 bContract Filing Requirements

The North European Conferences suggest that the Commission allow the

optional filing of service contracts involving exempted commodities ref

erenced in section 8 c of the Act While there does not appear to be

any legal barrier to allowing the filing of service contracts involving exempt

ed commodities on an optional basis by an individual carrier conferences

authority to enter into and file such contracts is not as clear The issue

is whether Congress exemption of certain commodities precludes concerted

rate action on those commodities with or witboutantitrust immunity That

issue will be made the subject of a separate proceeding At this point

conferences may file service contracts on exempt commodities at their

option However this is permitted without prejudice to any subsequent

Commission determination of the legality of such practices

Permitting such contracts to be filed but then exempting them from

the otherwise applicable regulatory requirements could however lead to

discrimination between similarly situated shippers and allow potential abuse

of the filing and publication process Therefore although the Commission

will permit the optional filing of exempted commodity contracts the Final

Rule is amended to make it clear that all other regulatory requirements

applicable to non exempt service contracts will apply to such filings

As mentioned above in the context of geographic area and port

range section 580 7b will also be modified to make clear that the

only locations which must be included in the service contract are those

actually agreed upon by the contracting parties

We have also modified the numbering system to be used in the filing

of service contracts These changes will enable the Commission to more

properly fulfill its responsibilities under the Act The Final Rule will require

that the filing carrier or conference assign each service contract a unique

number bearing the prefix SC and reference the applicable essential

terms publication and the specific set of essential terms which are

to be identified by the prefix ET within the identified publication

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FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

This was done for two purposes to permit potential shippers to accurately

identify the specific set of essential terms in which they may have

an interest and to enable the Commission to distinguish among several

contracts with the identical essential terms

Section 580 7b 5 of the Interim Rule requires that carriers and con

ferences identify in each service contract the shipment records which

will be maintained to support the contract The North Atlantic Conferences

contend that the maintenance of shipment records for service contracts

is inequitable because the requirement is imposed only on shipments mov

ing under service contracts We believe the record maintenance requirement

is necessary to the effective and efficient administration and enforcement

of the service contract system Ifthe need arises these records will enable

the Commission to ascertain whether a particular contract has been used

as a device to rebate or grant other unlawful rates or concessions This

requirement should serve to provide valuable competitive safeguards to

both carriers and shippers In addition it does not appear to be particularly

burdensome to the carriers The Commission s previous regulations applica

ble to time volume contracts contained a similar requirement which was

promulgated to assure that records would be available to verify that the

terms of the contract were met It did not appear to cause any particular

difficulties in practice

If any burden exists with respect to the maintenance of records it more

likely arises from the related requirement that such records be maintained

by a U S resident agent This is discussed below in the context of section

580 7 k

Section 580 7 cConfidentiality

The North European Conferences submit that service contract amendments

should be afforded the same confidential treatment as service contracts

and that section 580 7 c should be amended accordingly The Commission

notes that to the extent a contract amendment alters an essential term

of a service contract it would not be permitted under paragraph d i

of this section Amendments to non consequential terms of a service contract

are permissible and should be filed with the Commission for informational

purposes The Commission will accord such amendments the same confiden

tial treatment which the original contract received Section 580 7 c has

been revised to make this clear

Section 580 7 dContract Amendments

Section 580 7 d states that amendments to service contracts will be

treated as new contracts for the purposes of the filing and publication

requirements In addition this section provides that no new contract may

retroactively modify the terms or effects of a previously filed contract

DuPont and CMA propose that only amendments to the essential terms

of a service contract be considered new contracts They further suggest

27 F M C
330 FEDERAL MARITIME COMMISSION

that the reference to publication requirements should be changed to

availability requirements to avoid any confusion with general tariff con

cepts and to more closely track the language of the Act In addition

CMA proposes a change to clarify that contract amendments do not termi

nate the original contract

The North European Conferences express difficulty in understanding the

basis for section 580 7 d which they believe serves to restrict service

contract amendments They nonetheless offer changes in the wording of

the section to ameliorate what they perceive to be detrimental consequences

of the Interim Rule

In light of these comments the Commission has made several changes

in section 580 7 d of the Interim Rule In the first place the Commission

agrees that the only modifications to a service contract which should be

of any concern are those which modify an essential term of the contract

Modifications to non essential terms are of little consequence but should

nonetheless be filed with the Commission for informational purposes The

Commission does not believe however that modifications to essential terms

of a service contract should be permitted during the duration ofthe contract

because they could potentially affect the rights of other similarly situated

shippers For instance if a shipper was unable to meet its cargo volume

commitment under a contract and the parties agreed to lower that amount

during the term of the contract this could discriminate against another

shipper who was not able to take advantage of the contract during its

initial 30 day offering because of the volume of cargo originally required

to be committed but who could have done so under the lower minimum

Also the contract parties could agree to alter the geographic areas or

port ranges covered by the contract thereby including similarly situated

shippers who were not included under the original contract These situations

could be exacerbated if the non contract shipper had already shipped all

or a substantial portion of its cargo prior to the time of the modifications

and is therefore no longer able to take advantage of the altered terms

The Commission has concluded that the best approach to avoid such situa

tions is to prohibit any modification to an essential term during the term

of the contract

The parties remain free however to mutually agree to terminate the

contract at any time during its term If they take such action and the

minimum quantity has not been met the cargo previously carried under

the contract must be rerated according to the otherwise applicable tariff

rates in effect at the time of the shipments unless the contract provides

a different procedure This procedure would be similar to the carrier s

or conference s basic measure of damages if the shipper did not meet

the quantity term of the contract and there was no mutually agreed termi

nation Section 580 7 d iii further recognizes however that the contracting

parties may pursuant to section 5807 g

2 vii set forth in their initial

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FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

contract specific terms to govern situations in which the volume require

ment may not be met

Section 580 7

e

Transmittal ofService Contracts

DuPont suggests that the Interim Rule be amended to allow carriers

and conferences to annotate the inner envelope containing the service

contract for the purpose of identifying the number assigned to the cor

responding statement of essential terms This would allegedly obviate the

need to compare the contract with the filed essential terms

While the Commission has made certain amendments in this provision

it did so in order to clarify and streamline the administrative processing

of service contracts and related statements of essential terms However

contracts must still be compared with filed essential terms to ensure that

the statement of essential terms contains a concise statement of all of

the essential terms of the contract s The Commission cannot rely on

representations on an envelope to meet its statutory responsibilities

The Final Rule will protect the contents of each envelope containing

a service contract by limiting the amount of information on such envelope

to the statement This Envelope Contains a Confidential Service Contract

The Commission cannot maintain the confidentiality of any contract trans

mitted by any other procedure If a filing party fails to utilize the specific

procedures contained in this section the confidentiality of the contract

could inadvertently be compromised

Section 580 7jReturn of Contracts

Section 580 7 f of the Interim Rule permits the Commission to return

a service contract if its provisions are not substantiated by reference to

its statement of essential terms In addition section 580 7j

of the Interim

Rule allows the rejection of a statement of essential terms which fails

to conform to any of the requirements ofthe Rule

As an initial matter the North European Conferences question the Com

mission s authority to return or reject service contract filings lacking express

statutory authority to do so We believe that a carefully circumscribed

return and rejection procedure falls within the ambit of the Act srulemaking

authority in section 17 because such procedures are necessary for the

enforcement and implementation of section 8 c of the Act Without such

a procedure contracts or statements of essential terms which are contrary

to the Act or the Commission s

regulations could remain in effect for

a considerable period of time before being challenged This would not

only subvert the purposes of the service contract provision but would

also substantially affect the rights of similarly situated shippers

The Commission has determined however to treat its return and rejection

procedures in one section for purposes of clarity and uniformity Within

15 days of filing the Commission can return a contract or statement of

essential terms which does not conform to the requirements of paragraph

27 F M C
332 FEDERAL MARITIME COMMISSION

b or g

of section 580 7 When it does so the Commission will provide

a written explanation of its reasons Parties then have 15 days to refile

the document and the Commission can then reject it if it continues to

fail to conform This procedure should satisfy various concerns raised by

CMA the Journal of Commerce National Maritime Council North Euro

pean Conferences Trans Pacific Conferences and Pacific Coast Conferences

We have not adopted the recommendation of CMA that the contract

rate should apply to shipments made prior to return or rejection regardless

of whether the contract or statement of essential terms is cured and

refiled The otherwise applicable tariff rate must be charged in such situa

tions where rejected terms or returned contracts are not cured and refiled

Any other procedure would unduly favor contract parties who fail to adhere

to the requirements of the Act to the disadvantage of competing carriers

and shippers and would operate to the detriment of similarly situated ship

pers not fortunate enough to be the first shipper signatory of a contract

The Commission will exercise its return and rejection procedure only

during a limited 15 day review period Moreover this procedure will apply

in situations involving significant deficiencies in contract and essential terms

provisions as suggested by the Inter American Freight Conference

Section 580 7 g

Publication ofEssential Terms

Section 580 7g 1

Section 580 7 g

I of the Interim Rule requires that the essential terms

of all service contracts be filed with the Commission and be made available

to the general public in tariff format In addition this provision requires

that the essential terms be made available to all shippers or shippers

associations which are similarly situated under the same terms and condi

tions for no less than 30 days from the date of filing

The Inter American Freight Conference proposes that the phrase sched

ule of essential terms be substituted for publication of essential term

and that the heading of section 580 7 gbe changed to Essential Terms

It also suggests that the first sentence of section 580 7 g 1 which requires

the essential terms to be filed with the Commission be deleted because

section 580 7h requires a

summary of essential terms to be filed with

the Commission and is allegedly more in keeping with the Act s require

ments that a concise statement of essential terms shall be filed with

the Commission

Du Pont would add the words A concise statement of at the beginning

of section 580 7 g 1 This suggested change is intended to reflect the

statutory language quoted above and to distinguish between the concise

statement of essential terms which is available to the general public

and the essential terms themselves which are to be made available

to all similarly situated shippers To the extent possible these suggestions

are incorporated in the final Rule

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FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

The North European Conferences propose that the essential terms publica

tion requirement of section 580 7 gbe revised to provide carriers or con

ferences with the option of filing a

copy of the underlying service contract

minus the name of the shipper in lieu of a concise statement of its

essential terms NEC further submits that if such an option is exercised

there would be no reason to reject an essential terms filing on the grounds

that it did not include a term essential to the contract

The Commission is not adopting this proposal First section 8 c of

the Act clearly requires that each contract shall be filed with the Commis

sion and at the same time a concise statement of its essential terms

shall be filed with the Commission and made available to the general

public in tariff format Emphasis added This contemplates that initially

two distinct documents are to be submitted to the Commission simulta

neously one a contract and the other a summary of the contracts essen

tial terms in tariff format In addition as explained above in the discussion

of geographic areas and port ranges the concise statement of essential

terms may in certain instances be geographically broader than the locations

stated in the contract Lastly a brief summary of essential terms will

be easier for prospective shippers to review and will facilitate the administra

tion of the service contract system generally and the possible future comput

erization of such data To the extent that a service contract meets all

the essential terms format requirements and is appropriately stated in terms

of geographic areas or port ranges it could be submitted minus the ship

per s name in lieu of a statement of essential terms

The Trans Pacific Conferences oppose section 580 7 g l

which requires

a carrier or conference entering into a service contract to execute a similar

contract under the same essential terms with any and all similarly situated

shippers and shippers associations which approach the carrier or conference

within the first 30 days after the essential terms are filed They contend

that such a

requirement is contrary to the Act and impractical under normal

operating conditions They read section 8 c of the Act as mandating merely

that the statement of essential terms must be made available to the general

public and that a

copy of those terms must be made separately available

to any shipper similarly situated who specifically requests it They do

not believe however that they are required to accord those identical essen

tial terms to other shippers

The Commission rejects the contention that a carrier or conference which

enters into a service contract has only to provide acopy of its essential

terms to any similarly situated shipper who requests it There is nothing

in our review of the Act or its legislative history which supports this

position Section 8 c makes it clear that carriers must make a concise

statement of essential terms available to the general public but that those

essential terms shall be available to all shippers similarly situated This

latter requirement means more than providing similarly situated shippers

with an opportunity to view a copy of the essential terms If it meant

27 F M C
334 FEDERAL MARITIME COMMISSION

only that it would be redundant given the preceding requirement that

a concise statement of essential terms be made available to the general

public

The House Merchant Marine and Fisheries Committee put the publication

requirement for essential terms in its proper context when it noted

It is hoped that the requirement that a service contract s essential

terms be filed publicly so that those terms are available to all

other shippers who may wish to use them will preserve an impor

tant element of the common carriage concept that the bill is based

on

H R Rep No 53 98th Cong 1st Sess 17 1983

The Commission believes that section 8 c

requires a carrier which enters

into a service contract to enter into similar contracts with other similarly

situated shippers if they desire the same essential terms This requires

of course the exercise of sound business judgment on the part of the

carrier However if a carrier chooses to induce business by means of

a service contract it should be prepared to offer the same essential terms

to other similarly situated shippers

The Commission will not attempt here to establish the limits of a carrier s

or conference s obligations under a service contract Nor will it attempt

to define what constitutes a similarly situated shipper These are matters

which are more appropriately resolved on a case by case basis

Section 580 7 g

2 ivContract Rates

Section 580 7 g2 iv requires the statement of essential terms to include

the contract rate rates or rate schedule including any additional or other

charges viz surcharges terminal handling charges etc that apply

CMA objects to this provision on the ground that it is an unwarranted

expansion of the statutory term line haul rate which it believes is all

that need be included Whatever the definition of line haul rate may

be and it is not defined in the statute it is clear from the legislative

history that this essential term was meant to encompass all compensation

to be paid under a service contract S Rep No 3 98th Cong 1st

Sess 31 32 1983 The Commission s refinement of the term line

haul rate is thus fully supported and moreover should serve to provide

all shippers the requisite information they will need in order to make

an informed and intelligent decision concerning a service contract

The Commission has modified section 580 7 g2 iv to incorporate Sea

Land s suggestion that conditions and terms of service or operation or

concessions which in any way affect such rate or charge be disclosed

In addition we have adopted Matson s suggestion that retroactive price

adjustments based on experienced costs be allowed if the method of deter

mining such adjustments is disclosed in advance in the service contract

and the statement of essential terms

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FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

Section 580 7 g2

v Term of Contract

Section 580 7 g2 v of the Interim Rule requires the statement of essen

tial terms to include the effective date period and expiration date of

the contract The North European Conferences contend that the essential

terms publication need only disclose the term of the contract The

Commission has accepted this suggestion

Section 580 7 g 2 viii Deviation

Section 580 7 g2 viii of the Interim Rule requires a clear description

in the statement of essential terms of any circumstances which will permit

deviations from the contract terms CMA views this provision as an unwar

ranted expansion of the essential terms which are specified in the Act

and suggests that it be deleted The North European Conferences object

to subsection viii D which permits other deviations from the terms

of the contract NEC contends that the phrase other deviations is

too vague that the word deviations is incorrectly employed and that

such a catch all provision is unnecessary to carry out the Act

Admittedly section 8 c ofthe Act does not expressly include a deviation

provision in its list of seven essential terms However the Commission

does not consider its deviation provision section 580 7 g

2 viii to be

an essential term separate and apart from those set forth in the statute

Rather it relates back to those essential terms and states that if they are

subject to change for any reason that fact should be made apparent Any

contractual provision which can alter an essential term based on future

events is a necessary part of the essential term which it affects Any

other interpretation would undermine the purpose for essential terms publi

cation and frustrate the requirement that such terms be made available

to similarly situated shippers The Commission will therefore continue

to require the statement of essential terms to include any deviation that

may affect those terms

Moreover we do not believe that the term other deviations is vague

or uncertain A similar provision was included in the Commission s earlier

time volume rule and apparently engendered no confusion or difficulty

It is intended to be a catch all provision so that the contracting parties

have the maximum amount of flexibility to meet their commercial needs

Section 580 7 h Form and Filing ofEssential Terms

The Journal of Commerce suggests that carriers and conferences be al

lowed to publish essential terms publication for both export and import

trades It believes that such a procedure would make it easier for the

public and interested persons to determine applicable rates The Journal

of Commerce notes that it provides a computerized tariff watching service

which would be better served by separate essential terms publications We

will not adopt its suggestion It is the Commission s intent that a carrier

or conference have only one publication containing its essential terms

27 EM C
336 FEDERAL MARITIME COMMISSION

However this publication may be divided by trade areas or any other

way the carriers or conferences see fit Requiring statements of essential

terms to be included in one publication reduces the number of essential

terms publications and minimizes the scope of any inquiry to ascertain

whether a carrier or conference has any essential terms in which a shipping

party might be interested

Section 580 7h 3 requires all essential terms filings to be printed

on yellow paper using black ink The North European Conferences would

amend this provision to provide that the essential terms publication be

legibly printed in black without using yellow paper The yellow paper

requirement was designed to facilitate mail sorting of essential terms publi

cations and thus permit their prompt review The experience gained in

the last 90 days has reinforced our belief that the requirement is workable

and useful It is therefore retained The Commission is however incor

porating the suggestion of NEC concerning clarification of the printing

in black rather than using black ink This will permit the filing

of documents printed other than with black ink e g photocopies

Section 580 7h 5 is amended as suggested by NEC to require cross

references only in the general commodity tariff that applies in the particular

area covered by the essential terms In so doing we reject CMA s sugges

tion that the requirement for cross referencing be repealed altogether Tariff

cross references are necessary for users of tariffs to identify all possible

applicable rates

The Commission is also adding a

requirement that the essential terms

of a service contract or contracts be identified by an essential terms number

in the governing essential terms publication rather than a service contract

number Because it is anticipated that numerous contracts may be executed

under the same essential terms it is necessary to differentiate and identify

which contracts correspond to the appropriate essential terms See also

our discussion above on section 580 7b

Section 580 7i Transmittals ofEssential Terms Publications

Section 580 7 i sets forth procedures for the transmittal of concise state

ments of essential terms It is silent however on the timing of such

filings vis a vis the filing of service contracts The Journal of Commerce

suggests the contemporaneous transmittal of a service contract with its

statement of essential terms This approach is consistent with the statutory

language that a concise statement of essential terms be filed with the

Commission at the same time a service contract is filed with the Com

mission The Commission is amending section 580 7 i accordingly

Section 580 7 kResident Agent

Section 580 7 k of the Interim Rule requires every common carrier and

conference to designate a United States resident representative to maintain

contract shipment records for a period of five years from completion of

27 F M C
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FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

each contract The North Atlantic Conferences and the Trans Pacific Con

ferences oppose this provision on the grounds that it is burdensome will

result in duplication and increased costs is not directly supported by the

Act and may conflict with foreign non disclosure statutes The Trans

Pacific Conferences also contend that the Commission already possesses

sufficient means to ensure that service contracts comport with the Act

and that users of service contracts should not be burdened with requirements

not applicable to others They also note that the Commission previously

rejected a proposal to require the maintenance of all self policing records

in the United States Lastly the North Atlantic Conferences recommend

that because of the impact of a U S recordkeeping requirement on inbound

conferences which mainly conduct their shipping transactions abroad the

Commission should if a

recordkeeping requirement is retained permit in

bound conferences to designate a

representative abroad

The Commission has determined to delete the U S recordkeeping require

ment Experience gained under our prior time volume contract rules which

contained a similar provision does not reveal a compelling necessity for

this requirement at least at this time Its primary purpose was to aid

the Commission in its enforcement efforts However the Commission should

be able to obtain such records through normal processes if needed on

a case by case basis Ifthe Commission encounters any difficulties in obtain

ing such information it will consider reimposing the US recordkeeping

requirement

Carriers and conferences must of course retain whatever records they

deem sufficient to support their contractual arrangements so identified pur

suant to section 580 7 b 3 vi of this Rule and should do so for at

least the five year statute of limitations period contained in section 13 f

2

of the Act However such records need not be maintained in the United

States Section 580 7j

of the Final Rule reflects this requirement

Section 580 71 Time Volume Rates

As mentioned above this section and the definition of time volume

rate in section 580 7 a 6 will be redesignated sections 580 12 b and

580 12 a

respectively

Two commenters object to the advance enrollment requirement whereby

a shipper utilizing a time volume rate must notify the offering carrier prior

to tendering any shipments The Pacific Coast Conferences believe that

such a requirement might preclude multiple level time volume rates which

automatically apply a second tier lower rate once a given volume has

been achieved The North European Conferences contend that the word

enrollment implies that there is only one acceptable method of admin

istering a time volume rate offering They further contend that adequate

notice of shipper participation could be provided by means other than

enrollment

27 F M C
338 FEDERAL MARITIME COMMISSION

We do not believe that a notice requirement for a shipper intending

to utilize a timevolume rate is either unwarranted or impractical It is

difficult to conceive how carriers will know when to apply the lower

rate unless informed by the shipper that it intends to use it The Commission

further believes that even with such a

requirement multiple level time

volume rates are still feasible assuming some initial notification is provided

The Commission did not intend the word enrollment to serve as a

limitation on the methods by which a shipper can notify a carrier of

its intention to use a time volume rate It is therefore amending section

580 71 now section 580 12b 3 to eliminate any confusion which may

exist

The North European Conferences also object to the requirement that

time volume rates remain in effect without amendment for the term speci

fied They view this requirement as inconsistent with the tariff provisions

of the Act and the Commission s tariff filing rules They concede however

that it would be inappropriate to allow a timevolume tariff filing to be

amended to reduce or terminate the term if it is being used by at least

one shipper

It was not our intention to require a time volume rate offering to remain

in effect in a tariff for the full term if such an offering has not been

accepted by a single shipper However the Commission continues to believe

that once a shipper gives notice that it is tendering cargo under a time

volume rate offering the terms of that offering may not be amended during

the term specified

CMA proposes that the record of a shipper s notice of its intention

to use a timevolume rate should be maintained for at least one year

after the shipper has ceased to use the rate We find this suggestion to

have merit and to impose a minimal burden on the carriers However

in order to be consistent with the retention requirements for service contracts

and the relevant statute of limitations 46 U S C app 1712 f

2 the

Commission is going to impose a five year shipper notice retention require

ment and additionally require that shipment records supporting the time

volume rate be maintained for this period oftime

Lastly the Trans Pacific Conferences propose that records supporting

a timevolume rate be identified in a manner similar to that by which

the shipment records regarding service contracts must be identified pursuant

to section 580 7b 5 of the Interim Rule i e that the parties identify

which shipment records will be used to support the contract They believe

that such a requirement will ensure accountability and aid the Commission

in its enforcement efforts

There is merit to placing a similar record identification requirement on

both service contracts and timevolume rates The Commission has there

fore decided to amend its time volume rate provision to require the identi

fication of the shipment records which will be maintained to support applica

tion of a timevolume rate Such an identification can easily be made

27 F M C
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 339

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

in the context of the time volume rate offering in the carrier or conference

tariff and should impose little burden on shippers or carriers

GENERAL COMMENTS

A Thirty Day Notice

In the preamble to the Interim Rule the Commission suggested the

possibility of requiring a 3D day advance notice requirement for the imple

mentation of service contracts as an alternative to return or rejection of

defective filings after their effective date The ten parties that filed com

ments on this issue were divided as to which method was less disruptive

of commercial arrangements and whether the Commission was authorized

by law to implement such proposals

Neither the 3D day notice procedure nor the rejection procedure is based

upon an express statutory provision Either would have to rely upon the

general rulemaking authority of section 17 of the Act on the basis that

such procedures are necessary to enforce the requirements of section 8 c

One other alternative is to abandon both and rely upon the reactive enforce

ment methods of sections 11 and 13 of the Act Given these alternatives

the Commission has determined that a carefully circumscribed return and

rejection procedure is the best method of ensuring that service contract

filings will meet the requirements of the Act with minimal commercial

disruption

B Minimum Quantity Guidelines

The Tobacco Association recommends that the Commission establish

guidelines on minimum quantities eligible for contract rates to prevent

unreasonable preference being given to anyone industry The Commission

rejects this suggestion First the Commission does not possess the empirical

economic data at this time upon which it could promulgate such guidelines

More importantly such action would appear contrary to the fundamental

Congressional policy underlying the Act that commercial interests be given

maximum flexibility in arriving at their business arrangements Cases of

discrimination can be dealt with on an ad hoc basis Any shipper who

believes it has been unlawfully disadvantaged has remedies under the Act

and may file a complaint with the Commission

C Time Vo ume Contracts

Under the 1916 Act the Commission had permitted the use of time

volume contracts by common carriers by water and had issued regulations

governing their use 46 CFR 536 7 The May 3 1984 Interim Rule contin

ued to permit the use of time volume contracts by common carriers

and separately permitted the use of service contracts by ocean common

carriers This position engendered much opposition from those filing emer

gency comments on that Rule prior to its June 18 effective date In

response to these comments the Commission revised the Interim Rule

27 F M C
340 FEDERAL MARITIME COMMISSION

on June 14 1984 to inter alia treat time volume contracts as a form

of service contract No separate provision was made concerning the use

of time volume contracts The net result of this action is that non vessel

operating common carriers NVOCC s or NVO s which do not meet the

definition of ocean common carrier are no longer able to offer time

volume rates on a contractual basis They can however continue to offer

time volume rates in their tariffs pursuant to the June 14 1984 Interim

Rule and section 8b

of the Act

Several commenters support this position contending that service con

tracts are the only type of volume contracting authorized by the Act and

that time volume contracts have been subsumed within the concept of service

contract because they implicitly if not explicitly include a carrier service

commitment to carry at least the minimum volume within the contract

period One commenter also notes that NVO s by defmition do not operate

any vessels and therefore are in no position to offer any meaningful

service commitment as a guid pro quo for a volume commitment

IANVOCC and NPS International an NVOCC challenge the Commis

sion s treatment of time volume contracts NPS argues that the Commission

erred in equating timevolume contracts with service contracts because

the former do not contain any service commitments while the latter do

It submits that nothing in the Act requires the Commission to eliminate

NVO time volume contracting and points to the absence of any useful

legislative history on this issue NPS concedes that ultimately this is a

policy issue and not a legal one but contends that policy considerations

support continued time volume contracting by NVO s This commenter con

cludes that the Commission should republish its time volume regulations

previously in effect under the 1916 Act and make them applicable to

both ocean common carriers and NVO s Alternatively NPS suggests that

the Commission could limit the use of time volume contracts to NVO s

The IANVOCC essentially reiterates NPS comments

As noted above the Commission s May 3 Interim Rule treated service

contracts and time volume contracts as separate and distinct forms of volume

contracting but attempted to apply similar regulatory treatment to them

The Commission s June 14 amendment altered this position by treating

time volume contracts as a form of service contract and thereby deleted

any reference to time volume contracts in the Rule This decision was

not made with the purpose of denying to NVO s the ability to offer time

volume contract arrangements Rather it was arrived at because the Com

mission became convinced that what was previously known as a time

volume contract was nothing more than a type of service contract This

decision was further influenced by its conclusion that Congress has only

authorized service contracts and time volume rates under the 1984 Act

Section 8 b of the Act titled Time Volume Rates permits rates in

tariffs to vary with the volume of cargo offered over a specified period

of time Section 8 c titled Service Contracts allows ocean common

27 F M C
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 341

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

carriers and conferences to enter into service contracts with shippers or

shippers associations Nothing else in the Act expressly authorizes any

other volume arrangements I Nor is there any discussion in the legislative

history of the Act which specifically mentions time volume contracts or

would support the concept of time volume contracts as separate and distinct

from service contracts Thus a

reading of the statute and its legislative

history indicates that Congress contemplated but two types of volume ar

rangements time volume rates which are set forth in tariffs and are not

based upon any contractual arrangement between the shipper and carrier

and service contracts which are not filed in tariffs and are based on

reciprocal commitments by both the carrier and the shipper

This position is supported by the language of other provisions of the

Act For instance a shippers association is defined in section 3 24 as

a group of shippers that consolidates or distributes freight on a nonprofit

basis for the members of the group in order to secure carload truckload

or other volume rates or service contracts Emphasis added IfCongress

had intended that time volume contracts be offered as a separate category

for volume contracting it would surely have provided shippers associations

the opportunity to avail themselves of such arrangements However under

the definition as written shippers associations would be precluded from

entering into time volume contracts

Sections IOb I through IO b 4

require common carriers to adhere

to the rates and charges in their tariffs and service contracts 2

Time

volume contracts are not separately identified or treated As a result if

time volume contracts were allowed as a separate form of volume contract

ing it is possible that they would not be subject to these constraints

which go to the essence of a common carrier s Obligations to the public

I The Commission s May 3 Interim Rule relied on the definition of loyalty contract section 314 as

an indication that Congress recognized the concept of atime volume contract In view of the other statutory

provisions discussed below the Commission no longer draws this inference Itis important to note however

that section 314 is the only reference in the statute or its legislative history to time volume contracts

That reference in section 314 to a contract based upon time volume rates may be to nothing more than

the arrangement which arises from atime volume rate offering in atariff In any event whatever Congress

may have meant by a contract based upon time volume rates it was doing so in the context of contracts

offered by ocean common carriers and not NVOs

2

Section 100b states in pertinent part

No common carrier either alone or in conjunction with any other person directly or indirectly

may

I charge demand collect or receive greater less ordifferent compensation for the transportation

of property or for any service in connection therewith than the rates and charges that are shown

in its tariffs or service contracts

2 rebate refund or remit in any manner or by any device any portion of its rates except in ac

cordance with its tariffs or service contracts

3 extend ordeny to any person any privilege concession equipment orfacility except in accord

ance with its tariffs orservice contracts

4 allow any person to obtain transportation for property at less than the rates or charges estab

lished by the carrier in its tariff or service contract by means of false billing false classification

false weighing false measurement or by any other unjust or unfair device or means Emphasis

added

27 F M C
342 FEDERAL MARITIME COMMISSION

Moreover section lOb 6 prohibits any common carrier from engaging

in any unfair or unjustly discriminatory practice in the matter of rates

cargo classifications and cargo space accommodations Likewise section

lO b 1l prohibits any undue or unreasonable preference or advantage to

any particular person locality or description of traffic in any respect what

soever What is notable about both of these provisions is that they contain

an express exception for service contracts This reflects a Congressional

recognition that service contracts would perforce favor some shippers and

might discriminate as to rates or cargo classification or provide distinct

preferences or advantages See H R Rep No 600 98th Cong 2d Sess

40 1984 A similar exception was not made for time volume contracts

which are just as inherently discriminatory This leads us to conclude that

Congress did not contemplate the separate availability of time volume con

tracts under that name Even assuming it did however it is clear that

such contracts would soon run afoul of these proscriptions

It has been argued that the reason a time volume contract is different

from a service contract is that the former contains no service commitment

while the latter does The Commission cannot accept this contention and

moreover believes that its interpretation may explain Congress silence on

the matter of time volume contracts it also considered them subsumed

within the definition of a service contract

Under the Commission s prior time volume rule a time volume rate was

defined as 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

46 CPR 536 2

p However any such contract had to provide either explic

itly or implicitly basic service commitments on the carrier s

part The

carrier had to provide the space necessary to meet the shipper s volume

commitment and had to continue to operate in the trade for the duration

of the contract If a carrier failed to meet these obligations the shipper

would have a

remedy at law for breach of contract Time volume contracts

as previously recognized by the Commission thus fit into the definition

of service contract contained in the 1984 Act Whether explicitly or implic

itly stated it is clear that there were definite carrier service commitments

under a time volume contract There is no meaningful difference between

a service contract and a timevolume contract the latter is simply a sub

category ofthe former 3

Any contrary conclusion would be inconsistent with Congress treatment

of independent action and its relation to service contracts Congress gave

3While NYO s may have offered timevolume contracts under the Commission s previous rule they had

no actual service to commit since they do not actually operate vessels as ocean common carriers However

that earlier rule had coupled the concept of timevolume rate with timevolume contract acarrier could not

offer one without entering into the other Even though they had no service to commit NVO s were forced

by circumstances to enter into timevolume contracts with shippers The 1984 Act expressly rectifies this

anomaly by permitting timevolume rates by any common carrier including NVO s but restricting service

contracts to ocean common carriers who have the requisite service

27 P M C
27 F M C

SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 343

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

conferences the authority to limit or prohibit the use of service contracts

and also exempted such contracts from the mandatory right of independent

action since they were not required to be filed in tariffs All conference

agreements however had to provide their members independent action

on any rate or service item required to be filed in a tariff on not more

than 10 days notice If the Commission were to permit all common carriers

to offer time volume contracts in lieu of or in competition with service

contracts the situation could arise where carriers through the use of time

volume contracts to which independent action would apply could do indi

rectly what Congress has not authorized them to do directly

The Commission is not unmindful of the concerns raised by NPS and

IANVOCC However the Commission is constrained by the Act and is

in no position to provide solely for NVO s something Congress saw fit

to deny them In any event NVO s still have the option of offering time

volume rates governed by the provisions of this Rule Lastly the Commis

sion notes that even if time volume contracts were permitted it is likely

that NVO s would have difficultly offering them given their implicit service

commitments and the fact that NVOs have by definition no meaningful

service to commit and no control over the underlying carrier s schedules

capacity or services in a particular trade

II LOYALTY CONTRACTS DOCKET NO 84 23 Section 580 16

On May 17 1984 the Commission published an Interim Rule 49 FR

20817 in Docket No 8423 governing loyalty contracts or dual rate

contracts as they were referred to under 1916 Act regulation 46 CFR

Part 538 The purpose of the Interim Rule was to implement section

10 b 9 of the 1984 Act 46 D S C app 1709 b 9 which states that

b No common carrier either alone or in conjunction with any

other person directly or indirectly may

9 use a loyalty contract except in conformity with the antitrust

laws 4

The Interim Rule deleted the Commission s regulations governing dual

rate contracts in 46 CFR Part 538 and added a new provision to the

Commission s tariff filing regulations in 46 CFR Part 536 now 46 CFR

Part 580 reading as follows

4

Loyalty contract is defined in section 314 of the Act and in the Commission s tariff rules at 46

CFR S80 2 k as

acontract with an ocean common carrier or conference other than aservice contract or con

tract based upon time volume rates by which ashipper obtains lower rates by committing all or

afIXed portion of its cargo to that carrier or conference
344 FEDERAL MARITIME COMMISSION

536 16 Loyalty Contracts

a A

sample of any loyalty contract as defined in this part

must be filed in the applicable tariff together with rules which

set forth the scope and application of the contract system

b Every sample loyalty contract and applicable rule filed for

inclusion in a tariff under paragraph a of this section shall

make specific reference to a Business Review Letter issued pursu

ant to 28 CPR 50 6 indicating no objection to the use of that

contract A copy of the Business Review Letter shall be simulta

neously furnished to the Commission s Director Bureau ofTariffs

Failure to comply with these requirements will result in the rejec

tion of the contract and the applicable rules pursuant to

536 1O d

c The use of any loyalty contract in effect prior to June

18 1984 shall be prohibited after September 18 1984 unless

supported by a Business Review Letter issued pursuant to 28

CPR 50 6 Such Business Review Letter shall be furnished to

the Director Bureau ofTariffs

The Interim Rule became effective on June 18 1984 and interested

persons were provided 60 days to comment on the Rule Prior to the

Interim Rule s effective date emergency comments were received from

Admiral R A Ratti Chemical Manufacturers Association and Trans Pacific

Freight Conference of JapanKorea and JapanKorea Atlantic and Gulf

Freight Conference TPFCJ K The Commission published a response to

the emergency comments on June 14 1984 49 PR 24696 in which

it restated its earlier interpretation of the Act as it applied to loyalty

contracts and affirmed the Interim Rule

Ten additional comments were filed between the effective date of the

Interim Rule and the close of the comment period The Council ofEuropean

Japanese National Shipowner s Associations CENSA the National Mari

time Council NMC TPFCJ K and the Gulf Freight Conference and U S

Atlantic GulfAustralia New Zealand Conference et al USA G A

NZ generally oppose the Interim Rule Sea Land Service Inc favors the

Rule with some modifications The Department of Justice DOJ the Depart

ment of Transportation and Coming Glass Works generally support the

Rule as written and the Tobacco Association of United States favors elimi

nation of all loyalty contracts s

USA G A NZ TPFCJ K and CENSA argue that the Commission as

the agency charged with enforcement of the 1984 Act is responsible for

enforcing section 10b 9 They believe that the Commission s reliance

on a Business Review Letter BRL improperly delegates enforcement of

section 1O b 9 to DOJ These parties further submit that the Commission

The suggestion that the Commission abolish all loyalty contracts goes beyond the scope of this rule

making and mOJ eover appears contrary to the 1984 Act

27 F M C
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 345

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

has the necessary expertise to deal with the antitrust issues which will

arise under section IO b 9

USA G A NZ TPFCJ K and CENSA point out that a BRL only states

DOJ s current enforcement intentions and does not determine whether the

proposed activity is contrary to the antitrust laws Accordingly they argue

that by relying on the BRL the Commission is applying the wrong standard

to determine whether carriers and conferences are in compliance with section

1 O b 9

CENSA further contends that carriers and conferences do not have the

burden of proving that they fall within the exception to section IO b 9

Accordingly it believes that the Commission cannot even require carriers

and conference to obtain BRL s before entering into loyalty contracts with

shippers

CENSA and TPFCJ K also submit that the Commission has no summary

tariff rejection authority for substantive violations of the 1984 Act including

a violation of section 1O b 9 They argue therefore that a loyalty contract

may only be rejected after notice and the opportunity for hearing USA G

A NZ TPFCJ K and CENSA interpret the Interim Rule as providing no

appeal from denial of a

BRL and no opportunity for hearing under the

procedure contemplated by the Interim Rule Sea Land concurs with these

observations and suggests that carriers and conferences be permitted to

either file a BRL or prove in a hearing that no antitrust violation exists

by use of a particular loyalty contract

In supporting the Interim Rule DOJ argues that the Rule fully comports

with the 1984 Act properly reflects applicable antitrust law and that its

promulgation met all appropriate statutory procedures With respect to the

prospect of its issuance of the BRL s contemplated by the Rule DOJ

advises that

Such a favorable business review will be likely where the Depart

ment is presented with a unilateral loyalty contract involving but

a single carrier that does not possess significant market power

A favorable business review letter will not be issued however

for existing and future loyalty contracts of conferences or groups

of competitors because the Department of Justice does not intend

to issue business review letters supporting collective loyalty con

tracts Footnote omitted

All conference loyalty contracts in existence on June 18 1984 have

now been cancelled This effectively renders moot that portion of the Interim

Rule dealing with contracts in effect prior to that date paragraph C

of the Interim Rule 6Thus it is appropriate for the Commission to now

60n June 18 1984 there were 34 loyalty contracts on file with and approved by the Commission Thirty

three of these involved conferences of carriers The limited legislative history relating to the loyalty contract

provision in the Act indicates that while loyalty contracts involving asingle carrier would probably be law

Continued
346 FEDERAL MARITIME COMMISSION

focus on those portions of the Interim Rule that apply to new loyalty

contracts that is contracts filed after June 18 1984 paragraphs a and

b of the Interim Rule

The regulatory scheme pertaining to loyalty contracts filed after June

18 1984 differs in some respects from that applicable to loyalty contracts

existing at the time the 1984 Act became effective In the case of an

existing loyalty contract that was not accompanied by a BRL the Interim

Rule contemplated that the Commission would afford the parties some

form of hearing before terminating the contract7 The same procedure would

not necessarily apply to new loyalty contracts because the Interim Rule

provides that the Commission will reject any loyalty contract that is

not accompanied by a BRL In addition to this procedural distinction

the possible broader antitrust exposure of new loyalty contracts must also

be considered Whatever the antitrust exposure of existing loyalty contracts

may have been the Commission believes for reasons discussed below

that the use of a loyalty contract filed after June 18 1984 may violate

both the antitrust laws 8 and section 10 b 9 of the Act This suggests

that the considerations which prompted the mandatory BRL requirement

for existing loyalty contracts may be different from those applicable to

new loyalty contracts

Therefore the Commission has decided to modify its procedures applica

ble to loyalty contracts by deleting the mandatory Business Review Letter

requirement in the Final Rule Section 580 16 will be modified in paragraph

b to make the filing of a BRL permissive with BRL s creating a presump

tion of legality under section 1Ob

9 of the 1984 Act Paragraph a

of section 580 16 which requires that conferences and carriers reflect in

their tariffs on file with the Commission any loyalty contract system em

ployed is mandated by section 8 a 1 E of the 1984 Act and will be

retained

This amended procedure will leave the Commission free to address the

merits of individual loyalty contracts under section lO b 9 on a case

by case basis upon complaint or its own motion where circumstances war

ful any cQncerted useQf IQyalty contracts by carriers is likely tQ viQlate the antitrust laws 129 CQng

Rec H812S daily ed Oct 6 1983 statement Qf Rep JQnes

7

As was stated in the Supplementary InfQnnatiQn tQ be Interim Rule in addressing the CQncerns expressed

by a CQmmenter that paragraph c Qf the Interim Rule autQmatically tenninated existing CQntracts withQut

QPportunity fQr hearing

The rule simply does nQt provide fQr the autQmatic tenninatiQn Qf IQyalty CQntracts Failure by

the carriers and cQnferences tQ cQmply with the rule WQuld require further actiQn by the CQmmis

siQn under the 1984 Act Such further actiQn WQuld necessarily affQrd the QPportunity fQr any hear

ing required by law

49 FR at 24697

s

In mandating BRL s inits Interim Rule theCQmmissiQn explained that

Only the Department Qf Justice which is charged with the enfQrcement Qf the antitrust laws can

provide carriers with SQme assurance that they will nQt be prQsecuted under the antitrust laws fQr

use Qf aIQyalty CQntract

49 FR at 20818 n 2

l1 ur
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 347

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

rant The result will be to treat section 1O b 9 in the same manner as

any other act prohibited under section 10 9

It has been suggested that the use of a loyalty contract filed after June

18 1984 while required to be in conformity with the antitrust laws

under section 1O b 9 of the 1984 Act is an activity which otherwise

enjoys antitrust immunity by virtue of section 7 a 2 of that Act lO A

review of the legislative history of the 1984 Act suggests otherwise

Section 7 a 3 of H R 1878 as reported out of the House Merchant

Marine and Fisheries Committee and the House Judiciary Committee con

ferred antitrust immunity on

3 any loyalty contract in compliance with section 6 or any

activity pursuant to such loyalty contract

Section 6 to which section 7 a 3 referred set forth the requirements

pertaining to loyalty contracts There was significant disagreement between

the two Committees regarding the contents of section 6 In order to resolve

this dispute the two Committees reached a compromise which resulted

in the deletion of sections 6 and 7 a 3 and the addition of what is

now section 1 O b 9 The following explanation of the deletion of antitrust

immunity was given on the floor of the House of Representative Jones

The compromise eliminates subsection a 3 a provision no longer

needed in view of the broader proscription on the use of loyalty

contracts in section 9 b 9 now 1O b 9

129 Congo Rec H 8125 daily ed Oct 6 1983 statement of Rep Jones

It would appear therefore that Congress intended to subject loyalty

contracts filed after June 18 1984 to both section 1O b 9 of the 1984

Act and the antitrust laws llAccordingly to construe section 7 a 2 as

conferring antitrust immunity on loyalty contracts could well frustrate the

intent of Congress Moreover if Congress did not intend to impose liability

apart from the antitrust laws there would appear to have been no need

for section 1O b 9 In order to give meaning to section 1O b 9 therefore

As indicated in the Supplementary Information to the Interim Rule substantive provisions of section

10 other than IOb 9 may be applicable to loyalty contracts In Federal Maritime Board v lsbrandtsen

Company Inc

356 U S 481 1958 the Supreme Coun set aside the Board sapproval of adual rate system

on the ground that it was a discriminatory and unfair method to stifle outside competition in violation of

the 1916 Act The substantive prohibitions underlying the lsbrandtsen decision have been carried overin one

form or another to the 1984 Act in section 10 While the lsbrandtsen decision led to the 1961 enactment

of section 14b an amendment to the 1916 Act to permit dual rate contracts with Commission approval sec

tion 14b was repealed by section 20 of the 1984 Act 46 U S C app 1719

10 Section 7 a 2 of the 1984 Act 46 U S C app 1706 provides

The antitrust laws do not apply to any activity within the scope of this Act whether

permitted or prohibited by this Act undenaken or entered into with areasonable basis to conclude

that it is pursuant to an agreement on file with the Commission and in effect when the activity

took place

11 It is possible that shippers may also have antitrust exposure to the extent they are pany to unlawful

loyally arrangements with such carriers

27 F M C
348 FEDERAL MARITIME COMMISSION

it would be logical and reasonable to construe it as imposing liability

separate from that imposed by the antitrust laws

III FOREIGN TARIFF REGULATIONS GENERAL DOCKET NO 84 24

Sections 580 0 to 580 6 580 8 to 580 11 580 13 to 580 15

On May 23 1984 the Commission issued an Interim Rule in Docket

No 8424 governing the publishing and filing of tariffs by common carriers

in the foreign commerce of the United States to implement the 1984 Act

49 FR 21713 The Interim Rule was to become effective on June 18

1984 and interested persons were permitted to file comments on or before

June 22 1984 In addition persons believing the Interim Rule created

serious problems were urged to bring those concerns to the Commission s

attention in writing for immediate review without prejudice to the right

of any such party to file further comments within the comment period

Thereafter on June 11 1984 the Commission extended the comment

period to July 23 1984 49 FR 24023 Between the May 23 and June

11 notices two carriers filed emergency comments requesting certain

technical amendments to the Interim Rule The Commission acceded to

the requests of those parties and adopted appropriate modifications

Thereafter final comments were filed by 36 parties or groups of parties 12

representing all segments of the maritime community

All of the comments have been carefully considered and many adopted

Several miscellaneous non substantive administrative and technical changes

have been incorporated into the Final Rule without being expressly dis

cussed

Some comments were received concerning sections of 46 CFR 580 which

were not changed by the Interim Rule The revisions to Part 580 that

were made in this proceeding were limited to those required by changes

in law brought about by the enactment of the 1984 Act Accordingly

whatever their merits comments suggesting substantive changes to Part

12 North Atlantic European Conferences NEC GreecelU S Atlantic Rate Agreement lberianlU S North

Atlantic Freight Conference Marseilles North Atlantic U S A Freight Conference Med Gulf Conference

Mediterranean North Pacific Coast Freight Conference U S Atlantic Gulf Australia New Zealand Con

ference and West Coast of Italy Sicilian and Adriatic Ports North Atlantic Range Conference WINAC

Trans Pacific Freight Conference of JapanKorea JapanKorea Atlantic and Gulf Freight Conferences Trans

Pacific Freight Conference Hong Kong New York Freight Bureau and Philippines North America Con

ference Latin America Pacific Coast Steamship Conference North Europe U S Pacific Freight Conference

and Pacific Coast River Plate Brazil Conference and their Member Lines Latampac Chemical Manufactur

ers Association CMA Malson Navigation Company Inc Matson Zim Container Service Inter American

Freight Conference IAFC Sea Land Service Inc Sea Land National Maritime Council NMC

Westwood Shipping Lines Inc Greene Companies International Inc Coordinated Caribbean Transport Inc

Neptune Orient Lines Ltd Box Caribbean Agencies Trinidad Ltd Barber Blue Sea Lines Inc Hanjin Con

tainer Lines Ltd Central Gulf Lines Inc International Tariff Filing Services Inc Transax Data Corpora

tion Norton Lilly Co Inc Maritime Cost and Service Company T M T Shipping Chartering of La

Inc Agents for Deppe Line M G Otero Company Inc Hapag Lloyd Transpacific Service Yellow Freight

International Spartan International Pacific Coast European Conference Latin AmericalPacific Coast Steam

ship Conference Pacific Coast River Plate Brazil Conference Southern Cross Overseas Agency Inc Traffic

Service Bureau Inc Distribution Publications Inc Transmares S A Interocean Express Line Sherwood

Medical Foss Alaska Lines TAT Airfreight Inc and F W Myers Co Inc

27 F M C
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 349

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

580 not contemplated by the Interim Rule are beyond the scope of this

proceeding and will not be considered Among such comments are NEC s

suggestion to further define the term all or a fixed portion in the loyalty

contract definition section 580 2 k and the recommended expansion

of the open rate definition section 580 2

0 Several other suggested

non substantive style or technical revisions which result in a simplification

or clarification of Part 580 provisions were adopted e g

section 580 30

exceptions to the single tariff requirement and section 580 2 w 1 elec

tronic tariff filing format exception

Summarized below are the significant suggestions of the commenting

parties These comments together with discussion and disposition are pre

sented sequentially according to the section number they address Any

comments not expressly mentioned herein have either been incorporated

as a technical change without discussion or have been found to be without

merit unwarranted or unnecessary

GENERAL COMMENTS

One of the stated purposes of the 1984 Act is to establish a nondiscrim

inatory regulatory process for the common carriage of goods by water

in the U S foreign commerce These regulations implement the tariff filing

requirements of the Act

Included in section 3 of the Act 46 U S C app 1702 are new and

revised common carrier definitions Common carriers are divided into two

categories ocean common carriers otherwise known as vessel operating

common carriers or VOCC s and non vessel operating common carriers

also known as NVOCC s or NVO s This latter type of carrier was

not previously defined by statute Because the Act makes no distinctions

in the tariff filing responsibilities between VOCC s and NVOCC s parties

should note that the requirements contained in the Final Rule are equally

applicable to both types of common carriers whether they are domiciled

in the United States or in a foreign country

JAPC suggests that the Commission should explicitly state that any ref

erences to a section in Part 536 are amended to refer to the section

with the same suffix number in Part 580

The Commission has adopted IAPC s suggestion to the maximum extent

possible The Interim Rule stated that Part 536 of Title 46 Code of Federal

Regulations was redesignated Part 580 and that all internal references would

be changed accordingly Such changes have now been made and any ref

erences to Part 536 have been deleted

Section 580 1Exemptions and Exclusions

Section 580 1 a

Sections 580 I a exempts bulk cargo forest products recycled metal

scrap waste from tariff filing requirements consistent with the treatment

of those commodities under the Act NEC suggests that this paragraph

27 F M C
350 FEDERAL MARITIME COMMISSION

be revised to allow common carriers and conferences to optionally file

rates and charges on those exempted commodities in their tariffs

While there does not appear to be any legal barrier to allowing the

filing of rates and charges on exempted commodities on an optional basis

by an individual carrier conferences authority to do so is not as clear

The issue is whether Congress exemption of certain commodities precludes

concerned rate action on those commodities with or without antitrust immu

nity That issue will be the subject of a separate proceeding At this

point conferences may file rates and charges on exempt commodities

at their option However this is permitted without prejudice to any subse

quent Commission determination of the legality of such practices

However to the extent carriers and conferences elect to file rates and

charges on exempt commodities the Final Rule makes it clear that the

prohibitions of section 10 of the 1984 Act and any other statutory and

or regulatory requirements applicable to non exempt commodities will apply

to such filings

Section 58O 2 efin tions

Section 58O 2 b

CMA urges the Commission to clarify that bulk cargo loaded in LASH

and Seabee barges is included within the definition of bulk cargo This

suggestion is consistent with earlier Commission interpretations and has

accordingly been incorporated into the Final Rule

Section 58O 2 e

NEC notes that the Commission in defining common carrier in section

580 2 e used the term responsibility but used the term liability

in section 580 8b 3 when describing the obligations of common carriers

and requests a clarification of these terms

The definition contained in section 580 2 e reflects the Act s definition

of common carrier There wasno intention to create a distinction between

responsibility and liability In the interest of consistency responsibil

ity is substituted for liability in section 580 8 b 3 of the Final Rule

Section 5802 and j

NEe submits that the definitions of joint rates and local rates

in sections 580 2 i and j respectively are inadequate It suggests that

1 both be characterized as ocean rates 2 joint rates be limited

to route combinations resulting from transshipment agreements and 3

the definition of local rates expressly identify the specified types of

prior or subsequent movements which do not alter the rate charged The

purpose of those suggestions is to allow a common carrier to employ

other types of water carriers to perform part of the all water service covered

by its local rates

27 F M C
27 F M C

SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 351

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

The Commission has substantially revised the intermodal tariff filing

requirements of section 580 8 and has reduced the number of definitions

These revisions should eliminate any confusion between joint rates and

local rates Similarly because the definition of local rates can reasonably

be construed as permitting the employment of other water carriers by a

common carrier in establishing an all water route the revisions suggested

by NEC are not required

Section 580 2 k

Transpac IAFC and NEC recommend that the definition of loyalty

contract be revised to track the definition of section 3 14 of the 1984

Act Transpac claims that the Interim Rule could be read to cover forms

of arrangements not includable under the statutory definition

The Commission has modified the definition of loyalty contract in

the Final Rule as suggested by Transpac IAFC and NEe

Section 580 2 p

NEC suggests that the open for public inspection requirement for

tariffs be eliminated entirely It argues that no regulatory or commercial

purpose is served by requiring carriers to maintain tariffs in all of the

places the Interim Rule describes

The Commission is presently giving consideration to the automation of

tariffs If and when tariff publications are automated which would permit

the ready retrieval of information at a variety of locations this requirement

may become unnecessary Until that time however the need to have tariffs

open for public inspection at locations convenient to the tariff user

is the only practical way of implementing the publication requirement of

section 8 of the Act

Section 580 2 q

NEC suggests that another country be used instead of foreign coun

try in defining person and elsewhere in the Final Rule Foreign

country is used in the Act s definition of person and will be retained

Section 580 2

w

1

NEC recommends that the Final Rule allow the electronic filing of entire

tariffs and not just tariff pages It argues that because section 580 5 a

requires title pages to be filed on heavier paper than the paper used

in the body of the tariff an exception should be made for those title

pages filed electronically to avoid the problems inherent in using two

different qualities of paper on computer printers

The NEC comment is well taken Accordingly the Final Rule eliminates

the heavy paper requirement for title pages in section 580 5 a
352 FEDERAL MARITIME COMMISSION

Section 580 3Filing ofTariffs General

Section 580 3j

NEC suggests that an exception to the single tariff requirement for con

ferences and rate agreements be allowed for ratemaking agreements between

groups of conferences or between conferences and independent carriers

or new conference agreements new members to such agreements or en

largements of the geographic scope of conference agreements NEC argues

that administratively and practically effective tariff harmonization cannot

be accomplished by a newly approved agreement s effective date and that

therefore the Commission s present single tariff requirement has to be

routinely waived whenever a new conference is formed or an existing

conference s authority is expanded

NEC s suggestion has merit and is incorporated in the Final Rule

Section 580 4Tariff Format

Section 580 4

The Interim Rule eliminated a previous Part 536 requirement that a

check sheet be included in a tariff The Final Rule makes such check

sheets optional Check sheets are used to provide a record ofthe correction

numbers assigned to amendments issued to tariffs Typically correction

numbers are handwritten on the check sheet as the new tariff amendments

are published or for the agency s purposes as the amendments are received

for filing with the Commission A limited number oftariff publishers avoid

the manual notation of correction numbers on check sheets by publishing

and filing a check sheet containing the preprinted numbers of all the effec

tive corrections with page identifications each time the tariff is amended

This practice stems from the domestic tariff filing rules of the Interstate

Commerce Commission which require such a control system

Those opposing the elimination of check sheets described its use as

a necessary means of confirming or ensuring that all amendments have

been received and accounted for up to the date and correction number

shown on the last entry on the check sheet It is also argued that the

procedure preserves the integrity of rate quotations

Many comments were directed towards describing the commenters indi

vidual needs for tariff check sheets Most of the comments noted that

without a check sheet a tariff user would be unable to determine whether

the publication was complete at any given time It is pointed out that

under the check sheet recording system gaps in the numbers noted on

the check sheet alert a tariff user to the potential that there may be page

amendments missing or unaccounted for which could affect any rate

quotation or tariff rule Check sheets are also said to be used to monitor

rate changes of selected carriers where by merely recording the latest

correction number a competing carrier or tariff watching service can readily

determine at any later date the identification of pages or rate changes

which were filed since the tariff was last review d

27 F M C
7FMC

SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 353

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

Admittedly the check sheets provide a simple means of monitoring tariff

changes However at issue here is whether the Commission should be

called upon to bear the considerable expense and burden of maintaining

the tariff check sheet requirement for use by the shipping industry when

for the purpose of carrying out its functions and responsibilities the check

sheet is not necessary to the Commission

From the Commission s standpoint the check sheet serves little if any

regulatory or tariff husbanding purpose When a new or initial tariff is

filed every page is reflected as original page When a page is amended

the replacement page must be numbered in a numerically consecutive order

with the first revised page cancelling the original page the 2nd revised

page cancelling the first revised page etc Hence the highest numbered

revised page contains the rates in effect The effective time period of

any rate item is easily traced by observing the effective date published

on each and every revised page In the event that any consecutively num

bered revised page is not received for filing which would show up as

a gap on a check sheet the subsequent filing could be rejected since

it would cancel a non existing tariff page The check sheet it should

be noted does not alter the application of rates in any manner

It is neither practical nor meaningful for the Commission to expend

considerable time and resources working with a carrier or publishing agent

when gaps or missing correction references occur on a check sheet because

there is no requirement that the relating correction numbers be filed in

consecutive order A tariff filer who fails to place its publication on file

or fails to ensure that amendments are received by the Commission does

so at its own risk The Final Rule contains provisions to provide for

the receipt of tariffs and amendments Because filing is elsewhere defined

as receipt by the Commission see section 580 3 a I and the failure

to file is a statutory violation the check sheet safeguard is only a commer

cial convenience

The Commission is not insensitive to the needs of persons utilizing

tariffs and check sheets However it cannot afford to dedicate a substantial

portion of its resources on functions which are superfluous to its regulatory

responsibilities In order to accommodate the needs of these persons the

use of check sheets will be permitted on a voluntary basis for use by

such entities and not for processing by the Commission This alternative

is preferable to either prohibiting them or imposing them as an additional

regulatory burden on all tariff filers

Section 580 5Tariff Contents

Section 580 d

Former section 536 d governing transshipment service was deleted

in the Interim Rule Certain commenters note that the Commission s Interim

Rule on agreements continues to require that any transshipment service
354 FEDERAL MARITIME COMMISSION

i

I

be reflected in a tariff 46 CPR 572 310 13 The Commission is urged

to resolve the apparent conflict

The Commission has decided to reinstate the transshipment service provi

sion in the Final Rule to ensure consistency between the requirements

of Part 580 and Part 572 However to avoid subjecting tariff filers to

unnecessary paperwork or expense the Commission is deleting Exhibit

8 referred to in the previous section 536 5 c

l3 which specified a detailed

format for transshipment service tariffs Transshipment service tariffs which

comply with the general tariff format requirements and the specific require

ments of section 580 5 d l3 should be sufficiently clear to serve their

regulatory purpose

Section 580 5d 1B

This section redesignated section 580 d 2 in the Final Rule governs

overcharge claims and provides inter alia that refund claims for over

charges may be filed within three years of the date the cause of action

accrued NEC contends that compliance with this section could be construed

to constitute a waiver of constitutional rights and defenses

Section 11 gof the 1984 Act 46 U S C app 171O g permits claims

to be filed within three years This change from the Shipping Act 1916

which provided a two year limitations period is reflected in the Final

Rule Questions regarding attempts to revive claims barred by the two

year limitation of the 1916 Act will be determined on an ad hoc basis

in cases where they arise See Application of Shipping Act of 1984 to

Formal Proceedings Pending Before Federal Maritime Commission on June

1B 1984 49 FR 21798 May 23 1984

Section 5BO 6Statement of Rates and Charges

IAPC urges clarification of the use of the terms rate and charge

noting that although the terms are used conjunctively in the title to section

580 6 there is no reference to the term charges in the text of the

section itself

The Act requires the filing of both rates and charges but draws

no clear distinction between them The Final Rule will therefore reflect

the statutory language where appropriate

Section 580 8

Tariffs Containing Through Rates for Through Transpor

tation

Many of the commenters suggestions intended to simplify and clarify

filing regulations have been incorporated into the Final Rule The provisions

contained in the Final Rule should also more closely follow the statutory

scheme of the 1984 Act

13 Docket No 8426Rules Governing Agreements by Ocean Common Carriers and Other Persons Sub

jectto the Shipping Act of 1984 49 FR 22296 May 29 1984

F M l
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 355

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

Section 580 8 a

Section 580 8 a of the Final Rule defines only two intermodal tariffs

terms through rate and through transportation These are the only

definitions needed to implement existing intermodal tariff filing requirements

and concepts The definitions of contracting carrier joint through inter

modal rate participating carrier through rate and through inter

modal rate contained in the Interim Rule were deemed unnecessary and

have been deleted

The Interim Rule defined the terms contracting carrier and participat

ing carrier to draw distinctions between through intermodal rates and

joint through intermodal rates The 1984 Act however does not make

this distinction and requires only that each carrier and conference file

tariffs showing all its rates charges etc between all points or

ports on its own route and on any through transportation route that has

been established 46 D S C app 1707 The Final Rule wiII aIIow com

mon carriers and conferences to file through rates for any type of through

transportation The through transportation services provided by common

carriers and conferences may be the result of various forms of contractual

relationships between those participating in the service The matter of a

common carrier providing a through transportation service in conjunction

with a carrier not subject to the Act is governed by section 580 8 b 3

which requires common carriers to provide in the contract of affreightment

a clear explanation of the carrier s responsibility when through transportation

services are offered

Section 580 8 b

Section 580 8b prescribes tariff filing requirements for through transpor

tation services These requirements are in addition to those for port to

port service tariffs

Matson suggests that the Interim Rule be amended to clarify whether

through rates must be published in separate tariffs or may be combined

with tariffs containing port to port rates Carriers and conferences wiII not

be precluded from including both through rates and port to port rates in

the same tariff publication The Final Rule is clarified accordingly

NEC commented that the Interim Rule should not be interpreted to

require that a comprehensive list of services be named on the title page

of each tariff The Final Rule is amended to require that the title page

of each through rate tariff contain only a list of the countries to from

or between which the through rates apply and a brief description of the

modes of service offered under the tariff

The Final Rule further modifies the previous tariff filing requirement

that specific ports through which through shipments may move be listed

and permits carriers and conferences to name a range or ranges of ports

to be utilized for through movements to reflect the routing for through

intermodal transportation

27 F M C
356 FEDERAL MARITIME COMMISSION

Likewise the Final Rule carries forward the Interim Rule provIsIons

which allow common carriers and conferences to establish through rates

to from or between all points within a

region While official government

publications naming identified regions such as the National Five Digit

ZIP Code and Post Office Directory are acceptable to specify a region

the suggestions of NEC and WINAC that tariff filers be permitted to

define regions by non official descriptions are rejected Absent an objective

standard to guide tariff writers and users a proliferation of methods to

describe regions can be anticipated undermining the Commission s underly

ing policy of tariff simplification

Sea Land proposes several amendments to expand the disclosure of par

ticipating carrier services to all types of intermodal tariffs In eliminating

the definitions of joint through intermodal rate and participating car

rier the Pinal Rule also necessarily does away with the Interim Rule s

requirement that intermodal tariffs separately list each point served by each

participating carrier By expressly providing that inland through rate divi

sions need not be disclosed in intermodal tariffs Congress made a basic

determination not to subject the specifics of inland carrier rates to Shipping

Act tariff disclosure This policy underlies the elimination and simplication

of many previously prescribed through rate tariff requirements as they ap

plied to inland movements Sea Land s proposals are contrary to this basic

policy and therefore are not adopted

NEC suggests that the requirement in section 580 8b that tariffs contain

on the title page or an interior page referenced on the title page a

list of the pointsports to which the rates apply be eliminated because

this information is already contained on the rate pages themselves and

need not be repeated elsewhere This suggestion will not be adopted Absent

a list or description on a tariffs title or interior page of the pointsports

to which the tariff applies tariff users would have great difficulty finding

the rate to be applied to their particular shipments Some title pages filed

with the Commission have contained broad scope descriptions e g Euro

pean Continent but internally listed portspoints in only a few countries

This has resulted in shippers being required to examine each page of

a number of generally described tariffs a practice which has substantially

thwarted the underlying regulatory purpose of tariffs i e the ready disclo

sure of rates to shippers It is only through a title or internal page listing

that the tariff user is able to determine the scope of the publication and

find the desired rate without having to page through each tariff Accordingly

the Final Rule requires that the listing of points ports or regions be

shown in Rule No 1 of the tariff and that the title page describe the

general scope of the tariff by naming the countries to from or between

which the rates apply These requirements will facilitate rapid determination

of the appropriate intermodal tariff

27 F M C
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 357

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

Section 580 8 c

Section 580 8 c of the Interim Rule governs amendments to intermodal

tariffs Latampac contends that this paragraph could allow an individual

conference line to take one day independent action on a new service point

This would allegedly cause disruptive intra conference competition with

a deleterious impact on the trades as a whole and would be inconsistent

with conference authority to regulate advance notice of independent action

subject to the lO day limitation of section 5 of the 1984 Act Latampac

urges the Commission to clarify section 580 8 c by reference to such

conference authority under section 5 of the 1984 Act

The Final Rule contains a number of provisions which may generally

authorize filings that conflict with limitations placed on conference members

by their particular conference agreement Rather than complicate the Final

Rule with a number of exceptions such as the one suggested by Latampac

the Commission will generally interpret such provisions as not authorizing

violations of conference agreements The provision allowing the filing of

new inland points is retained and now appears in section 580 8b

NEC opposes exempting controlled carriers from the 30 day notice re

quirements with respect to tariffs establishing new or initial joint through

intermodal rates andor through intermodal rates NEC argues that the In

terim Rule repeals the special permission provisions of section 9 c of

the 1984 Act 46 D S C app 1708 c and that such an exemption otherwise

undermines the purposes of the controlled carrier provisions of the statute

NMC is also opposed to easing the 30 day notice requirements for con

trolled carriers NMC contends that the Interim Rule appears to be inconsist

ent with the 1984 Act and recommends that the Commission reinstate

the requirement that controlled carriers observe a 30 day filing period

subject to ad hoc exceptions rather than extend exceptions on an across

the board basis

Likewise Sea Land recommends that the Commission apply a special

permission approach similar to that found in section 580 10 a 3 to allow

controlled carriers rates to be filed on less than 30 days notice in lieu

of a general waiver of the notice period for rates that meet but do not

go below those previously established by non controlled carriers Sea Land

claims that the proposed modifications would maintain the proper conformity

between Part 580 and section 9 of the 1984 Act

To avoid a possible conflict with the intent of the controlled carrier

provisions of the Act section 580 8 c is deleted Controlled carriers will

therefore remain fully subject to the requirements of section 9 of the

1984 Act when publishing new or initial through rates for through inter

modal transportation unless special permission is granted under the provi

sions of section 580 15 of the Final Rule This does not alter the previous

provisions of former Part 536 carried forward in the Final Rule allowing

the filing of open rates and lower independent action rates by controlled

carriers on less than 30 days notice See sections 580 6 m and 580 10 a

27 F M C
358 FEDERAL MARITIME COMMISSION

In lieu of a provision governing amendments to intermodal tariffs a

new provision has been substituted at section 580 8 c which governs mul

tiple tariffs As a result of the determination to allow multiple tariffs in

a trade common carriers and conferences can now be expected to publish

rates for the same commodity in different tariffs based upon differences

in the modes of service Similarly a commodity rate could also be closely

related to a separately filed rate in a specialized commodity tariff Therefore

to allow rate filers needed flexibility and at the same time enable the

Commission and all tariff users to locate the appropriate through rate tariff

a new requirement to cross reference all through rate tariffs when more

than one such tariff is published in the same general trade area is imposed

This information must also be disclosed in Rule No 1 of each tariff

EXHIBITS

In addition to the other changes to the tariff filing requirements new

exhibits are provided to facilitate understanding of and compliance with

the regulations

The Commission has determined that this Final Rule is not a major

rule as defined in Executive Order 12291 dated February 17 1981 be

cause it will not result in

1 An annual effect on the economy of 100 million or more

2 a major increase in costs or prices for consumers individual industries

Federal State or local government agencies or geographic regions or

3 Significant adverse effects on competition employment investment

productivity inn9vations or on the ability of United States based enterprises

to compete with Foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies that this

1

Final Rule will not have a significant economic impact on a substantial

i

number of small entities including small businesses small organizations

and small governmental jurisdictions

List of Subjects in 46 CFR Part 580

Antitrust Cargo Cargo vessels Contracts Exports Harbors Imports

Maritime carriers Rates and fares Reporting and recordkeeping require

ments Water carriers Water transportation

i

CORRECTIONS

These final rules are subject to review and editing ofform before

publication in the Code of Federal Regulations Users are requested

to notify the Commission of any omissions and typographical

type errors in order that corrections can be made before the Com

mission s CFR book goes to press in January 1985

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
SERVICE CONTRACTS LOYALTY CONTRACTS PUBLISHING 359

FILING OF TARIFFS BY COMMON CARRIERS IN THE U S

THEREFORE pursuant to 5 D S C 553 sees 3 4 5 6 8 9 10

13 15 16 17 and 19 of the Shipping Aet of 1984 46 D S C app

1702 1705 1707 1709 1712 1714 1716 and 1718 Part 538 of Title

46 Code of Federal Regulations is removed and Part 580 of Title 46

Code of Federal Regulations is revised to read as follows

l7lUr
FEDERAL MARITIME COMMISSION

46 CPR PART 580

PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS

IN THE FOREIGN COMMERCE OF THE UNITED STATES

Scope

Exemptions and exclusions

Definitions

Filing oftariffs general

Tariff format

Tariff contents

Statement ofrates and charges

Filing of service contracts and availability of essential terms

Tariffs containing through rates for through transportation

Terminal rules charges and allowances free time allowed at

New York

Amendments to tariffs rejection

Supplements to tariffs

Time Volume Rates

Governing tariffs

Transfer of operations transfer of control changes in common

carrier name and changes in conference membership

Applications for special permission

Loyalty contracts

OMB control numbers assigned pursuant to the Paperwork Re

duction Act

Exhibition No Ito Part 580Title Page Front Format

Exhibit No 2 to Part 580TitIe Page Reverse Format

Exhibit No 3 to Part 58O Class Tariff or Class and Commodity Tariff

Index

Exhibit No 4 to Part 580 Single Level of Rates PackedUnpacked Rates

Special Rates Emergency Rates and Valuation Rates

Exhibit No 5 to Part 58O Class Rate Tariff or Class Rate Section of

Class and Commodity Tariff

AUTHORITY 5 U S C 553 sees 3 4 5 6 8 9 10 13 15 16

17 and 19 of the Shipping Act of 1984 46 U S C app 1702 1705 1707

1709 1712 17141716 and 1718

580 0 Scope

a These regulations govern the publication and filing of tariffs for

the transportation of property performed by common carriers in the foreign

Sec

580 0

580 1

580 2

580 3

580 4

580 5

580 6

580 7

580 8

580 9

580 10

580 11

580 12

580 13

580 14

580 15

580 16

580 91

l f
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 361

IN THE FOREIGN COMMERCE OF THE UNITED STATES

commerce of the United States and by combinations of such common

carriers including through transportation offered in conjunction with one

or more carriers not otherwise subject to the Shipping Act of 1984

b Section 8 of the Shipping Act of 1984 requires common carriers

and conferences of such common carriers to file with the Commission

and keep open to public inspection tariffs showing all rates and charges

for transportation between U S and foreign ports and between points on

any through route which is established These regulations implement this

requirement and in addition the requirements of section 9 10 and 16

of the Shipping Act of 1984 The tariff format and content requirements

of this part also reflect the Commission s

responsibilities in identifying

and preventing unreasonable preference or prejudice and unjust discrimina

tion pursuant to section 10 ofthe Shipping Act of 1984

c 1 Compliance with this part is mandatory and any tariff submitted

for filing which fails to meet criteria specified in this part is subject

to rejection pursuant to 580 1O d 1 Upon rejection it shall be void

and its use unlawful

2 Operating without an effective tariff on file with the Commission

or charging rates not in conformance with such a tariff is unlawful and

pursuant to section 13 of the Shipping Act of 1984 is subject to a civil

penalty of not more than 5 000 for each violation unless the violation

was willfully and knowingly committed in which case the amount of

civil penalty may not exceed 25 000 for each violation Each day of

a continuing violation constitutes a separate offense Additionally the Com

mission may suspend any or all tariffs of the common carrier or that

common carrier s

right to use any or all tariffs of conferences of which

it is amember for a period not to exceed 12 months

580 1 Exemptions and exclusions

a This part does not apply to bulk cargo forest products recycled

metal scrap waste paper and paper waste except that carriers or conferences

which voluntarily file tariff provisions covering otherwise exempt transpor

tation thereby subject themselves to all statutory provisions and the require

ments of this part including the requirement to adhere to the filed tariff

provisions

b This part does not apply to transportation of cargo between foreign

countries including that which is transshipped from one ocean common

carrier to another or between vessels of the same common carrier at

a U S port or transferred between an ocean common carrier and another

transportation mode at a U S port for overland carriage through the United

States where the ocean common carrier accepts custody of the cargo in

a foreign country and issues a through bill of lading covering its transpor

tation to a foreign point of destination

c The following services are exempt from the tariff filing requirements

ofthe Act and the rules of this part

27 F M C
362 FEDERAL MARITIME COMMISSION

1 Transportation by vessels operated by the State of Alaska between

Prince Rupert Canada and ports in southeastern Alaska if all the following

conditions are met

i Carriage of property is limited to vehicles

ii Tolls levied for vehicles are based solely on space utilized rather

than the weight or contents of the vehicle and are the same whether

the vehicle is loaded or empty

Hi The vessel operator does not move the vehicles on or off the

ship and

iv The common carrier does not participate in any joint rates establishing

through routes or in any other type of agreement with any other common

carrier

2 Transportation of passengers commercial buses carrying passengers

personal vehicles and personal effects by vessels operated by the State

of Alaska between Seattle Washington and Prince Rupert Canada if such

vehicles and personal effects are the accompanying personal property of

the passengers and are not transported for the purpose of sale

3 Transportation of mail between the United States and foreign coun

tries

4 i Transportation by Incan Superior Ltd of cargo moving in railroad

cars between Thunder Bay Ontario and Superior Wisconsin if

A The through rates are filed with the Interstate Commerce Commission

andor the Canadian Transport Commission and

B Certified copies of the rate divisions and of all agreements arrange

ments or concurrences entered into in connection with the transportation

of such cargo are filed with the Commission within 30 days of the effective

ness of such rate divisions agreements arrangements or concurrences

ii This exemption is inapplicable to cargo originating in or destined

to foreign countries other than Canada

5 i Transportation by water of cargo moving in rail cars between

British Columbia Canada and United States ports on Puget Sound and

between British Columbia Canada and ports or points in Alaska if

A The through rates are filed with the Interstate Commerce Commission

andor the Canadian Transport Commission and

B Certified copies of the rate divisions and of all agreements arrange

ments or concurrences entered into in connection with the transportation

of such cargo are filed with the Commission within 30 days of the effective

ness of such rate divisions agreements arrangements or concurrences

ii This Exemption is inapplicable to cargo originating in or destined

to foreign countries other than Canada

6 iTransportation by water of cargo moving in bulk without mark

or count in rail cars on a local port to port rate basis between ports in

British Columbia Canada and United States ports on Puget Sound if the

rates charged for any particular bulk type commodity on anyone sailing

are identical for all shippers

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 363

IN THE FOREIGN COMMERCE OF THE UNITED STATES

ii This exemption shall not apply to cargo originating in or destined

to foreign countries other than Canada

iii The carrier will remain subject to all other provisions of the Shipping

Act of 1984

7 Transportation of used military household goods and personal effects

by non vessel operating common carriers

d The following services are subject to continuing special permission

authority to deviate from the 3D day notice requirement of section 8 of

the Act and the form and content requirements of this part Transportation

of U S Department of Defense cargo by American flag common carriers

under terms and conditions negotiated and approved by the Military Sealift

Command MSC if all the following conditions are met

1 Exact copies of all common carrier quotations or tenders accepted

by MSC are filed with the Commission as soon as possible after they

are approved by MSC but on not less than one day s

filing notice prior

to the effective date thereof

2 All tenders are filed in triplicate one copy of which is signed

and maintained at the Commission s Washington Office for public inspec

tion

3 A letter of transmittal accompanies the filing stating that the docu

ments are submitted in accordance with the requirements of the Shipping

Act of 1984 and this section

4 Tenders submitted for filing are to be numbered by the respective

common carriers as part of a distinct tariff series with each common

carrier s series to begin with the number I and run consecutively there

after

5 Each tender which supersedes a prior tender must specifically cancel

the prior tender by its series number and

6 Amendments or supplements to tenders must also be filed with the

Commission upon not less than one day s filing notice and contain an

appropriate reference to the original tender being amended or supplemented

e Controlled common carriers

1 A controlled common carrier shall be exempt from the provisions

of this part exclusively applicable to controlled common carriers when

i The vessels of the controlling state are entitled by a treaty of the

United States to receive national or most favored nation treatment

ii The controlling state subscribed as of November 17 1978 to the

shipping policy statement contained in note I Annex A of the Code

of Liberalization of Current Invisible Operations adopted by the Council

of the Organization for Economic Cooperation and Development

Hi As to any particular rate the controlled common carrier s tariff

contains an amount set by the duly authorized action of a

ratemaking

body except that this exemption is inapplicable to rates established pursuant

to an agreement in which all the members are controlled common carriers

not otherwise excluded by this paragraph

27 F M C
I

I

364 FEDERAL MARITIME COMMISSION

iv The controlled common carrier s rates charges classifications rules

or regulations govern transportation of cargo between the controlling state

and the United States including its districts territories and possessions

or

v The controlled common carrier operates in a trade served exclusively

by controlled common carriers

2 The Commission will notify any common carrier of its classification

as a controlled common carrier

3 i Any common carrier contesting such a classification may within

30 days after the date of the Commission s notice submit a rebuttal state

ment

ii The Commission shall review the rebuttal and notify the common

carrier of its final decision within 30 days from the date the rebuttal

statement was filed

580 2 Definitions

For the purposes of this part the following definitions of terms shall

apply unless otherwise indicated by the context of this part for other

definitions see 580 3 a 1 580 7 a 580 8 a 580 10 a 1 and

580 l2 a

a Act means the Shipping Act of 1984

b Bulk cargo means cargo that is loaded and carried in bulk without

mark or count in a loose unpackaged form having homogeneous character

istics Bulk cargo loaded into intermodal equipment except LASH or Seabee

barges is subject to mark and count and is therefore subject to the

tariff filing requirements of this part

c Class rates means rates applicable to all articles which have been

grouped or classified together in a classification tariff or a classification

section of a rate tariff

d Commodity rates means rates applying to a commodity or commodities

specifically named or described in the tariff in which the rate or rates

are published

e Common ca ier means a person holding itself out to the general

public to provide transportation by water of cargo between the United

States and a foreign country for compensation that

1 Assumes responsibility for the transportation from the port or point

of receipt to the port or point ofdestination and

2 Utilizes for all or part of that transportation a vessel operating

on the high seas or the Great Lakes between a port in the United States

and a port in a foreign country

0 Conference means an association of ocean common carriers permitted

pursuant to an approved or effective agreement to engage in concerted

activity and to utilize a common tariff but the term does not include

a joint service consortium pooling sailing or transshipment arrangement

g Controlled common carrier means an ocean common carrier that

is or whose operating assets are directly or indirectly owned or controlled

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 365

IN THE FOREIGN COMMERCE OF THE UNITED STATES

by the government under whose registry the vessels of the common carrier

operate ownership or control by a government shall be deemed to exist

with respect to any common carrier if

1 A majority portion of the interest in the common carrier is owned

or controlled in any manner by that government by any agency thereof

or by any public or private person controlled by that government or

2 That government has the right to appoint or disapprove the appoint

ment of a majority of the directors the chief operating officer or the

chief executive officer of the common carrier

h Forest products means forest products in an unfinished or semifinished

state that require special handling moving in lot sizes too large for a

container including but not limited to lumber in bundles rough timber

ties poles piling laminated beams bundled siding bundled plywood bun

dled core stock or veneers bundled particle or fiber boards bundled hard

wood wood pulp in rolls wood pulp in unitized bales paper board in

rolls and paper in rolls

iJoint rates means rates or charges established by two or more common

carriers for ocean transportation over the combined routes of such common

carriers

j

Local rates means rates or charges for transportation over the route

of a single common carrier or anyone common carrier participating in

a conference tariff the application of which is not contingent upon a

prior or subsequent movement

k Loyalty contract means a contract with an ocean common carrier

or conference other than a service contract or contract based upon time

volume rates by which a shipper obtains lower rates by committing all

or a fixed portion of its cargo to that carrier or conference

1

Non vessel operating common carrier means a common carrier that

does not operate the vessels by which the ocean transportation is provided

and is a shipper in its relationship with an ocean common carrier

m Ocean common carrier means a vessel operating common carrier

but the term does not include one engaged in ocean transportation by

ferry boat or ocean tramp

n Ocean freight forwarder means a person in the United States that

1 Dispatches shipments from the United States via common carriers

and books or otherwise arranges space for those shipments on behalf of

shippers and

2 Processes the documentation or performs related activities incident

to those shipments

0 Open rate means a rate on a specified commodity or commodities

over which a conference relinquishes or suspends its ratemaking authority

in whole or in part thereby permitting each individual common carrier

member of the conference to fix its own rates on such commodity or

commodities

27 F M C
366 FEDERAL MARITIME COMMISSION

p Open for public inspection means the maintenance of a complete

and current set of the tariffs used by a common carrier or to which

it is a party in each of its offices and those of its agent in every city

where it transacts business involving such tariffs

q Person includes individuals corporations partnerships and associations

existing under or authorized by the laws of the United States or of a

foreign country

r Proportional rates means rates or charges assessed by a common

carrier for transportation services the application of which is conditioned

upon a prior or subsequent movement

s Shipment means all of the cargo carried under the terms of a single

bill of lading

t Shipper means an owner or person for whose account the ocean

transportation of cargo is provided or the person to whom delivery is

to be made

u Tariff means a publication containing the actual rates charges classi

fications rules regulations and practices of a common carrier or conference

of common carriers The term practices refers to those usages customs

or modes of operation which in any way affect determine or change

the transportation rates charges or services provided by a common carrier

and in the case of conferences must be restricted to activities authorized

by the basic conference agreement

v Tariff filing means any tariff or modification thereto which is re

ceived by the Commission as properly filed pursuant to these rules

w Tariff filing electronic means 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 Commis

sion s Washington D C offices Tariff material filed electronically must

conform to all the regulations applicable to permanent tariff filings except

as follows

1 Electronically filed tariff pages received from data processing termi

nals may be used for filing with the Commission and

2 Electronically filed tariff matter shall be accompanied by an electroni

cally filed letter of transmittal

580 3 Filing oftariffs general

a I As used in this part the terms file filed or filing when

used with respect to the filing of tariffs with the Commission mean actual

receipt at the Commission s Washington D C offices

2 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 located 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

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 367

IN THE FOREIGN COMMERCE OF THE UNITED STATES

b Tariffs shall be published and filed by an officer or employee of

the common carrier or if a conference tariff by an officer or employee

of the conference In the alternative publication and filing may be accom

plished through an agent authorized to act for such common carrier or

conference by a specific written delegation of authority

1 A common carrier or conference may delegate authority to a person

not an official or employee of such common carrier or conference for

the purpose of issuing all its tariffs or any particular tariff

2 Whenever there is a delegation oftariff issuing authority by a common

carrier or conference there shall be filed with the Commission a written

statement indicating the appointment of the agent and setting forth the

exact limits of the agent s authority

c l No common carrier or conference shall publish and file any tariff

or modification thereto which duplicates or conflicts with any other tariff

on file with the Commission to which such common carrier or conference

is a party whether filed by such common carrier conference or by an

authorized agent

2 No common carrier shall publish and file any tariff or modification

thereto which conflicts with any other tariff on file with the Commission

and which names such common carrier as a participant therein

d All tariffs published in a foreign language shall be accompanied

by two true copies translated into the English language when submitted

for filing except that controlled common carriers shall submit three true

copies translated into the English language

e All tariff matter filed with the Commission shall be accompanied

by a letter of transmittal which clearly identifies the tariff and pages in

volved If the sender desires a receipt a duplicate of such letter must

be furnished together with a plain self addressed stamped envelope measur

ing approximately 41 2 by 9 inches The duplicate letter will be stamped

with the date of receipt and mailed to the sender in the envelope provided

If a duplicate letter and self addressed stamped envelope are not submitted

a

receipt will not be furnished

f All tariff matter shall be filed in duplicate except that controlled

common carriers shall file all tariff matter in triplicate

g

Tariff filings shall be addressed to

Bureau of Tariffs Federal Maritime Commission Washington

D C 20573

h Each common carrier shall keep open for public inspection all tariffs

published by it or to which it is a party in the foreign commerce ofnthe

United States i

Common carrier participants ina conference tariff are not relieved from

the necessity of complying with the Commission sregulations and the

requirements of section 8a l of the Act with regard to keeping tariffs

open for public inspectionT
368 FEDERAL MARmME COMMISSION

j

A common carrier s obligation to file tariffs pursuant to section 8 a

ofthe Act and this part must be carried out as follows

1 When the common carrier is not a party to an agreement by filing

its own tariff or tariffs

2 When the common carrier is party to an agreement by participation

in a single tariff filed by the conference except that this requirement

shall not apply to

i Ratemaking agreements either between or among conferences or be

tween one or more conferences and one or more independent carriers

or

ii New conference agreements new members to such agreements or

enlargements of the geographic scope of conference agreements until ninety

90 days after the fact unless special permission to extend that period

is granted for good cause shown

k When a common carrier is admitted to membership in a conference

cancellation of the common carrier s individual tariff if any in the trade

served by the conference and revision of the participating common carrier

page of the conference tariff naming the newly admitted common carrier

shall be published and filed with the Commission and may become effective

upon the date of such filing except that

1 If the common carrier has an individual tariff in the trade served

by the conference and cancellation of that tariff and revision of the partici

pating common carrier page of the conference tariff naming the newly

admitted common carrier would result in an increase in that common

carrier s rates the common carrier shall 30 days prior to being admitted

as a new conference member cancel its individual tariff effective 30 days

from date of publication making reference to the conference tariff and

where it may be examined unless special permission to become effective

in less than 30 days has been granted by the Commission pursuant to

580 15 and

2 A controlled common carrier newly admitted to membership in a

conference shall 30 days prior to admission file notice of cancellation

of any applicable independent tariff effective upon the date of admission

to conference membership unless special permission has been granted by

the Commission pursuant to 580 15

1 Reserved

m Copies of all tariffs on file with the Commission including all

subsequent revisions and changes thereto shall be made available by com

mon carriers and conferences to any person A reasonable charge may

be made for this service

n New or initial tariffs shall be published and filed to become effective

not earlier than 30 days after publication and filing unless special permis

sion to become effective on less than 30 days notice has been granted

by the Commission pursuant to 580 15

7lur
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 369

IN THE FOREIGN COMMERCE OF THE UNITED STATES

0 Rules applicable to tariffs containing rates charges rules and regula

tions for through transportation set forth in 580 8 are additional require

ments for use only for through transportation and are not a substitute

for any other requirements of this part

580 4 Tariffformat

a All tariffs which are filed and kept open to public inspection shall

be clear and legible and shall be plainly printed mimeographed multilithed

or prepared by some other similar permanent process on durable paper

of good quality

b No alteration in writing or erasure shall be made in any tariff publica

tion

c Sufficient marginal space of not less than three fourths of an inch

shall be allowed at the left side of each tariff page to permit insertion

in tariff binders In addition a margin of not less than one half inch

shall be allowed at the bottom of each tariff page for application of the

Commission s

receipt stamp

d Tariffs shall be in looseleaf form and printed on pages approximately

8 2 by 11 inches If other than a looseleaf tariff is to be filed application

for permission to make such filing shall be made to the Commission

Ifpermission to file other than a looseleaf tariff is granted by the Commis

sion such permission will set forth the form and manner of filing the

tariff and any amendments or supplements thereto

e 1 Tariff pages shall be printed on one side only and each page

after the title page shall be numbered in the upper right hand comer

except that the anti rebating statement as set forth in 580 c 2 ii must

be published on the reverse side of the tariff title page See Exhibit No

2 to this part or alternatively at any location in the tariff provided

that reference to such location is shown on the title page thereof

2 Each tariff page must show the name of the common carrier or

conference for whose account the tariff is issued the effective date the

page number the FMC number of the tariff etc as illustrated by Exhibit

No 4 to this part

3 When the common carrier s tariff is a conference tariff the common

carrier shall ensure that the conference publishes the common carrier s

tariff provisions in the conference tariff

f

To the extent applicable all tariffs filed pursuant to this part shall

be arranged in the following order

Title Page Check Sheet optional Table of Contents Participating

Common Carrier Page Surcharge andor Arbitrary Differential

Outport Differential or other identifying term Section Rules and

Regulations Section Index of Commodities and Classifications

Commodity Rate Section Classification and Class Rate Section

and Open Rate Section

27 F M C
370 FEDERAL MARITIME COMMISSION

580 5 Tariff contents

a The first page of every tariff shall be a title page which shall

contain the following information see Exhibit No 1 to this part

1 The name of the common carrier appropriately identified as a Non

Vessel Operating Common Carrier or a Vessel Operating Common Carrier

or the name of the conference Tariffs filed pursuant to an agreement

shall be further identified with the agreement number A controlled common

carrier subject to section 9 of the Act shall so identify itself under the

common carrier name on the title page

2 An FMC tariff number assigned by the common carrier or conference

For example

Smith Line TariffFMC l

The first tariff filed by a common carrier or conference pursuant to this

or any prior regulation shall be assigned the number FMC lEach tariff

thereafter issued by the common carrier or conference shall be assigned

the next consecutive FMC number Beneath the FMC tariff number shall

be shown the number or numbers of any FMC tariff or tariffs cancelled

by the issuance of such tariff For example

Smith Line Tariff FMC 14 cancels Smith Line Tariff FMC 5

and Smith Line TariffFMC 9

or

Smith Line Tariff FMC 14 cancels Smith Line Tariff FMC 12

3 When an individual common carrier partnership or joint service

operates under a trade name the legal name or names of each individual

common carrier shall be shown as well as the trade name Alternatively

reference may be made to an internal tariff page where this information

is shown

4 i A list of the portsregions covered by the tariff or reference to

an internal tariff page where such portsregions are listed In lieu of such

listing of ports a statement of the range of ports served will be accepted

if any exclusion of a port within the range or any restriction applying

at a port within the range is specifically stated

ii Whenever tariff application is shown by identification of a range

of ports in lieu of listing individual ports such range of ports must be

within a

geographical area generally served by the common carrier s partici

pating in the tariff

5 A statement showing the type of service offered by the common

carrier s e g

direct service transshipment etc When transshipment service

is indicated reference shall be made to the page in the tariff describing

such service

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 371

IN THE FOREIGN COMMERCE OF THE UNITED STATES

6 A statement showing the type of rates contained in the tariff For

example local proportional through class commodity overland common

point etc

7 A reference to other publications which in any manner govern the

tariff Alternatively reference may be made on the title page to an internal

page identifying such governing publications as prescribed in paragraph

c 8 of this section

8 The date on which the tariff will become effective Every tariff

in which any provision is to become effective upon a date different from

the general effective date of such tariff shall so indicate in substantially

the following form

Effective except as otherwise herein provided

or except as provided in Item No or except as pro

vided on page

9 The name title and address of the person issuing the tariff or

if the common carrier or conference has appointed a tariff filing agent

pursuant to 580 3 b the name title and address of the agent making

such filing

10 An expiration date if the entire tariff publication is to expire on

a specified date

11 The names of all participating common carriers in the tariff if

more than one common carrier participates Alternatively reference may

be made to an internal page on which are listed the names of all participat

ing common carriers see paragraphs c

2 and c 3 of this section

12 The subscription price of the tariff and any major components

thereof offered separately or a statement that the entire tariff will be

furnished without charge accompanied by a reference to a tariff rule which

clearly states where subscriptions may be obtained and the materials which

will be furnished to subscribers

b All pages after the title page shall be numbered beginning with

Original Page 1 Original Page 2 etc Each page as thereafter revised

shall be a consecutively numbered revision of the same page in the form

required by paragraphs a 6 and a 8 of 580 10 See Exhibit No

4 to this part For example

The 7th page in a tariff as originally filed would be titled Origi

nal Page 7 The first revision of this page would be titled

First Revised Page 7 cancels Original page 7

c The body of the tariff shall contain the following

1 A table of contents containing a full and complete statement of

the exact locations where information in the tariff will be found Such

statement shall list all subjects in alphabetical order and shall show the

page number and number of the item rule or unit where such subject

will be found

27 F M C
372 FEDERAL MARITIME COMMISSION

i

2 i The full legal name of each participating common carrier appro

priately identified as a Non Vessel Operating Common Carrier or Vessel

Operating Common Carrier and the address of its principal office Where

a joint service participates the FMC number of the agreement authorizing

the joint service shall also be shown

ii Every common carrier shall publish a tariff provision to be effective

upon filing which shall read substantially as follows see Exhibit No 2

to this part

Name of company has a policy against the payment of any

rebate by the company or by any officer employee or agent

thereof which payment would be unlawful under the United States

Shipping Act of 1984 Such policy has been certified to the Fed

eral Maritime Commission in accordance with the Shippin Act

of 1984 and the regulations of the Commission set forth 10 46

CFR 582

iii When the common carriers s tariff is a conference tariff the common

carrier shall ensure that the conference publishes the common carrier s

tariff provision set forth in paragraph c 2 ii of this section in the con

ference tariff

3 All trade names if any under which service will be provided and

the names of the common carrier or common carriers operating under

each such trade name if not shown on the title page

4 A list of the ports or ranges of ports to and from which the tariff

rates apply if not shown on the title page in conformity with paragraph

a 4 of this section

5 A statement indicating the extent of any limitation or restriction

if the application of any of the rates charges rules or regulations stated

in the tariff are restricted to any particular port pier etc or otherwise

limited

6 A single complete alphabetically arranged index listing all commod

ities for which the tariff names rates together with a reference to each

item or page where a

particular article is shown If a rate item embraces

two 2 or more commodities each commodity shall be shown in the

index Class rate tariffs and tariffs containing both class and commodity

rates shall contain in addition to applicable item or page references the

ratings of commodities to which class rates apply See Exhibit No 3

to this part Such index may be omitted where rates on less than 100

commodities are included in the tariff All articles generic to different

species of the same commodity should be grouped together For example

Paper building paper printing paper wrapping

7 A full explanation of any symbols reference marks or abbreviations

used in the tariff If such explanation does not appear on the page where

the reference marks or symbols are used such page shall refer to the

page in the tariff where the explanation is given The symbols shown

in 580 IO a 7 ishall be used only for the purposes indicated therein

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 373

IN THE FOREIGN COMMERCE OF THE UNITED STATES

8 If governed in any manner by other publications as may be permitted

herein a reference thereto substantially in the following form

This tariff is governed except as otherwise provided herein by

Bill of Lading Tariff FMC No or by Rules Tariff

No etc

Where such reference is fully made on the title page reference elsewhere

in the tariff is unnecessary Governing publications must be on file with

the Federal Maritime Commission

9 All rates applicable to the transportation of the articles or classes

of articles named in the tariff Rates shall be stated as required by 580 6

10 Rules and regulations which in any way affect the application of

the tariff

d Specific tariff rules shall be published to govern each of the following

subjects and shall be designated in all tariffs by the numbers and headings

specified below In the event that a specified rule does not apply to the

service offered the rule number and heading shall be published with a

statement that the rule is not applicable For example Rule No 15

Open Rates NotApplicable

1 Scope A list of the ports or range of ports to and from which

the tariff rates apply if not shown on the title page in conformity with

paragraph a 4 of this section

2 Application of rates A clear statement of all the services provided

to the shipper and included in the transportation rates set forth therein

3 Rate applicability rule A clear and definite statement of the time

at which a rate becomes applicable to any given shipment

4 Heavy lift

5 Extra length

6 Minimum bill oflading chargers

7 Payment offreight charges

i A clear statement of all requirements for the payment of freight

charges

ii Currency restrictions if any must be specified and the basis for

determining the rates of currency exchange must be set forth

Hi If credit is extended to shippers the rule must include the credit

terms available and the conditions upon which credit is extended When

credit applications or agreements are required specimens of such applica

tions or agreements shall be published as part of this rule

8 Specimen Bill s of Lading A specimen copy of any bill of lading

contract of affreightment or other document evidencing the transportation

agreement applicable to the service offered shall be submitted with the

tariff unless a separate bill of lading tariff is on file as permitted by

580 13 a Such documents shall not contain provisions inconsistent with

the rules and regulations published in any applicable tariff

27 F M C
374 FEDERAL MARITIME COMMISSION

9 Freight forwarder compensation A statement describing the rate or

rates of compensation to be paid to licensed ocean freight forwarders on

United States export shipments in accordance with 51O 23 b of this chap

ter

10 Application of surcharge and or arbitraries differentials outport

differentials or other identifying term Tariffs imposing upon the same

shipment more than one surcharge andor arbitrary expressed in percentage

terms shall also clearly state the manner in which the percentages shall

be applied in computing the additional charges

11 Minimum quantity rates Tariffs naming two or more rates for dif

ferent quantities of commodities covered by the same description shall

state

When two or more freight rates are named for carriage of goods

of the same description over the same route and under similar

conditions and the application is dependent upon the quantity

of the goods shipped the total freight charges assessed against

the shipment shall not exceed the total charges computed for

a larger quantity if the rate noted alongside a qualification specify

ing arequired minimum quantity either weight or measurement

per container or in containers will be applicable to the contents

of the container s and if the minimum set forth is met or exceed

ed At the shipper s option a quantity less than the minimum

level may be freighted at the lower rate if the weight or measure

ment declared for rating purposes is increased to the minimum

level

12 Ad Valorem rates A statement specifying the exact method of

computing the charge e g shipper s declaration invoice value delivered

value and the additional liability if any assumed by the common carrier

in consideration therefor

13 Transshipment Tariffs providing for transshipment service pursuant

to an ongoing agreement shall provide

i The through rate

ii The routings origin transshipment and destination ports additional

charges if any e g port arbitrary andor additional transshipment charges

and participating carriers and

Hi A tariff provision substantially as follows

The rules regulations and rates in this tariff apply to all trans

shipment arrangements between the publishing carrier or carriers

and the participating connecting or feeder carrier Every participat

ing connecting or feeder carrier which is a party to transshipment

arrangements has agreed to observe the rules regulations rates

and routings established herein as evidenced by a connecting car

rier agreement between the parties

14 Reserved

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 375

IN THE FOREIGN COMMERCE OF THE UNITED STATES

15 Open rates A clear and complete explanation of the extent to

which conference rates have been opened pursuant to paragraphs 1 and

m of 580 6 Any restriction or limitation on the right of participating

common carriers to fix their own rate items and the extent to which

applicable rules and regulations of the conference tariff will continue to

govern the rates filed by each individual line shall also be stated

16 Explosives or other dangerous articles A clear statement of all

regulations governing the transportation ofexplosives inflammable or corro

sive material or other dangerous articles or a reference to a separate

publication which contains such regulations

17 Green salted hides A rule which requires that

i

The shipping weight for purposes of assessing transportation charges

be either a scale weight or a scale weight minus a deduction which amount

and method of computation are specified in said rule and

ii The shipper furnishes the common carrier a weighing certificate

or dock receipt from an inland common carrier for each shipment of green

salted hides at or before the time the shipment is tendered for ocean

shipment

18 Returned cargo Tariffs offering the return shipment of refused

damaged or rejected shipments or exhibits at trade fairs shows or expo

sitions to port of origin at the rates assessed on the original movement

when such rates are lower than prevailing rates shall also provide that

i The return of shipments be accomplished within a specific period

not to exceed one year

H The return movement be made over the line of the same common

carrier performing the original movement except that in the case of a

conference tariff return may be made by any member line when the original

shipment was carried by a conference member under the conference tariff

and

Hi A copy of the original bill of lading showing the rate assessed

be surrendered to the return common carrier

19 Shippers requests consultations and complaints Clear and complete

instructions in accordance with the effective agreement s provisions stating

where and by what method shippers may file their requests and complaints

and how they may engage in consultation under section 5b 6 of the

Act together with a sample of the rate request form if one is used or

in lieu thereof a description of the information necessary for processing

the request or complaint

20 Overcharge Claims

i No tariff in the foreign commerce shall limit the filing of overcharge

claims with a common carrier for private settlement to a period of less

than three 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

27 F M C
1

i

i

j

J

i

376 FEDERAL MARITIME COMMISSION

ii No tariff in the foreign commerce shall require that overcharge claims

based on alleged errors in weight measurement or description of cargo

be filed before the cargo has left the custody of the common carrier

Hi Tariffs shall contain a rule which states that shippers or consignees

may file claims for the refund of freight overcharges resulting from errors

in weight measurement cargo description or tariff application This rule

shall clearly indicate where and by what method such claims are to be

filed with the common carrier and shall further advise that such claims

may also be filed with the Federal Maritime Commission At a minimum

tariffs shall contain the following provisions

A Claims seeking the refund of freight overcharges may be filed in

the form of a complaint with the Federal Maritime Commission Washing

ton DC 20573 pursuant to section l1 g

of the Shipping Act of 1984

Such claims must be filed within three years of the date the cause of

action accrued and

B Claims for freight rate adjustments filed in writing will be acknowl

edged by the common carrier within twenty days of receipt by written

notice to the claimant of the tariff provisions actually applied and the

claimant s

rights under the Act

e Additional rules which affect the application of the tariff shall follow

immediately the rules specified in paragraph d of this section and shall

be numbered consecutively

f Where a tariff rule affects only particular items or rates the affected

items or rates shall specifically refer to such rule

g No rate tariff shall require reference to any other rate tariff for

determination ofany applicable rate e cept that

1 Reference may be made to another tariff for terminal and accessorial

charges

2 Returned cargo rates accompanied by the rule specified in paragraph

d 18 of this section are permitted

3 Reference may be made to another tariff not containing rates for

commodity lists or generic descriptions as provided in paragraphs f

and

g

of 580 6 and

4 References may be made to another tariff not containing rates

covering

i Explosives inflammable or corrosive materials or other dangerous

articles

ii Bills of lading or contracts of affreightment

Hi Commodity classifications and

iv Routing guides or other similar tariffs as provided in 580 13

580 6 Statement ofrates and charges

a The application of aU rates and charges shall be clear and definite

and explicitly stated per 100 pounds per cubic foot per ton of 2 000

pounds per ton of 2 240 pounds or some other expressly defined unit

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 377

IN THE FOREIGN COMMERCE OF THE UNITED STATES

b All rates and charges shall be stated in a

simple and systematic

manner Commodities and generic commodity groupings on which rates

are stated shall be listed in alphabetical order If published in the index

item numbers shall also be shown in the body of the tariff

c Where rates are stated in amounts per package the method ofpacking

and specifications showing size measurement or weight of the packages

to which such rates apply shall be shown

d Where rates vary depending upon whether cargo is packed crated

palletized bundled strapped loose or otherwise prepared or delivered for

shipment there shall be a statement clearly and specifically governing the

application of such rates See Exhibit No 4 to this part

e Where rates and charges to or from designated ports are determined

by the adding or subtracting of arbitraries or differentials to or from rates

applicable at other ports such application shall be clearly shown

f A commodity item may by use of a generic term provide rates

on a number of articles if such term contains reference to an item in

the tariff which clearly defines the type of commodities contained in such

generic term or which contains a complete list of such articles or contains

a reference to the FMC number of a separate tariff of the same common

carrier or conference containing such definition or list of such articles

Example Packinghouse products as described in Item or pack

inghouse products as described under heading Packinghouse products

in FMC No or successive issues thereof

g

A separate tariff not containing rates may be filed by a common

carrier or conference showing a list of the commodities on which rates

published by reference to generic terms will apply rate tariffs shall be

made subject thereto as provided in paragraph f of this section

h When commodity rates are established the description of the commod

ity must be specific Rates may not be applied to analogous articles

i The rate section of a tariff may include a rate applicable to all

commodities or all commodities of a class on which specific commodity

rates are not stated in the tariff to be called cargo n o s not otherwise

specified general cargo or other identifying name or by broad generic

heading such as chemicals n os

j

A separate tariff naming rates on a group of related commodities

may be published if such tariff contains all of the rates applicable to

such commodities which are published by the same common carrier or

conference to or from the same ports or points When such tariffs are

published reference shall be made thereto in the tariff of general application

for the same common carrier or conference to or from the same ports

or points

k l Publication of rates which duplicate or conflict with the rates

published in the same or any other tariff is prohibited

2 The publication of a statement in a tariff to the effect that the

rates published therein take precedence over the rates published in some

7PMr
378 FEDERAL MARITIME COMMISSION

1

l

other tariff or that the rates published in some other tariff take precedence

over or alternate with rates published therein is prohibited

3 Where a common carrier or conference publishes both commodity

and class rates a statement shall be published in the tariff clearly indicating

which of the two rates shall apply on the commodity or commodities

on which both class rates and commodity rates are published

1 Where a conference opens any or all rates each tariff item so opened

shall be amended to indicate the word open in place of the previously

stated rates and shall indicate a reference to a

published role in the tariff

clearly defining the word open as used in each tariff and indicate where

the rates of the individual conference member lines on such items will

be found

m 1 Where a conference opens rates pursuant to paragraph 1 of

this section an individual conference member shall not charge rates on

the open item unless and until the individual member files a proper tariff

rate covering such item as required by these roles This may be accom

plished by the individual common carrier or its tariff agent filing a com

plete tariff pursuant to this part or by the conference or its tariff agent

filing a separate supplement at the end of the conference tariff indicating

the rates which will be charged by each individual common carrier and

the governing roles and provisions of the conference tariff applicable to

each common carrier Separate open rate tariffs may also be published

by a conference or its tariff agent When COnference members publish

their open rates in a

separate tariff such tariffs must reference on the

title page the conference tariff in which the open rated condition is re

flected

2 i Controlled common carriers filing open rates are subject to the

30 day controlled common carrier notice requirement of 580 1O a 3 i

except when special permission is granted by the Commission under

580 15

ii Notwithstanding paragraph m 2 i of this section a conference

may on less than 30 days notice file reduced rates on behalf of controlled

common carrier members for open rated commodities

A At or above the minimum level set by the conference or

B At or above the level set by a member of the conference that

has not been determined by the Commission to be a controlled common

carrier subject to section 9 of the Act in the trade involved

n Special or emergency rates or rates conditioned upon an expiration

date or other factor shall be shown under the same commodity item

generic heading or class in the same place in the tariff as the ordinarily

applicable rates See Exhibit No 4to this part

1 If only a portion of particular rates or other provisions will expire

with a special date a notation to that effect shall clearly be shown in

connection with such items as indicated in Exhibit No 4 to this part

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 379

IN THE FOREIGN COMMERCE OF THE UNITED STATES

2 Project rates may be placed in a special section of the tariff if

the Table of Contents or Commodity Index contains a specific reference

to Project Rates

0 All rate pages shall be filed in the form and manner shown in

Exhibit Nos 4 and 5 to this part

p

The number of rate columns may vary as required to state rates

to one or more ports port groupings or port ranges The width of all

columns in the rate block section of tariff rate pages may vary as required

See Exhibit No 5 to this part

580 7 Filing of service contracts and availability of essential terms

a Definitions The following definitions shall apply for purposes of

this section

1 Contract party means a party signing a service contract as shipper

shippers association or ocean common carrier and any other named entity

associated with such party entitled to receive or authorized to offer services

under the contract except that in the case of a shippers association individ

ual members need not be named in the contract

2 Geographic area means the general location from which or to which

cargo subject to a service contract will move in intermodal service

3 Port range means those ports in the countries of loading or unloading

of the contract cargo that are regularly served by the contracting carrier

or conference as specified in the tariff applicable to the service in which

the contract is to be employed even if the contract itself contemplates

use of but a single port within that range

4 Service contract means a contract between a shipper or a shippers

association and an ocean common carrier or conference in which the shipper

makes a commitment to provide a certain minimum quantity of cargo

or freight revenue over a fixed time period and the ocean common carrier

or conference commits to a certain rate or rate schedule as well as a

defined service level such as assured space transit time port rotation

or similar service features The contract may also specify provisions in

the event ofnonperformance on the part of either party

5 Shipper means an owner or person for whose account the ocean

transportation of cargo is provided or the person to whom delivery is

to be made

6 Shippers association means a group of shippers that consolidates

or distributes freight on a nonprofit basis for the members of the group

in order to secure carload truckload or other volume rates or service

contracts

b Contract filing requirements

1 Except for contracts relating to bulk cargo forest products recycled

metal scrap waste paper or paper waste every ocean common carrier

and conference that enters into a service contract with a shipper or shippers

association shall file with the Director Bureau of Tariffs as specified

27 F M C
I

1

i

380 FEDERAL MARITIME COMMISSION

in paragraph e of this section a true and complete copy of each contract

prior to its effective date

2 Service contracts involving the exempted commodities listed in para

graph b I of this section may be file pursuant to this section at the

option of the contract parties Upon filing such contracts will be subject

to the same requirements as those contracts involving non exempt commod

ities

3 Service contracts shall clearly state

i

The contract parties

ii The essential terms except that the origin and destination of cargo

moving pursuant to the contract need not be stated in the form of port

ranges or geographic areas but shall reflect the actual locations agreed

to by the contract parties

Hi Aunique service contract number bearing the prefix SC

iv The FMC number of the governing essential terms publication which

contains the carrier s or conference s statement of essential terms

v A

specific reference to the essential terms number ET No

in the governing publication which contains the summary of

the essential terms of the contract as provided in paragraph 11 of this

section and

vi The shipment records which will be maintained to support the con

tract

c Confidentiality

1 All service contracts filed with the Commission will to the full

extent permitted by law be held in confidence

2 Amendments to non essential terms of a service contract will be

accorded similar confidential treatment

d Modification and termination of contracts

1 The essential terms of a service contract cannot be modified during

the duration of the contract

2 Service contracts may be terminated by mutual agreement of the

parties

3 In the event of a contract termination as provided in paragraph

d 2 of this section if the minimum quantity required by the contract

has not been met the cargo previously carried under the contract must

be rerated according to the otherwise applicable tariff provisions of the

carrier or conference in effect at the time of such shipments unless the

contract itself provides an alternative procedure for dealing with such a

situation

e Transmittal ofservice contracts

Service contracts are to be filed in single copy contained in double

envelopes which contain no other material The outer envelope is to be

addressed to the Director Bureau of Tariffs Federal Maritime Commission

Washington D C 20573 The inner envelope is to be sea1ed contain only

the executed contract s and shall state This Envelope Contains a Con

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 381

IN THE FOREIGN COMMERCE OF THE UNITED STATES

fidential Service Contract The top of each page of a filed service contract

shall be stamped Confidential

f Contract implementation return and rejection

I Perfonnance under a service contract may begin without prior Com

mission authorization on the date the service contract and statement of

essential tenns are on file with the Commission

2 i Within 15 days of filing of the contract and statement of essential

tenns the Commission may return to the contract parties a service contract

or statement of essential tenns that does not confonn to the requirements

of paragraph b or paragraph g

of this section The Commission shall

provide the contract parties a written explanation of the reasons for such

return The contract parties shall have 15 days from the date of return

to refile the contract or statement of essential tenns

ii Within 15 days of refiling the Commission may reject a refiled

contract or statement of essential tenns that does not confonn to the require

ments of paragraph b or paragraph g

of this section

3 i If a returned service contract or statement of essential tenns is

not refiled perfonnance under the service contract shall be unlawful after

the IS day refiling period has expired

ii If refiled and subsequently rejected perfonnance under the service

contract shall be unlawful after the contract parties receive notice of the

rejection

4 If perfonnance under the service contract becomes unlawful by oper

ation of this paragraph all services theretofore perfonned under the service

contract shall be rerated in accordance with the otherwise applicable tariff

provisions for such services

5 The minimum 3D day period of availability of essential tenns required

by paragraph g

of this section shall be suspended upon return of a

service contract or statement of essential tenns and a new 3D day period

shall commence upon refiling thereof

g Availability of essential terms

1 iA concise statement of the essential tenns of each service contract

shall be filed with the Commission and made available to the general

public in tariff fonnat pursuant to the requirements of paragraph h of

this section

ii The essential tenns of each service contract must be made available

to all shippers or shippers associations similarly situated under the same

tenns and conditions for a specified period of no less than 3D days from

the date of filing of the concise statement of essential tenns

2 The essential tenns shall include where applicable the following

i The origin and destination port ranges in the case of port to port

movements and the origin and destination geographic areas in the case

of through intennodal movements

ii The commodity or commodities involved

27 F M C
382 FEDERAL MARITIME COMMISSION

Hi The minimum quantity of ClUgo or freight revenue necessary to

obtain the rate or rate schedule s

iv The contract rate rates or rate schedule s including any additional

or other charges viz surcharges terminal handling charges etc that apply

provisions specifying methods or retroactive rate adjustments based upon

experienced costs and any and all conditions and terms of service or

operation or concessions which in any way affect such rates or charges

v The term ofthe contract

vi Carrier or conference service commitments

vii Liquidated damages for nonperformance ifany or where the volume

requirement may not be met during the contract period in situations other

than those described in paragraph g2 viii of this section the rate charge

or rate basis which will be applied and

viii A clear description of any circumstances which will permit

A A reduction in the quantity of cargo or amount of revenues required

under the contract

B An extension of the contract term without any change in the contract

rate or rate schedule

C A discontinuance ofthe contract or

0 Any other deviation from the terms of the contract

h Form andfiling of essential terms

1

Each carrier or conference shall summarize the essential terms of

service contracts it has executed in a governing publication on file with

the Commission

2 i The form and manner requirements applicable to governing tariffs

as set forth in this part shall apply to the essential terms publication

ii Such publication shall include an alphabetical index of the commod

ities covered by the service contracts

3 All essential terms filings shall be printed in black on yellow paper

4 The essential terms of a service contract or contracts shall be identified

with an essential terms number bearing the prefix ET No The ET

No shall be located on the top of each page used to summarize the

essential terms of a service contract or contracts

5 i The essential terms publication shall contain on its title page

or in a rule of such publication reference to the carrier s or conference s

tariff s of general applicability The tariff of general applicability is the

tariff which would apply in the absence of a service contract

ii Every tariff of general applicability shall bear a reference to the

FMC number of a carrier s or conference s governing essential terms publi

cation

i Transmittal of essential terms publications

At the same time that a service contract is filed with the Commission

publications containing the essential terms of service contracts shall be

transmitted to the Commission with an accompanying transmittal letter in

an envelope which contains only matter relating to essential terms The

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 383

IN THE FOREIGN COMMERCE OF THE UNITED STATES

envelope and the inside address on the transmittal letter are to be addressed

to the Director Bureau of Tariffs Federal Maritime Commission Wash

ington D C 20573

U Recordkeeping

Every common carrier or conference shall maintain contract shipment

records for a period of five years from the termination of each contract

k Submission ofmodifications

Any time a service contract is modified terminated or extended a notice

to that effect shall be filed with the Commission

580 8 Tariffs containing through rates for through transportation

a Definitions The following definitions shall apply for purposes of

this section

1 Through rate means the single amount charged by a common carrier

in connection with through transportation

2 Through transportation means continuous transportation between

points of origin and destination either or both of which lie beyond port

terminal areas for which a through rate is assessed and which is offered

or performed by one or more carriers at least one of which is a common

carrier between a United States point or port and a foreign point or

port

b Filing requirements Every common carrier and conference subject

to the Act which establishes through rates for through transportation shall

file tariffs which state all such rates and related charges rules regulations

privileges or facilities granted or allowed Through rates may be filed

in separate tariff publications or as a part of a port to port tariff Such

tariffs shall be filed and maintained in the manner set out in the Act

and in accordance with the rules of this part Through rate tariffs shall

be filed in the name of the common carrier or conference subject to

the Act Through rate tariffs shall be initially filed on thirty days notice

as provided by sections 8 and 9 of the Act unless a shorter notice is

permitted pursuant to special permission Amendments to tariffs containing

through rates which provide for the addition of new inland points may

however become effective upon publication and filing Such tariffs shall

contain the following provisions

1 The title page shall identify the tariff as a through rate tariff

and shall also provide a brief description of the modes of services covered

by the tariff e g

railmotor ocean services and the trade area covered

by the tariff The trade area shall be described on the title page by naming

the countries to from or between which the through rates apply and the

port s or range s of ports via which through transportation will be per

formed

2 Rule No 1 ofeach through rate tariff shall provide

i A clear description of the points regions or ports to from or between

which the rates apply Each point region or port shall be described by

27 F M C
384 FEDERAL MARITIME COMMISSION

its commonly used geographic name The utilization of U S postal ZIP

codes is permitted and

ii The name of the port or ports via which through shipments will

be moved or a clear description of the range or ranges of ports via

which through shipments will be moved

3 A contract of affreightment clearly setting forth the responsibility

for through transportation which is consistent with the holding out provided

by the application of the rates and conditions of the tariff

c Multiple tariffs Common carriers and conferences which publish more

than one through rate tariff from to or between the same points ports

or regions based on mode of service description of commodities etc

shall provide in Rule No 1 of each respective tariff a cross reference

to the FMC number and description ofthe application of such other tariff s

580 9 Terminal rules charges and allowances free time allowed at New

York

a Every tariff filed pursuant to this part shall state separately all terminal

or other charges privileges or facilities under the control of the common

carrier or conference which are granted or allowed to shippers

b Wherever a tariff includes charges for terminal services canal tolls

or additional charges not under the control of the common carrier or con

ference which merely acts as a collection agent for the charges and the

agency making such charges to the common carrier increases the charges

without notice to the common carrier or conference such charges may

be increased in the common carrier or conference tariff without being

subject to the 30 day advance filing requirement of this part or separately

stated on the bill of lading

c Every tariff naming rates on import traffic shipped through the port

of New York or to a range of ports which includes New York shall

contain a rule in compliance with Part 525 ofthis chapter

580 10 Amendments to tariffs rejection

a Tariff amendments

1 For the purposes of this part amendments means all changes

in additions to or deletions from a tariff

2 Amendments which provide for new or initial rates or amendments

which provide for changes in rates charges rules or other provisions result

ing in an increase in cost to the shipper shall be published and filed

to become effective not earlier than 30 days after the date of publication

and filing unless special permission to become effective on less than said

30 days notice has been granted by the Commission pursuant to 580 15

3 i Amendments which provide for changes in rates charges rules

regulations or other provisions resulting in a decrease in cost to the shipper

or amendments which result in no change in cost to the shipper may

become effective upon publication and filing except that all changes to

controlled common carrier tariffs shall not become effective earlier than

30 days from the date of filing unless special pennission has been granted

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 385

IN THE FOREIGN COMMERCE OF THE UNITED STATES

by the Commission under 580 15 or the change affects tariff matters

which are the subject of a suspension proceeding in which case 580 11 g

shall apply

ii Conferences may file on behalf of their controlled common carrier

members lower independent action rates on less than 30 days notice subject

to the requirements of their basic agreements and subject to such rates

being filed at or above the level set by a member of the conference

that has not been determined by the Commission to be a controlled common

carrier subject to section 9 of the Act in the trade involved

4 An amendment containing a rate on a specific commodity not pre

viously named in a tariff which is a reduction or no change in cost to

the shipper may become effective upon publication and filing if

i The tariff contains a

cargo n o s or similar general cargo rate

which would otherwise be applicable to the specific commodity

ii The specific commodity rate is equal to or lower than the previously

applicable general cargo rate and

iii The common carrier is not a controlled common carrier which has

not received special permission authorizing the amendment

5 An amendment which deletes a specific commodity and rate applicable

thereto from a tariff thereby resulting in the application of a higher Cargo

n o s or similar general cargo rate is a rate increase and shall be published

and filed to become effective not earlier than 30 days after the date of

filing in the absence of special permission for an earlier effective date

pursuant to 580 15

6 Looseleaf tariffs shall be amended by reprinting the entire page

upon which any modification is made An amended tariff page shall be

designated in the upper right hand corner as a revised page in the

manner ilIustrated by Exhibit No 4 to this part For example

First revised page I

or

First revised page 21

7 i The revised page filed to accomplish a tariff amendment shall

reprint the page to be replaced in its entirety changing only the matter

on the page which is modified Changes in existing rates charges classifica

tions rules or other provisions accomplished by an amendment shall be

indicated on the revised page by the following uniform symbols

R To denote a reduction

A To denote an increase

C To denote changes in wording which result in neither an increase

nor a decrease in charges

D To denote a deletion

E To denote an exception to a general change

N To denote reissued matter

27 F M C
386 FEDERAL MARITIME COMMISSION

I To denote new or initial matter

K To denote a rate or charge that is filed by a controlled common

carrier member of a conference under independent action

ii An explanation of such symbols shall be set forth in the tariff

as required by 580 5 c 7

8 Each revised tariff page shall cancel the previously issued page

upon which a change is made The previous page being cancelled shall

be indicated immediately under the designation of the new revised page

number as illustrated by Exhibit No 4to this part For example

First revised page 1 cancels original page 1

or

First revised page 21 cancels fourth revised page 21

All matter on a cancelled page which is not being changed shall be reissued

on the revised page as it appeared on the page being cancelled

9 Each revised page shall in the upper right hand corner state the

effective date of the changes made on that page Such effective date shall

be subject to the requirements of sections 8 and 9 of the Act and of

this section Revised pages may also state the issue date

10 When a revised page cancelling a previous page deletes any matter

contained in the previous page the deletion shall be indicated by the

symbol 0 and any other symbol under paragraph a 7 i of this

section applicable to the effect of the deletion upon the common carrier s

rates or charges

11 Every tariff amendment effective upon less than statutory notice

pursuant to special pennission granted by the Commission shall show

in connection with such change the notation required by 580 15 t

12 Increased rates brought forward from a previously filed page prior

to their effective date shall be designated with the symbol N as

reissued and state their original effective date

13 If on account of expansion of matter of any page it becomes

necessary to add an additional page in order to accommodate said new

matter such additional page except when it follows the final page shall

be given the same number as the previous page with a letter suffix unless

all subsequent pages are reissued and renumbered For example

Original Page 4A Original Page 4B etc

If it is necessary to change matter on Original Page 4A it may be

done by issuing First Revised Page 4A which shall indicate the cancellation

of Original Page 4A

14 When a revised page deletes rates rules or other provisions pre

viously published on the page which it cancels and such rates rules or

provisions are published on a different page the revised page shall make

a specific reference to the page on which the rates rules or provisions

will be found and the page to which reference is made shall contain

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 387

IN THE FOREIGN COMMERCE OF THE UNITED STATES

the following notation in connection with such rates rules or other provi

sions

For here insert rates rules or other provisions in question in

effect prior to the effective date hereof see page

Subsequently revised pages of the same number shall omit this notation

insofar as this particular tariff matter is concerned

b Reserved

c Reserved

d Rejection oftariff amendments orother tariff publications

1 Any amendment or other tariff publication submitted for filing

which fails in any respect to conform with the Act or with the provisions

of this part is subject to rejection or partial rejection When tariff matter

is rejected either in whole or in part the Commission acting through

a designated official will inform the person tendering the material for

filing of the rejection by telegram cablegram or letter

2 Upon receipt ofnotice of a

rejection the filing party shall immediately

remove such rejected material from its effective tariff and immediately

notify all subscribers to affected tariffs that the rejected material is void

3 The number assigned to an amendment or other tariff publication

which has been rejected may not be used again The rejected material

may not be referred to any subsequent amendment or other tariff publica

tion in any manner whatsoever except that a notation shall appear at

the bottom of any new tariff matter issued to replace rejected matter which

reads substantially as follows

Issued in lieu of Page No rejected by the

Federal Maritime Commission

580 11 Supplements to tariffs

a Supplements to tariffs may be filed only to accomplish the following

1 To cancel a tariff in whole or in part

2 To provide for a general rate decrease applicable to all or substan

tially all the commodities listed in a tariff

3 To provide for a general rate increase applicable to all or substantially

all the commodities listed in a tariff

4 To indicate seasonal discontinuance temporary suspension or reinstitu

tion of service covered by a tariff

5 To provide for change in name of the publishing common carrier

or its tariff agent

6 To indicate controlled common carrier rates which have been sus

pended by the Commission

b Supplements filed pursuant to paragraphs a 2 and a 3 of this

section which do not change the rates applicable to all listed commodities

shall bear one of the following notations

27 F M C
388 FEDERAL MARITIME COMMISSION

1 The general rate increase decrease provided for on this page

applies to all commodities stated herein except the following here

list the excepted commodities or commodity item number or

2 The general rate increase decrease provided for on this page

applies to all commodities stated herein except those noted on

page

c General rate change supplements paragraphs a 2 and a 3 of

this section shall bear an expiration date that coincides with the date

the changes will be reflected in the rates and charges in the tariff Such

date shall not be more than 90 days after the date of filing No more

than one such supplement may be in effect at any time

d Additional supplements to other than looseleaf tariffs shall be filed

as provided by any special permission authority granted by the Commission

pursuant to 580 4d and 580 15

e Supplements shall be numbered consecutively on the upper right

hand comerof each page For example

Supplement No I

to FMC TariffNo

0 General rate increase decrease supplements filed by controlled common

carriers are subject to the 30 day notice requirements of 580 lO unless

special permission has been granted pursuant to 580 15 or the change

affects tariff matter which is the subject of a suspension proceeding in

which case 580 11 gshall apply

g

Treatment of suspended tariff matter controlled common carriers

1 Tariff matter filed by a controlled common carrier may be suspended

at any time before its effective date Tariff matter already in effect may

be suspended upon issuance of a show cause order on not less than 60

days notice to the common carrier In either instance the suspension

period shall not exceed 180 days

2 Upon receipt of a suspension order the controlled common carrier

shall immediately file a supplement which

i

Contains the specific rates charges classifications or rules suspended

ii Cites the date upon which the suspension becomes effective and

iii States that all use and application of the suspended tariff matter

is deferred for the period specified in the suspension order

3 Controlled common carrier tariff matter filed to become effective

during a suspension period in lieu of the suspended matter may become

effective immediately upon filing or upon the effective date of the suspen

sion whichever is later In determining whether to reject replacement rates

the Commission will consider whether such rates result in total charges

e grate plus applicable surcharges that are lower than the lowest com

parable charges effective for a U S flag or reciprocal flag common carrier

serving the same trade

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 389

IN THE FOREIGN COMMERCE OF THE UNITED STATES

i The filing controlled common carrier shall identify the specific D S

flag or reciprocal flag common carrier s rates charges classifications or

rules resulting in total charges which equal or are lower than its own

ii All replacement filings shall state on the appropriate tariff page

the following

Filed pursuant to 46 D S C app 1708 d and 46 CFR 580 11 g

580 12 Time Volume Rates

a Definition Time volume rate for the purposes of this section

means a rate published in a tariff which is conditional upon receipt of

a specified aggregate volume of cargo or aggregate freight revenue over

a specified period of time

b General requirements

1 Time volume rates may be offered by common carriers or conferences

All rates charges classifications rules and practices concerning time volume

rates must be published in an applicable tariff on file with the Commission

The time volume rate offering must identify the shipment records which

will be maintained to support the rate

2 Once a time volume rate is accepted by one shipper it shall remain

in effect for the time specified without amendment

3 Any shipper utilizing a time volume rate must give notice to the

offering carrier or conference of its intention to use such a rate prior

to tendering any shipments under such an arrangement Notice may be

accomplished by any effective method deemed appropriate by the offering

carrier or conference and set forth in the applicable tariff

4 Shipper notices and shipment records supporting a time volume rate

shall be maintained by any offering carrier or conference for at least five

years after any shipper s use of a time volume rate has ended

c Continuation of contracts

Any contract with respect to a time volume rate entered into prior to

June 18 1984 pursuant to former 536 7 and in effect on that date

shall be permitted to remain in effect for the duration of the term specified

in the contract or until June 17 1985 whichever occurs first

580 13 Governing tariffs

a If it is undesirable or impractical to include tariff rules or bills

of ladingcontracts of affreightment in a rate tariff as required by paragraphs

c 10 and d 8 of 580 5 such materials may be separately published

and filed as a rules tariff andor bill of lading tariff Classifications

of freight and similar tariff matter may also be published and filed as

separate governing tariffs Rate tariffs affected by such governing publi

cations shall be made expressly subject thereto by the inclusion of a ref

erence in substantially the following form

Except as otherwise provided this tariff is governed by insert

type of tariff FMC No

27 F M C
390 FEDERAL MARITIME COMMISSION

b No rate tariff shall refer to or be governed by another rate tariff

c Tariffs naming rates for the transportation of explosives inflammable

or corrosive material or other dangerous articles shall contain as required

by 580 5 d 16 the rules and regulations issued by the common carrier

or conference governing the transportation of such articles or reference

to a separate publication commercial or governmental where such regula

tions are available to the general public

580 14 Transfer of operations transfer of control changes in common

carrier name and changes in conference membership

a Whenever a common carrier with an individual tariff on file changes

its name or transfers operating control to another person the person who

will thereafter operate the common carrier service shall make appropriate

tariff filings to indicate the change in name Subsequent amendments to

such tariffs shall be in the name of the new common carrier

b Whenever the name of a common carrier which participates in a

conference is changed the conference shall file an appropriate amendment

to its tariff indicating the participating common carrier s new name

c Whenever the operation control or ownership of a common carrier

is transferred resulting in a majority portion of the interest of that common

carrier being owned or controlled in any manner by a government under

whose registry the vessels of the common carrier are operated the common

carrier shall immediately notify the Commission in writing of the details

of the change

580 15 Applications for special permission

a l Section 8 d of the Act authorizes the Commission in its discretion

and for good cause shown to permit increases in rates or the issuance

of new or initial rates on less than statutory notice Section 9 c of the

Act authorizes the Commission to permit a controlled common carrier s

rates charges classifications rules or regulations to become effective on

less than 30 day s notice The Commission may also in its discretion

and for good cause shown permit departures from the requirements of

this part The Commission will grant such permission only in cases where

merit is demonstrated

2 Typographical andor clerical errors constitute good cause for the

exercise of special permission authority but every application based thereon

must plainly specify the error and present clear evidence of its existence

together with a full statement of the attending circumstances and shall

be filed with reasonable promptness after issuance of the effective tariff

publication

b Application for special permission to establish rate increases or de

creases on less than statutory notice or for waiver of the provisions of

this part shall be made by the common carrier conference or agent that

holds authorization to file the tariff publication Such applications shall

be accompanied by a filing fee of 90

27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 391

IN THE FOREIGN COMMERCE OF THE UNITED STATES

c Application for special permission shall be made only by cable

telegram or letter except that in emergency situations application may

be made by telephone if the telephone communication is promptly followed

by a cable telex or letter and the filing fee of 90

d 1 If the authority granted by special permission is used it must

be used in its entirety and in the manner set forth by the Commission

2 If the exact authority granted by the special permission is not used

and more less or different authority is desired a new application complying

with the requirements of this part in all respects and referring to the

previous special permission must be filed

e Applications for special permission shall contain the following infor

mation

1 The name of the conference or carrier

2 The FMC number and description of the specific tariff involved

3 The rate commodity rules etc related to the application and

the special circumstances which the applicant believes constitute good cause

to depart from the requirements of this part or to warrant a tariff change

upon less than the statutory notice period

f Every tariff or tariff amendment filed pursuant to special permission

granted by the Commission shall contain the following notation

Issued under authority of Federal Maritime Commission Special

Permission No

The filing common carrier s shall fill in the blank with the special permis

sion letter and number assigned by the Commission For example No

F 1212 or No CC 1212

580 16 Loyalty contracts

a A sample of any loyalty contract as defined in this part must

be filed in the applicable tariff together with rules which set forth the

scope and application ofthe contract system

b The use of any sample loyalty contract and applicable rules filed

for inclusion in a tariff under paragraph a of this section shall be presumed

to be in conformity with the antitrust laws within the meaning of

section 10 b 9 of the Act if such contract makes reference to a Business

Review Letter issued pursuant to 28 CFR 50 6 indicating no objection

to the use of that contract

580 91 OMB control numbers assigned pursuant to the Paperwork Reduc

tion Act

This section displays the control numbers assigned to information collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980

Pub L 96511 The Commission intends that this section comply with

the requirements of section 3507 f of the Paperwork Reduction Act which

requires that agencies display a current control number assigned by the

27 F M C
392 FEDERAL MARITIME COMMISSION

Director of the Office of Management and Budget OMB for each agency

information collection requirement

Section

Current

OMS Con

trol No

j

580 3

580 7 1

5SO 8 through 580 15

3072009

3072044

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27 PM C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 393

IN THE FOREIGN COMMERCE OF THE UNITED STATES

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27 F M C
394 FEDERAL MARITIME COMMISSION

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27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 395

IN THE FOREIGN COMMERCE OF THE UNITED STATES

IXBIIIT 50 3 YO PA1T SID

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27 F M C
396 FEDERAL MARITIME COMMISSION

a111 n110 tO Alt 510

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27 F M C
PUBLISHING AND FILING OF TARIFFS BY COMMON CARRIERS 397

IN THE FOREIGN COMMERCE OF THE UNITED STATES

EXBlIIT 110 5 10 PAIlT 510

Cl late Iriff or ClI late

Section of CI and COmmodity Tariff

See II 510 6 0 and 580 6 p

CAlLETOR STEAMSHIP LINE

nu 110 ORIG REV PAGE

lUIGBT ToUIFF 110 1

ORIGINAL 35

FIfe 110 1 CANCELS PAGE

FI QK u S PACDnCC TPORTS

TO PORTS IN JAPMl 0 E EM nATE

CLASS RATES January 1 1985

Except a othervi a

1rD91dad rat

app17 par taD of 2240 lb or 40 err CLASS

vhich er produce the Ira ter rev nu

PORTS 101BICB IlATES APPLY 5 10 15 20

Porta A I C

50 00 82 50 95 00 102 00

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47 00 56 30 84 00 90 00

Port B I

37 75 53 00 66 00 78 00

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PARTS 585 AND 587

DOCKET NO 8422 FOR PART 587

ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

AND CONDmONS UNDULY IMPAIRING ACCESS OF U S FLAG

VESSELS TO OCEAN TRADE BETWEEN FOREIGN PORTS

November 9 1984

Final Rules

These Final Rules revise and supersede the Commis

sion s

regulations in Subchapter D implementing section

19 of the Merchant Marine Act 1920 and the Interim

Rule implementing section 13b 5 of the Shipping Act

of 1984 which became effective on June 18 1984 The

revision of Part 585 implementing section 19 of the

1920 Act merely makes technical corrections The revi

sions of Part 587 implementing the 1984 Act relate to

among other items definitions factors which would indi

cate conditions unduly impairing access of U S flag ves

sels in cross trades petitions for relief proceedings deci

sions sanctions and effective date of decisions

DATES Effective December 15 1984

SUPPLEMENTARY INFORMATION

IREGULATIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE

TO SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

ACTION

SUMMARY

In the Commission s program to review and republish all of its regulations

since the passage of the Shipping Act of 1984 the Act 46 D S C app

1701 certain technical and style changes appeared to be required for

Part 585 Regulations to Adjust or Meet Conditions Unfavorable to Ship

ping in the Foreign Trade of the United States formerly 46 CFR Part

506 These regulations implement section 19 b of the Merchant Marine

Act 1920 46 D S C app 876 1 b Previously a Final Rule on Part

585 was published in the Federal Register at 49 FR 20816 May 17

1984 but further changes were deemed necessary

The non substantive technical and style changes to Part 585 reflect revi

sions in nomenclature and Commission organization correction of typo

graphical errors and removal of superfluous verbiage Outdated and obsolete

provisions have also been deleted Also changed or deleted where feasible

j

398 27 F M C
ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 399

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

are citations to other laws required by recodifications and other statutory

changes references to the obsolete General Order system Provided

howevers and gender specific terms There are no substantive changes

to Part 585

II ACTIONS TO ADDRESS CONDITIONS UNDULY IMPAIRING ACCESS

OF U S FLAG VESSELS TO OCEAN TRADE BETWEEN FOREIGN

PORTS

The Shipping Act of 1984 was enacted on March 20 1984 with an

effective date of June 18 1984 Section 13 b 5 46 U S C app 1712 b 5

of the Act provides that

If after notice and hearing the Commission finds that the action

of a common carrier acting alone or in concert with any person

or a foreign government has unduly impaired access of a vessel

documented under the laws of the United States to ocean trade

between foreign ports the Commission shan take action that it

finds appropriate including the imposition of any of the penalties

authorized under paragraphs I 2 and 3 of this subsection

13b

1

On May 16 1984 the Commission published in the Federal Register

49 FR 20654 corrected 49 FR 21931 May 24 1984 26 F M C 649

an Interim Rule implementing section 13 b 5 of the Act The Commission

provided ninety days for comments on the Interim Rule Comments were

received from I

Parties to FMC Agreement No 10050 Agreement No

10050 2 American President Lines Ltd 3 Chilean Line Inc 4

China Ocean Shipping Company COSCO 5 Council of European and

Japanese National Shipowners Associations CENSA 6 Consultative

Shipping Group CSG 2

7 Delta Steamship Lines Inc Delta 8 Govern

ment of Japan 9 National Maritime Council NMC 10 Sea Land Serv

ice Inc 11 United States Department of State 12 Transportes Navieros

Ecuatorianos Transnave and 13 United States Department of Transpor

tation DOT After consideration of these comments the Commission is

issuing this Final Rule to supersede the Interim Rule

I These penalties include suspension of the tariffs of acommon carrier or that common carrier s right to

use any or all tariffs of conferences of which it is a member and the imposition of a civil penalty of not

more than 50 000 per shipment for the acceptance or handling of cargo for carriage under atariff that has

been suspended or after the common carrier s right to utilize that tariff has been suspended See 46 U S c

app 1712 b 91 3

2The eSG includes the governments of Belgium Denmark Finland France Federal Republic of Germany

Greece Italy Japan Netherlands Norway Spain Sweden and the United Kingdom

27 F M C
I

I

400 FEDERAL MARITIME COMMISSION

DISCUSSION OF COMMENTS

Section 587 1 Purpose

Section 587 1 a

Agreement No 10050 proposes definitions that it believes will clarify

three terms U S flag vessel U S flag carrier and ocean trade be

tween foreign ports

U S flag vessel is defined in the Interim Rule as a vessel docu

mented under the laws of the United States Agreement No 10050 takes

the position that while this definition is technically correct it should be

amended to make clear that the term includes vessels of all types whether

liner bulk tramp or other category as recognized in section 587 39 a

The Commission agrees with this clarification and the Final Rule is being

revised accordingly

The suggested change clarifies the definition of a U S flag vessel in

the Final Rule This definition is supported by the legislative history of

the Act Both the House and Senate Reports point out that section 13 b 5

is broad enough to permit retaliation against liner operators in U S trades

for events occurring in foreign bulk trades 3 As noted in the Reports

section 13b 5 supersedes section 14 a of the Shipping Act 1916 Con

gress however did not use the language of section 14 a which limited

relief to a common carrier by water which is a citizen of the United

States Instead in section 13b5 reference is made to the much

broader category ofvessels documented under the laws ofthe United States

For reasons stated above we believe relief under section 13 b 5 is intended

to cover the types of U S flag vessels mentioned in the Final Rule

U S flag carrier is defined in the Interim Rule as an owner or

operator of a U S flag vessel Agreement No 10050 suggests that in

light of modern service freight systems including intermodal feeder relay

and other connecting operations the defmition be expanded so that relief

under section 13b 5 is not limited to all water or exclusively U S flag

vessel operations The Commission has not adopted this suggestion because

the Act only protects vessels documented under the laws of the United

States The suggested changes would go beyond the scope of the Act

In the area of intermodal transport section 587 2 d makes clear that

relief is offered to U S flag carriers in instances where a government

or commercial practice results in or may result in unequal or unfair

opportunity for U S flag vessel access to port or intermodal facilities or

services related to the carriage of cargo inland to or from ports in a

cross trade It is not necessary therefore to revise the definition of a

U S flag carrier to accomplish this purpose

The phrase ocean trade between foreign ports was not defined in

the Interim Rule However in the Supplementary Information accom

3

See H R Rep No S3 98th Cong 1st Sess 22 23 S Rep No 3 98th Cong 1st Sess 38 1983

27 F M C
ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 401

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

panying the Interim Rule it was pointed out that the phrase ocean trade

between foreign ports includes intermodal movements Agreement No

10050 suggests that the phrase ocean trade between foreign ports be

defined as cargo moving entirely or in part by ocean carriage between

ports andor points in foreign countries The Commission agrees that

the phrase should be explained in the text of the Final Rule and has

done so in section 587 I a I

by inserting the words which includes

intermodal movements after ocean trade between foreign ports

CENSA notes that section 587 I a of the Interim Rule refers to only

one of the purposes of the Act which is to encourage the development

of the U S flag liner fleet 46 U S c app 1701 CENSA suggests that

any action taken by the Commission must balance all of the Act s pur

poses including the other two which are I to establish a non discrimina

tory regulatory process and 2 to provide an efficient and economic trans

portation system insofar as possible in harmony with and responsive to

international shipping practices

Section I3 b 5 protects U S flag vessel access to cross trades thus

encouraging the development of the U S flag liner fleet To the extent

that the other purposes of the Act are pertinent in any particular section

I3 b 5 matter they will be taken into consideration

Sections 587 1 b and c

Agreement No 10050 suggests that sections 587 1 b and c be strength

ened to provide relief for prospective harm Delta suggests changes in

section 587 I c to authorize Commission action upon a finding that a

U S flag carrier will incur imminent harm in the trade Transnave objects

to any imposition of sanctions for prospective harm and suggests that

paragraph c be changed to allow Commission action but no punitive

sanctions until actual harm is shown

It is the Commission s intention as pointed out in the Supplementary

Information accompanying the Interim Rule that Commission flexibility

to act swiftly when harm to a U S flag carrier has been demonstrated

or is imminent be preserved In order to make this point clear paragraphs

b and c of section 587 1 of the Interim Rule are being amended to

indicate that Commission action may be taken when undue impairment

is imminent

On the other hand we appreciate Transnave s concern with respect to

remedial versus punitive measures that may be taken by the Commission

on the basis of prospective harm Should the Commission find that the

adverse practice or activity from which relief is sought has not yet occurred

but that punitive sanctions are warranted when it does occur such sanctions

will be made effective concurrently with the actual implementation of the

practice or activity threatening undue impairment of access Section 587 7 c

of the Final Rule now so provides

27 F M C
i

I

4

I

402 FEDERAL MARITIME COMMISSION

Delta points out that section 587 1 c would appear to limit conditions

unduly impairing the access of a U S flag carrier to those where the

carrier is unable to enter the trade or where actual participation is being

eroded for reasons other than its commercial ability or competitiveness

Delta therefore suggests that this provision be expanded to enable the

Commission to find impairment of access when a U S flag carrier is pre

vented from increasing its participation in a cross trade for reasons other

than its competitive ability

The Commission agrees that the term eroded could be interpreted

to limit the Commission s ability to find the expansion of a U S flag

carrier s participation in a trade may have been unfairly restricted The

Interim Rule is therefore being amended to clarify this point by substituting

the term restricted for eroded

Agreement No 10050 and Delta recommend the deletion of the cautionary

language in section 587 1 c of the Interim Rule which provides that section

13b 5 procedures should not be used as an instrument for the harassment

of foreign flag carriers operating in the U S foreign trade These com

menters believe that adequate safeguards against the filing of frivolous

petitions are elsewhere provided for in the Interim Rule CENSA however

favors retention ofthe cautionary language

The Commission agrees that the Rule otherwise provides ample safeguards

against potential harassment Section 587 3 allows the Commission to reject

frivolous or deficient petitions and requires petitions for relief to be sup

ported by affidavits and other supporting documents Given these safeguards

the cautionary language in section 587 1 c would appear unnecessary and

is therefore deleted This deletion however does not reflect a change

in Commission policy The Commission will carefully review section

13b 5 petitions in order to ensure that the procedures of Part 587 are

not abused

CENSA suggests that when the Commission evaluates the operational

ability of a carrierto offer a service it consider recent U SfCSG discussions

on the criteria which such a carrier should meet CENSA goes on to

note that the specific criteria set out in the Interim Rule have been overtaken

by developments in those discussions

The Commission is aware of and closely follows the U SfCSG discus

sions wQich have centered on reaching an agreement regarding reciprocal

competitive access for U S and CSG vessels to U S and CSG trades

with developing nations These discussion are ongoing and no agreement

has been concluded between the United States Government and the CSG

Governments Itwould therefore be premature to even consider formalizing

in the Final Rule the policies still under discussion

Section 587 1 c ofthe Interim Rule provided that the condition of unduly

impaired access would be found only where a U S flag carrier is fit

willing and able to enter a trade in which its access is being unduly

impaired Upon further consideration the Commission does not believe

27 F M C
ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 403

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

that U S flag carriers should be required to meet a

rigid fit willing

and able standard with regard to foreign to foreign trades when foreign

flag carriers have free and unrestricted access to U S trades Therefore

the term fit willing and able has been deleted from the Final Rule

and in its place is substituted the term commercially able The commer

cially able standard will still allow the Commission to screen out a

frivolous petition without imposing an overly restrictive standard on US

flag carriers

Section 587 1 d

Section 587 1 d provides that when exammmg conditions in a trade

between foreign ports and considering appropriate action the Commission

will give due regard to U S maritime policy and U S Government shipping

arrangements with other nations as well as the degree of reciprocal access

afforded in U S foreign trades to the carriers of the countries against

whom action is requested

CENSA and the CSG suggest that the Commission also give due regard

to the U SCSG discussions particularly on the issue of restrictive commer

cial practices and derogations from reciprocal competitive access CENSA

urges that complaints received by the Commission concerning restrictive

commercial practices be first taken up at the diplomatic level with the

governments of the carriers concerned The CSG believes that the Commis

sion should make clear that it would normally look to the CSG Governments

to remedy any restrictive commercial practices in their trades In addition

the CSG notes that the Commission should avoid any threat to derogations

agreed upon in the U SCSG discussions These derogations include certain

government and commercial agreements which in some way restrict competi

tive access but were in effect prior to the start of the ongoing U S

CSG discussions

As discussed in connection with section 587 I c above an agreement

between the U S and CSG has not yet been accepted by either party

and therefore cannot be considered by the Commission for the purposes

of the Final Rule In appropriate circumstances the Commission will under

section 587 6 of the Final Rule request that the Secretary of State seek

resolution ofrestrictive practices through diplomatic channels

Section 587 2 Factors indicating conditions unduly impairing access

This section provides various examples of factors which would be deemed

to indicate conditions unduly impairing access of a US flag vessel to

cross trades Numerous comments addressed various portions of this section

DOT is generally concerned that certain of the listed practices of ocean

carriers or foreign governments might be considered as per se impairment

of access of US flag vessels to a cross trade Specifically mentioned

is section 587 2 c which cites certain commercial activities e g

closed

conferences employing deferred rebates as indicating conditions unduly

27 F M C
i

404 FEDERAL MARITIME COMMISSION

impamng access The discussion below with respect to section S87 2 c

should allay any concern that closed conferences employing deferred rebates

would be treated by the Commission as per se violations of section 13b 5

Delta suggests that this section be expanded to list additional factors

indicating conditions of impaired access including 1 the existence of

foreign intergovernmental agreements 2 discriminatory fines taxes or

other financial penalties levied on cargo shippers and consignees when

using U S flag vessels and 3 discriminatory financial benefits granted

to shippers or consignees when using other than U S flag vessels

The first factor suggested by Delta ie foreign intergovernmental agree

ments is too broad and indefmite to be included in this section However

to the extent that an intergovernmental agreement reserved substantial

amounts of cargo or otherwise restricted access to cargo it could be a

factor indicating unduly impaired access Such cargo reservation arrange

ments are covered in section 587 2 b

Fines fees for those employing U S flag vessels or benefits for those

not doing so are factors which the Commission would consider as unduly

impairing access Accordingly section 587 2 a is being so amended

Section 587 2 a

Section 587 2 a states that the imposition upon U S flag vessels of

fees charges requirements or restrictions different from those imposed

on other vessels or which preclude or tend to preclude U S flag vessels

from competing in the trade on the same basis as any other vessel is

a factor which may indicate unduly impaired access

Agreement No 10050 notes that section 587 2 a of the Interim Rule

does not make specific references to national flag operators Agreement

No 10050 is concerned that this omission might be read as an unintended

limitation on the scope of this section especially in view of the express

reference to national flag vessels in section 587 2b Such a limitation

on the scope of section 587 2 a was not intended Section 587 2 a is

therefore being clarified by amending the phrase from those imposed

on other vessels to read from those imposed on national flag or other

vessels in the Final Rule This is not to say that imposition of different

restrictions on national and non national carriers results in a

per se finding

of conditions unduly impairing the access of U S flag vessels The United

States Government itself makes a distinction between U S flag camers

and other carriers under its various cargo preference statutes The Commis

sion will determine whether the alleged restrictions are unfair or unreason

able after consideration of all the facts relevant to each case

COSCO reads sections 587 2 a and d as requiring that U S flag

vessels receive not merely the same treatment as other cross trading vessels

but instead treatment as favorable as is accorded vessels flying the flag

of the bilateral trading partners COSCO believes that the effect of these

sections is to require foreign governments to give U S flag vessels most

27 F M C
ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 405

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

favored nation MFN treatment 4 COSCO asserts that the United States

Government does not accord MFN treatment to COSCO vessels and con

cludes that these sections are contrary to principles of equality and mutual

benefit

As stated above the Commission is charged by the Act with determining

whether alleged restrictions are unfair or unreasonable to U S flag vessel

access The Commission will make such a determination after consideration

of all facts relevant to each case Facts that the Commission would consider

would include the treatment of national flag and other vessels in U S

cross trades as well as the degree of reciprocal access afforded in U S

foreign trades to the carriers of the countries against whom the Commission

action is contemplated

Agreement No 10050 suggests that discriminatory burdens applied to

intermodal and connecting services should be mentioned in section 587 2 a

We do not believe this change is necessary As previously discussed section

587 2 d should adequately address the concerns regarding intermodal re

strictions expressed by Agreement No 10050

Section 587 2 b

Section 587 2 b includes as a factor indicating undue impairment the

reservation of a substantial portion of the total cargo in the trade to

national flag or other vessels which results in failure to provide reasonable

competitive access to cargoes by U S flag vessels CENSA and the CSG

suggest that this provision be clarified to indicate that it does not apply

to commercial cargo sharing arrangements Agreement No 10050 urges

that it be strengthened to state that the United States will oppose cargo

sharing schemes and that 40 40120 and other restrictive devices may be

met by similar restrictions

Use of the word reservation in section 587 2b refers to government

reservation laws Only governments can reserve cargoes to carriers Com

mercial pools may allocate the commercial cargo captured by its members

but these are cargoes for which they compete Section 587 2 b would

however cover the situation where a commercial cargo sharing agreement

is government influenced or a conference pool or any other conference

practice operates in a predatory fashion such that it is unduly impairing

the access of a U S flag carrier in a cross trade

Section 587 2 c

The Interim Rule provides that the use of predatory practices including

but not limited to closed conferences employing fighting ships or deferred

rebates is a factor which may unduly impair the access of a U S flag

vessel to cross trades Although the wording of this paragraph follows

4

In these circumstances MFN treatment would generally require that anation give U S flag carriers treat

ment e

g regarding port call notice fees etc no less favorable than the treatment accorded that nation s

most favored trading partner

27 F M C
406 FEDERAL MARITIME COMMISSION

the language used in both the House and Senate Reports S which listed

closed conferences employing fighting ships or deferred rebates as prac

tices which could have the effect of unduly impairing the access of U S

flag vessels to trade between foreign ports several commenters objected

to its inclusion in the Interim Rule

DOT Department of State CENSA CSG and COSCO all suggest that

specific references to closed conferences employing deferred rebates be

deleted as a factor indicating unduly impaired access It is pointed out

that these practices are not unlawful in some foreign trades As stated

above DOT believes that reference to these practices creates the impression

that they may be considered as per se violations of section 13b 5

Delta on the other hand submits that closed conferences

employing deferred rebates is one of the most effective devices

used in foreign to foreign trades for closing a trade to outsiders and the

fact that this practice is not considered predatory by many of our trading

partners is irrelevant Delta maintains that while the Commission need

not impose U S open conference policy on foreign to foreign trades to se

cure reasonable access to those trades for U S vessels it should consider

that policy in determining whether conditions exist which unduly impair

the access of a U S flag vessel

Agreement No 10050 suggests that the reference to possible entities

which may engage in predatory practices be expanded to include not only

closed conferences but all conferences open or closed pools and carriers

employing fighting ships Agreement No 10050 would agree to the removal

of the term deferred rebates provided that the Commission state that

its removal is without prejudice to future consideration of finding deferred

rebates as a factor impairing access

The factors enumerated in section 587 2 were not intended to be

either exclusive or conclusive These practices would ultimately require

a finding that they resulted in undue impairment of access before sanctions

would be imposed Thus the mere existence in a trade of a closed con

ference which utilizes deferred rebates would not in and of itself support

a conclusion that deferred rebates unduly impair access of a U S flag

vessel It is only where they are used in a predatory fashion that such

practices would violate this section To make this clear we are inserting

the word possibly prior to the phrase including but not limited to

closed conferences employing fighting ships or deferred rebates in

section 587 2 c Furthermore the list of practices that may be predatory

was not meant to be exhaustive By its terms section 587 2 c includes

use of any predatory practice Delta s suggestion that the Commission

consider U S open conference policy when determining whether undue im

pairment exists under section 587 2 c is accommodated by section 587 1 d

which provides that the Commission will consider the degree of reciprocal

5

See H R Rep No S3 98th Cong 1st Sess 22 23 S Rep No 3 98th

Cong

1st Sess 38 1983

27 F M C
27 F M C

ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 407

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

access afforded in U S foreign trades to the carriers of the countries against

whom Commission action is contemplated

Section 587 2 d

The Government of Japan suggests that the reference in section 587 2 d

to unequal treatment with respect to intermodal facilities is inappropriate

for inclusion as a factor requiring retaliatory action because it extends

U S regulatory authority to the domestic transportation systems of another

country Agreement No 10050 supports retention of section 587 2 d

In light of the world wide growth and development of intermodal trans

portation systems the reference in section 587 2 d to intermodal facilities

and services is necessary in order to provide meaningful protection to

U S flag vessels Denial of the opportunity to compete for intermodal cargo

on a fair basis can constitute an undue impairment of access in the same

fashion as unfair discrimination in access to port to port cargo movements

For this reason no change to section 587 2 d is being made

Sections 587 2 b c d and e

Agreement No 10050 suggests that references to U S flag vessel s

in sections 587 2 b c d and e should be changed to U S flag

carrier s

thereby incorporating this commenter s proposed definition of

U S flag carrier which in part was meant to expand the coverage

for relief to foreign flag feederships of U S carriers For the reasons dis

cussed above in connection with section 587 1 a Agreement No 10050 s

proposed definition of U S flag carrier is not accepted and changes

to these paragraphs are not made

Section 587 3 Petitions for relief

Agreement No 10050 suggests that a new paragraph be added to section

587 3 stating that petitioners may recommend time periods for Commission

action on a petition We are not adopting this suggestion If a filing party

desires to specify a time period for Commission action it may do so

under section 587 3 b 9 However due to the possible significant foreign

policy implications of any action taken the Commission believes it requires

maximum flexibility in structuring section 13 b 5 proceedings and deter

mining when sanctions should be applied It cannot be locked into any

rigid pre determined time frames

Section 587 3

a

Filing

Agreement No 10050 suggests that the term US flag carrier be

substituted for the owner or operator of a liner bulk tramp or other

vessel documented under the laws of the United States as the person

who may file a petition for relief under section 587 3 a This suggested

language change is predicated on the Commission s acceptance of Agree

ment No loo50 s definition of U S flag carrier For the reason discussed

above in connection with section 587 1 a this suggestion is not adopted
408 FEDERAL MARITIME COMMISSION

In any event a U S flag carrier obviously may file a petition under

section 587 3 a

Section 587 3 bContents

Section 587 3b lists what should be included in the contents of petitions

for relief Delta and Agreement No 10050 believe that many of the manda

tory submission requirements e g

certified documents statistics affidavits

of fact and memoranda of law should be made permissive We disagree

By requiring a complete submission at the initial stage of the proceeding

the Commission is better able to move with dispatch if warranted The

mandatory requirements of this section therefore shall except as modified

below be continued

Delta and Agreement No 10050 suggest that certain information ie

certified copies of foreign laws and certain statistics may be difficult or

impossible for the petitioner to provide and that in such a case the petition

could be rejected by the Commission as deficient causing undue delay

or denial of consideration of an otherwise meritorious petition The Commis

sion understands that obtaining a certified copy of a foreign law may

sometimes be difficult and is revising section 587 3b 4 to provide that

certified copies of the law rule regulation or other document are to be

provided when available The Commission believes however that the

petitioning parties should generally be able to provide a concise description

and citation of the foreign law rule or government or commercial practice

which is alleged to impair access to a trade This information will obviously

be essential to section 13b 5 deliberations

Likewise the Commission concludes that statistics relating to alleged

harm required under sections 587 3b 7 i and b 7 iii are necessary

to make an informed decision regarding the merits of the petition and

the harm alleged The Commission will exercise its judgment when evaluat

ing the statistics provided including the particular circumstances surrounding

each petition and will consider the difficulties involved in obtaining and

or compiling these statistics

In addition affidavits of fact and memoranda of law provide needed

information to enable the Commission to evaluate the merits of the petition

and proceed expeditiously where swift action may be critical to prevent

irreparable harm to the U S flag carrier Therefore these documents remain

a

requirement for petition contents

Section 587 3 b2

Section 587 3b 2 of the Interim Rule requires that the name and

address of each party carrier person or foreign government agency against

whom the petition is made be included in the petition DOT believes

that this section should be amended to require the name of each party

foreign government agency or instrumentality thereof carrier or other

person against whom the petition is made DOT points out that addition

of the language foreign government agency or instrumentality thereof

27 F M C
1 6 r

ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 409

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

would enable a petitioner to name a quasi governmental organization such

as a national commodity or cargo allocation authority that is acting in

concert with common carriers to unduly impair the access of a D S

flag vessel The language carrier or other person is intended to make

section 587 3 b 2 more consistent with the Act which defines person

to in effect include a carrier DOT s suggestion clarifies the definition

of party and is therefore being adopted

CENSA notes that section 5873 b 2 fails to require the petition to

be served on the parties The CENSA comment has merit and section

587 4b of the Final Rule previously section 587 6 b provides for such

service by the Commission In cases where a foreign government agency

or instrumentality thereof is named as a party in the petition the Commis

sion will seek service through appropriate diplomatic channels In order

for the Commission to recognize with certainty whether a party name

in a petition is a foreign government agency or instrumentality thereof

it is requiring a statement to that effect under section 587 3b 2 of the

Final Rule

Section 587 3 b5

Section 587 3 b 5 of the Interim Rule requires that a

petition include

any other evidence of the existence of a government or commercial

practice alleged to be causing undue impairment of access Agreement

No 10050 has suggested that section 587 3 b 5 be expanded to include

other evidence relating to any law rule or regulation as well as any

government or commercial practice Agreement No 10050 believes this

change is appropriate because as it noted in its comment on section

587 3 b 4 a certified copy of foreign laws may not be obtainable Al

though this section would probably allow for the inclusion of such informa

tion under either section 587 3b 3 or section 5873 b 7 the change

suggested in section 587 3 b 5 is being adopted to include any other

information relating to any law rule or regulation or indicating the exist

ence of any government or commercial practice

One other change is being made to section 587 3 b 5 The term evi

dence is being peleted and in its place the term information is being

inserted This change is made here and in any other section of the Final

Rule where the term evidence is used The contents of the petition

cannot be properly characterized as evidence at this point in the section

13b 5 procedure

Section 587 3 b 8

Section 587 3 b 8 of the Interim Rule requires a memorandum of law

addressing relevant legal issues Agreement No 10050 believes that it is

not clear whether this provision contemplates submission of a separate

document It suggests that a change be made to indicate that any legal

discussion where appropriate may be incorporated in the petition for relief
410 FEDERAL MARITIME COMMISSION

This suggestion is being adopted in the Final Rule The Commission will

permit the petitioner to submit a separate memorandum as part of the

petition or where appropriate incorporate any legal discussion within the

petition Section 587 3 b 8 is being amended accordingly

Section 587 4 Receipt of relevant information

Redesignated Section 587 5 in the Final Rule

CENSA suggests that information submitted to the Commission be made

available to all interested parties Agreement No 10050 suggests that any

information submitted pursuant to this section should be provided to the

petitioning or affected U S flag carrier before it is made part of the record

DOT recommends the establishment of standards for confidential treatment

and procedures for segregating proprietary information from other factual

statements and arguments in order to provide maximum disclosure of infor

mation

Persons submitting information pursuant to section 587 5 of the Final

Rule may request that all or any portion of that information be accorded

confidential treatment under an appropriate exemption of the Freedom of

Information Act FOIA 5 U S C 552 Where an exemption applies pro

prietary or other information would be protected from disclosure The Com

mission does not believe it is necessary to specifically provide for confiden

tial treatment of business or other information in Part 587

It should be noted that any information which is submitted even if

covered by a FOIA exemption must be disclosed to all parties in any

proceeding under Part 587 if that information is made part of the record

in the proceeding upon which the Commission will base its decision Fun

damental precepts of due process require that such information be made

available to all parties in a proceeding Where appropriate such information

may be shielded from public disclosure through a protective order In

any event Commission action will be based on the record before it Finally

there does not appear to be any need or reason for submitting information

to a petitioning or affected U S flag carrier prior to making the information

a part of the public record

Section 587 4a

Redesignated Section 587 5 a in the Final Rule

DOT recommends that section 587 4 a of the Interim Rule be modified

to provide for both compulsory production of information in appropriate

circumstances and express sanctions for failure to produce information

noting comparable provisions under the Commission sregulations imple

menting section 19 1 b of the Merchant Marine Act of 1920 6

The Commission believes it unnecessary to make a specific reference

in the Final Rule to the Commission s subpoena powers conferred by

6

See 46 C F R 585 formerly Part 506 as amended 49 FR 20816 May 17 1984
ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 411

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

section 12 of the Shipping Act of 1984 46 U S C app 1711 Nothing

precludes the Commission from employing its subpoena powers in a section

13 b 5 proceeding Furthermore the failure of affected parties to provide

information may result in findings or conclusions that would be adverse

to them

Section 587 4 b

Redesignated section 587 5 b in the Final Rule

The phrase bona fide has been deleted from section 587 b of the

Final Rule A petition which has been published in the Federal Register

has in effect been determined to be bona fide and the phrase bona

fide in this section is unnecessary

Section 587 5 Notification to Secretary of State

Redesignated Section 587 6 in the Final Rule

Section 587 now section 587 6 in the Final Rule provides for notifica

tion to the Secretary of State by the Commission when there are indications

that conditions unduly impairing the access of a U S flag vessel to trade

between foreign ports exist The section provides that the Commission

may request that the Secretary of State seek resolution of the matter through

diplomatic channels and may request the Secretary to report the results

of such efforts within a specified time period

CENSA suggests that this section be amended to explicitly permit the

Secretary of State to concert with friendly governments sharing the

same aim of free access to trade so that joint efforts may be made to

seek a diplomatic solution The CSG states that where resistance against

restrictive trade practices is intended to be collective the Commission should

invariably request the Secretary of State to join in the pursuit of a diplomatic

resolution to each problem

COSCO suggests that in the event actions complained of are those of

a controlled carrier or of a foreign government the Final Rule should

require the Commission to request that the Secretary of State seek diplo

matic resolution and report to the Commission on those diplomatic efforts

before a Commission proceeding begins

These suggestions are not being adopted The Commission would of

course seek assistance from the State Department where feasible and appro

priate and prefers where possible diplomatic resolution of matters raised

in section 13 b 5 petitions However in some cases attempts to seek

resolution through diplomatic channels may be time consuming and could

result in a U S flag carrier suffering irreparable harm Commission requests

that the Secretary of State seek diplomatic resolution of section 13 b 5

matters will therefore be kept discretionary

Delta seeks to clarify the Commission s enforcement role by modifyingnsection

587 5to clearly indicate that the Commission andnot the Depart ment

of State is responsible forthe enforcement ofsection 13b5 Delta 27

F M C
412 FEDERAL MARITIME COMMISSION

also suggests that an affected U S flag carrier be kept apprised of the

progress of any diplomatic negotiations undertaken by the Secretary of

State

The Shipping Act of 1984 unequivocally entrusts this Commission with

the administration and enforcement of section 13b 5 We have no inten

tion of abdicating those responsibilities in any way The Commission is

neither required to request assistance from the Secretary of State nor re

quired to delay action pending a diplomatic resolution As noted above

however the diplomatic resolution of grievances presented in section

13b 5 matters would generally appear preferable to unilateral Commission

action The Commission may of course assist in these diplomatic efforts

ifrequested

We do not believe it necessary or appropriate to provide in the Final

Rule that the U S flag carrier or any other party will be apprised by

the Commission of the progress ofdiplomatic negotiations U S flag carriers

or other parties can of course contact the Department of State with respect

to the status of diplomatic negotiations

The Department of Transportation suggests that section 587 5 be amended

to provide that the Commission also notify the Secretary of Transportation

and when appropriate consult with the Secretaries of State and Transpor

tation on policy questions The Interim Rule specifies notification to the

Secretary of State because it is our understanding that the Department

of State is the agency which would have the primary responsibility to

seek diplomatic resolution of 13b 5 matters which will involve foreign

laws and commercial practices existing in foreign to foreign trades How

ever the Commission will as in the past consult with the Secretary of

Transportation who is the Administration s chief spokesperson for maritime

policy and with various other agencies of the Executive Branch in matters

relevant to their areas of interest and will keep them informed as requested

The Commission does not believe that DOT s proposal should be incor

porated into the Final Rule but rather that consultation with other agencies

should be handled on an ad hoc basis

NMC suggests that once a proper petition for relief has been filed

notification to the Secretary of State under section 587 5 should be provided

within a specified number of days As indicated in connection with section

587 3 the Commission requires maximum flexibility in structuring the pro

cedures and cannot be locked into any pre determined time frames The

Commission will act as expeditiously as possible in each instance

Section 587 6 Hearing

Redesignated Section 587 4in the Final Rule

Section 587 6 now section 587 4 in the Final Rule provides for proceed

ings pursuant to section 13b 5 DOT believes that it is unclear whether

the term hearing refers to oral argument or to the more general oppor

tunity to be heard either orally or in writing on matters potentially affecting

27 F M C
ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 413

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

one s interests DOT suggests that the title of the section be changed

to Procedure or Notice and Opportunity to be Heard and that the

word proceedings be substituted for the word hearing where it appears

in this section

Section 587 6 establishes a basic procedure of notice and opportunity

to be heard in a section 13 b 5 proceeding Section 587 6 a

provides

for the institution of a proceeding upon the filing of a meritorious petition

or upon the Commission s own motion Section 587 6 b further provides

that notice of any such proceeding will be published in the Federal Register

and interested or affected persons will have an opportunity to reply to

the petition Section 587 6 c provides that the Commission may issue a

final determination after there has been notice and opportunity to be heard

or it may order further hearing if warranted Any further hearings ordered

by the Commission will be structured on a case by case basis

The meaning of the term hearing in section 587 6 c would appear

to be sufficiently clear and this term shall be retained However the title

of this section shall be changed from Hearing to Proceeding in order

to more accurately reflect the contents of this section which includes proce

dures other than hearing procedures This section is also being amended

to require that an original and 15 copies of replies be filed with the

Secretary Finally section 587 6 has been redesignated as section 587 4

This placement provides for a more logical sequence in the Final Rule

Section 587 6 b of the Interim Rule is being amended to indicate that

notice of the institution of a proceeding will be served on the parties

by the Commission section 587 4b 1 of the Final Rule Additionally

this paragraph is being amended to note that replies to a petition by

interested or adversely affected parties will be submitted pursuant to section

587 of the Final Rule previously section 587 4 This amendment is

being made to clarify that section 587 of the Final Rule provides respond

ents or other interested parties the opportunity to reply to a petition by

submitting information In addition a technical language modification is

being made to section 587 6b of the Interim Rule regarding the form

of factual submissions section 587 4b 2 of the Final Rule

Transnave suggests that special procedures be established in the Final

Rule to provide for expedited evidentiary hearings and Commission decision

within 120 days It believes that the Final Rule should expressly guarantee

the respondent the right to challenge information received by the Commis

sion under section 587 previously section 587 4 Similarly CENSA ex

presses concern that the ad hoc hearing procedures satisfy the standards

of due process and the Administrative Procedure Act APA 5 D S C

553

A formal procedural framework for consideration of petitions would not

provide the necessary flexibility to address all the various circumstances

under which an action for impairment of access might arise In establishing

the appropriate procedures for each case the mandates of fundamental

27 F M C
414 FEDERAL MARITIME COMMISSION

due process will however be observed and respondents will have an oppor

tunity to confront petitioners allegations In certain situations the require

ments of due process may be met by the filing of written submissions

In others more formal procedures may be appropriate Whatever procedures

the Commission establishes it will ensure that all procedures will satisfy

the requirements of due process and where applicable the APA

Section 587 6b

Redesignated Section 587 4b in the Pinal Rule

CENSA points out that section 587 6b of the Interim Rule appears

to require that factual submissions of persons responding to a petition

be supported by affidavits and sworn documents but that it does not

clearly make the same requirement for the submission of the petitioner s

factual allegations It is the Commission s intention that both the peti

tioner s and respondent s provide supporting affidavits and sworn docu

ments In addition to the requirement in section 587 4b 2 of the Pinal

Rule that factual submissions shall be in affidavit form sections 587 3 b

and 587 5 a previously 587 4a are being amended to make this clear

CENSA suggests that actual notice of a proceeding should be given

to affected parties As mentioned above such notice will be given by

the Commission and section 587 4b of the Pinal Rule so provides

Transnave submits that due process requires that affected parties be given

not less than 30 days to reply to a petition It is unlikely that the Commis

sion would prescribe a period of less than 30 days for response to a

petition given the fact that certain responses might be based on information

located outside of the United States and that certain documents might

require English translations The Commission however will consider the

length of time needed to respond as well as the likelihood that injury

will result from a delay on a case by case basis

Agreement No 10050 believes that procedural time frames are inad

equately addressed in the Interim Rule and proposes that a new provision

be added which states that prompt response and expeditious action may

be required in any given case NMC suggests the imposition of specific

deadlines for completion of the various procedural stages of a section

13b 5 proceeding

As noted earlier in discussing comments on section 587 3 because of

the possible complexity and significant foreign policy considerations under

lying section 13b 5 petitions the Commission requires maximum flexibil

ity in structuring appropriate proceedings and formulating the necessary

time frames The Commission will therefore not attempt to prescribe proce

dural deadlines in its Pinal Rule

27 F M C
27 F M C

ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 415

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

Section 587 7 Decisions sanctions effective date

Section 587 7 a and b

CDSCD suggests that prior to the imposition of sanctions the Commis

sion take into consideration the fault of the person against whom the

sanction would be imposed and the effect of such sanctions on the trade

In resolving a section 13 b 5 petition the Commission intends as the

law requires it to do to consider the complete record and make an informed

decision based on all the facts taking into account all the ramifications

of its decision such as those raised by CDSCD

Section 587 7b

CENSA suggests that section 587 7 b should be amended to provide

that sanctions based on the restrictive trade practices of a foreign govern

ment will be imposed only against that government or a carrier of that

government CDSCD notes that it is inappropriate for the Commission

to impose sanctions against a carrier which is acting in compliance with

the laws of a foreign government The Commission cannot limit itself

with respect to the nationality of a carrier on which sanctions may be

imposed In each case brought before the Commission the role that a

government plays in unduly impairing the access of a U S flag carrier

as well as the role of the national flag lines of that government and other

carriers will be considered Whatever sanctions might be imposed by the

Commission will be against those parties which are either directly or indi

rectly responsible for undue impairment of access of a US flag vessel

Section 587 7c

Redesignated Section 587 7 d in the Final Rule

Section 587 7 c of the Interim Rule provides for the publication and

effective date of a Commission decision CENSA suggests that all parties

should be served with a decision It is the intention of the Commission

to serve the decision on all parties and section 587 7 a is being amended

to make this clear

CENSA suggests that all decisions should be published in the Federal

Register The Commission agrees with this suggestion and section 587 7 d

ofthe Final Rule is so amended

CENSA believes it is improper to set the effective date of a Commission

action under section 13 b 5 prior to Presidential review As previously

discussed the Executive Branch will have ample opportunity to comment

on section 13 b 5 petitions and participate in section 13 b 5 proceedings

if it desires Moreover the Commission has already established procedures

for advising and consulting with the Department of State prior to the

issuance of any final order In no event will the Commission establish

an effective date of less than 10 days from the date an order is issued

This should provide the President time to review a

decision of the Commis

sion issued under section 13 b 5 It would neither be appropriate nor
416 FEDERAL MARITIME COMMISSION

fair to any affected carrier to allow the Presidential review period to delay

publication of an effective date

Agreement No 10050 and Delta believe that 30 days is too lengthy

a time period between publication of the Commission decision and its

effective date The Commission believes that a 30 day notice period would

generally be appropriate and necessary given the international ramifications

of a section 13 b 5 action However because there may be circumstances

and situations requiring more expedited action section 587 7 d 2 of the

Final Rule allows the Commission for good cause to prescribe an

effective date of less than 30 days

Section 587 7e

A new procedure has been added to section 587 7 which provides that

any party may file a petition for reconsideration of any final decision

under this part Section 587 7 e further provides for service of the petition

upon all parties and states that the petition does not in itself stay the

effective date of Commission action

Section 587 8 Submission of orders to the President

Sections 587 7 587 8 and 587 9

DOT suggests that sections 587 7 587 8 and 587 9 be modified to allow

the President a reasonable opportunity to classify the Commission s decision

for national security reasons and thereby withhold it from publication in

appropriate circumstances We do not agree Any potentially sensitive issue

involving national defense or national security surrounding a section 13 b 5

case or its outcome can be expected to be brought to the Commission s

attention by the Executive Branch well prior to a Commission decision

In addition section 587 8 procedures are consistent with those established

in section 9 of the Act 46 U S C app 1708 which provides for the

publication of a Commission order of suspension or final order of dis

approval of rates charges of a controlled carrier concurrent

with submission of the order for Presidential review Similarly as in any

section 13 b 5 order the President may stay the effect of the Commission s

order for reasons of national defense or foreign policy Therefore the

Commission will not withhold a section 13 b 5 decision pending Presi

dential review

Section 587 8

The Interim Rule provided that a decision imposing sanctions would

be transmitted to the President concurrently with the submission of the

decision for publication in the Federal Register CENSA believes that all

decisions including those that do not impose sanctions should be submitted

immediately to the President We see no reason to submit decisions to

the President which do not impose sanctions If no action is being taken

27 F M C
PMr

ACTIONS TO ADDRESS CONDITIONS UNFAVORABLE TO 417

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

there is no reason to involve the President CENSA s suggestion therefore

is not adopted

To clarify the term decision this section is being amended in the

Final Rule to refer to any decision imposing sanctions In certain situa

tions where impairment of access may be imminent the Commission

may wish to issue two decisions The first decision would be a notice

of intent to impose sanctions should the action threatening the impairment

of access occur This decision would be followed by a second notice

imposing sanctions when the action impairing access actually takes place

In such a situation both decisions would be transmitted to the President

Alternatively the Commission could in its discretion issue a single deci

sion to be served on the President imposing sanctions at the time the

action impairing access actually occurs

Conforming changes have been made throughout the Rule to accommo

date this change Reference to final determinations or decisions have

therefore been dropped A decision however must pertain to a sub

stantive finding or conclusion as distinguished from a procedural ruling

Section 587 9 Postponement discontinuance or suspension of action

Section 587 9 provides that the Commission may on its own motion

upon petition or by order of the President postpone discontinue or suspend

any or all actions taken by it under the provisions of this part Agreement

No 10050 suggests that this section state that the filing of a petition

does not stay the effective date of a Commission action except upon compel

ling showing As with petitions for reconsideration under new section

587 7 e the filing of a petition to postpone discontinue or suspend would

not in and of itself stay the effective date of that action Section 587 9

of the Interim Rule is being amended to make this clear In addition

section 587 9 has been reorganized in order to clarify the distinction between

discretionary and mandatory postponements Finally some editorial changes

have been made in the language of this section

The Commission has carefully considered all comments submitted to

the Interim Rule and as discussed above has made a number of changes

to accommodate valid suggestions therein Other non substantive technical

or style changes have been made and not expressly discussed Any com

ments not expressly mentioned herein nevertheless have been considered

and found to be without merit unwarranted or unnecessary

The Chairman of the Federal Maritime Commission certifies pursuant

to section 605 b of the Regulatory Flexibility Act 5 D S C 601 et seq

that the Final Rule published herein will not have a significant economic

impact on a substantial number of small entities within the meaning of

that Act The primary economic impact of the Final Rule would affect

common carriers by water which generally are not small entities A second

ary impact may fall on shippers some of which may be small entities

but that impact is not considered to be significant
418 FEDERAL MARITIME COMMISSION

List of Subjects in 46 CFR Parts 585 and 587

Foreign relations Foreign trade Maritime carriers Rates and fares

Therefore pursuant to 5 D S C 553 section 19 b of the Merchant

Marine Act 1920 46 D S C app 876 1 b sections 13 b 5 15 and

17 of the Shipping Act of 1984 46 D S C app 1712 b 5 1714 and

1716 and Reorganization Plan No 7 of 1961 75 Stat 840 Parts 585

and 587 of Title 46 Code of Federal Regulation are revised to read as

follows

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 585

REGULAnONS TO ADJUST OR MEET CONDITIONS

UNFAVORABLE TO SHIPPING IN THE FOREIGN TRADE OF THE

UNITED STATES

Purpose

Scope

Findings Conditions unfavorable to shipping in the foreign trade

of the United States

Petitions for section 19 relief General Who may file

Petitions How filed

Petitions Contents

Petitions Amendment or dismissal of

Initial action to meet apparent conditions unfavorable Resolu

tion through diplomatic channels

Actions to meet conditions unfavorable to shipping in the foreign

trade ofthe United States

585 10 Participation of interested persons

585 11 Production ofinformation

585 12 Production ofinformation Failure to produce

585 13 Postponement discontinuance or suspension ofaction

585 14 Content and effective date of regulation

AUTHORITY 5 U S C 553 sec 19 b of the Merchant Marine Act

1920 46 U S C app 876 1 b secs 15 and 17 of the Shipping Act

of 1984 46 U S C app 1714 and 1716 and Reorganization Plan No

7 of 1961 75 Stat 840

585 1 Purpose

It is the purpose of the regulations of this part to declare certain condi

tions resulting from governmental actions by foreign nations or from the

competitive methods or practices of owners operators agents or masters

of vessels of a foreign country unfavorable to shipping in the foreign

trade of the United States and to establish procedures by which persons

who are or can reasonably expect to be adversely affected by such condi

tions may petition the Federal Maritime Commission for the issuance of

regulations under the authority of section 19 of the Merchant Marine Act

of 1920 It is the further purpose of the regulations of this part to afford

notice of the general circumstances under which the authority granted to

the Commission under section 19 may be invoked and the nature of the

regulatory actions contemplated

Sec

585 1

585 2

585 3

585 4

585 5

585 6

585 7

585 8

585 9

27 F M C 419
420 FEDERAL MARITIME COMMISSION

585 2 Scope

Regulatory actions may be taken when the Commission finds on its

own motion or upon petition that a foreign government has promulgated

and enforced or intends to enforce laws decrees regulations or the like

or has engaged in or intends to engage in practices which presently have

or prospectively could create conditions unfavorable to shipping in the

foreign trade of the United States or when owners operators agents or

masters of foreign vessels engage in or intend to engage in competitive

methods or practices which have created or could create such conditions

585 3 Findings Conditions unfavorable to shipping in the foreign trade

of the United States

For the purposes of this part conditions created by foreign governmental

action or competitive methods of owners operators agents or masters of

foreign vessels are found unfavorable to shipping in the foreign trade of

the United States if such conditions

a Impose upon vessels in the foreign trade of the United States fees

charges requirements or restrictions different from those imposed on other

vessels competing in the trade or which preclude vessels in the foreign

trade of the United States from competing in the trade on the same basis

as any other vessel

b Reserve substantial cargoes to the national flag or other vessels

and fail to provide on reasonable terms for effective and equal access

to such cargo by vessels in the foreign trade of the United States

c Are otherwise unfavorable to shipping in the foreign trade of the

United States

d Are discriminatory or unfair as between carriers shippers exporters

importers or ports or between exporters from the United States and their

foreign competitors and which cannot be justified under generally accepted

international agreements or practices and which operate to the detriment

ofthe foreign commerce or the public interest ofthe United States

585 4 Petitions for section 19 relief General Who may file

Any person including but not limited to any importer exporter shipper

consignee or owner operator or charterer of a liner bulk or tramp vessel

who has been hanned by or who can reasonably expect harm from existing

or impending conditions unfavorable to shipping in the foreign trade of

the United States may file a petition for the relief under the provisions

ofthis part

585 5 PetitionsHow filed

All requests for relief from conditions unfavorable to shipping in the

foreign trade shall be by written petition An original and fifteen copies

of a petition for relief under the provisions of this part shall be filed

with the Secretary Federal Maritime Commission Washington D C 20573

27 F M C
REGULATIONS TO ADJUST CONDITIONS UNFAVORABLE TO 421

SHIPPING IN THE FOREIGN TRADE OF THE U S

585 6 PetitionsContents

Petitions for relief from conditions unfavorable to shipping in the foreign

trade of the United States shall set forth the following

a A concise description and citation of the foreign law rule regulation

practice or competitive method complained of

b A certified copy of any law rule regulation or other document

involved and if not English a certified English translation thereof

c Any other evidence of the existence of such practice or competitive

method

d A clear description in detail of the harm already caused or which

may reasonably be expected to be caused petitioner including

I

Statistics for the representative period showing a present or prospective

cargo loss if harm is alleged on that basis Such statistics shall include

figures for the total cargo carried or projected in the trade for the period

2 Statistics or other evidence for the representative period showing

increased costs inferior services or other harm to cargo interest if injury

is claimed on that basis and

3 A statement as to why the period is representative

e A recommended regulation the promulgation of which will in view

of the petitioner adjust or meet the alleged conditions unfavorable to ship

ping in the foreign trade of the United States

585 7 Petitions Amendment or dismissal of

Upon the failure of a petitioner to comply with the provIsIons of this

part the petitioner will be notified by the Secretary and afforded reasonable

opportunity to amend its petition Failure to timely amend the petition

will result in its dismissal For good cause shown additional time for

amendment may be granted

585 8 Initial action to meet apparent conditions unfavorable Resolution

through diplomatic channels

Upon the filing of a petition or on its own motion when there are

indications that conditions unfavorable to shipping in the foreign trade

of the United States may exist the Commission will notify the Secretary

of State that such conditions apparently exist and may request he or she

seek resolution of the matter through diplomatic channels If request is

made the Commission will give every assistance in such efforts and the

Commission may request the Secretary to report the results of his or her

efforts at a specified time

585 9 Actions to meet conditions unfavorable to shipping in the foreign

trade of the United States

Upon a submission of a petition filed under the rules of this part or

upon its own motion the Commission may find that conditions unfavorable

to shipping in the foreign trade of the United States do exist and may

without further proceeding issue regulations Such regulations may effect

the following

27 F M C
422 FEDERAL MARITIME COMMISSION

a Imposition of equalizing fees or charges

b Limitation of sailings to and from United States ports or of amount

or type of cargo during a specified period

c Suspension in whole or in part of any or all tariffs filed with

the Commission for carriage to or from United States ports and

d Any other action the Commission finds necessary and appropriate

in the public interest to adjust or meet any condition unfavorable to shipping

in the foreign trade of the United States

585 10 Participation of interested persons

In the event that participation of interested persons is deemed necessary

by the Commission notice will be published in the Federal Register and

interested persons will then be allowed to participate in this procedure

by the submission of written data views or arguments with or without

opportunity to present same orally

585 11 Production of information

In order to aid in the determination of whether conditions unfavorable

to shipping in the foreign trade of the United States exist or in order

to aid in the formulation of appropriate regulations subsequent to a finding

that conditions unfavorable to shipping in the foreign trade of the United

States exist the Commission may when it deems necessary or appropriate

and without further proceedings order any owner operator or charterer

in the affected trade to furnish any or all of the following information

a Statistics for a

representative period showing cargo carried to and

from the United States in the affected trade on vessels owned operated

or chartered by it by type source value and directions

b Information for a

representative period on the activities of vessels

owned operated or chartered which shall include sailings to and from

United States ports costs incurred taxes or other charges paid to authorities

and subsidies or other payments received from foreign authorities and

such other information that the Commission considers relevant to discovering

or determining the existence of general or special conditions unfavorable

to shipping in the foreign trade of the United States

c Information for a specified future period on the prospective activities

of vessels which it owns operates or charters or plans to own operate

or charter to and from United States ports which shall include projected

sailings anticipated costs taxes or other charges to be paid to authorities

and expected subsidies or other payments to be received from foreign

authorities and such other information that the Commission considers rel

evant to discovering or determining the existence of general or special

conditions unfavorable to shipping in the foreign trade of the United States

585 12 Production of information Failure to produce

The Commission may when there is a failure to produce any information

ordered produced under 585 1l make appropriate findings of fact or

27 F M C
REGULATIONS TO ADJUST CONDITIONS UNFAVORABLE TO 423

SHIPPING IN THE FOREIGN TRADE OF THE U S

deem such a failure to produce as an admission that conditions unfavorable

to shipping in the foreign trade of the United States do exist

585 13 Postponement discontinuance or suspension of action

The Commission may on its own motion or upon petition postpone

discontinue or suspend any and all actions taken by it under the provisions

of this part The Commission shall postpone or discontinue any or all

such actions if the President informs the Commission that postponement

discontinuance or suspension is required for reasons of foreign policy or

national security

585 14 Content and effective date of regulation

The Commission shall incorporate in any regulations adopted under the

rules of this part a concise statement of their basis and purpose Regulations

shall be published in the Federal Register Except where conditions warrant

and for good cause regulations promulgated under the rules of this part

shall not become effective until 30 days after the date of publication

NOTE In accordance with 44 U S c 3506 c 5 any information request

or requirement in this part is not subject to the requirements of section

3507 f of the Paperwork Reduction Act because there are nine or fewer

respondents

27 F M C
I

i

FEDERAL MARITIME COMMISSION

46 CPR PART 587

ACTIONS TO ADDRESS CONDtrIONS UNDULY IMPAIRING

ACCESS OF U S FLAG VESSELS TO OCEAN TRADE BETWEEN

FOREIGN PORTS

Sec

687 1 Purpose general provisions

687 2 Factors indicating conditions unduly impairing access

687 3 Petitions for relief

687 4 Proceeding

687 5 Receipt ofrelevant infonnation

687 6 Notification to Secretary of State

687 7 Decision sanctions effective date

687 8 Submission of decision to the President

687 9 Postponement discontinuance or suspension of action

AUTHORITY 5 U S C 553 sees 13b 5 15 and 17 of the Shipping

Act of 1984 46 U S C app 1712 b 5 1714 and 1716

587 1 Purpose general provisions

a 1 It is the purpose of this part to enumerate certain conditions

resulting from the action of a common carrier acting alone or in concert

with any person or a foreign government which unduly impair the access

of a vessel documented under the laws of the United States whether liner

bulk tramp or other vessel hereinafter U S flag vessel to ocean trade

between foreign ports which includes intennodal movements and to estab

lish procedures by which the owner or operator of a U S flag vessel

hereinafter U S flag carrier may petition the Federal Maritime Commis

sion for relief under the authority of section 13b 5 of the Shipping

Act of 1984 the Act 46 U S C app 1712 b 5

2 It is the further purpose of this part to indicate the general cir

cumstances under which the authority granted to the Commission under

section 13b 5 may be invoked and the nature of the subsequent actions

contemplated by the Commission

3 This part also furthers the goals of the Act with respect to encouraging

the development of an economically sound and efficient U S flag liner

fleet as stated in section 2 ofthe Act 46 U S C app 1701

b 1 This part implements the statutory notice and hearing requirement

and ensures that due process is afforded to all affected parties At the

same time it allows for flexibility in structuring proceedings so that the

Commission may act expeditiously whenever harm to a U S flag carrier

resulting from impaired access to cross trades has been demonstrated or

is imminent

424 27 F M C
CONDITIONS UNDULY IMPAIRING ACCESS OF U S FLAG 425

VESSELS TO OCEAN TRADE BETWEEN FOREIGN PORTS

2 The provisions of Part 502 of this chapter Rules of Practice and

Procedure shall not apply to this part except for those provisions governing

ex parte contacts 502 11 of this chapter and except as the Commission

may otherwise determine by order

c The condition of unduly impaired access will be found only where

a U S flag carrier is commercially able to enter a trade in which its

access is being unduly impaired or is reasonably expected to be impaired

or where actual participation in a trade by a U S flag carrier is being

restricted for reasons other than its commercial ability or competitiveness

d In examining conditions in a trade between foreign ports and in

considering appropriate action the Commission will give due regard to

U S maritime policy and U S Government shipping arrangements with

other nations as well as the degree of reciprocal access afforded in U S

foreign trades to the carriers of the countries against whom Commission

action is contemplated

587 2 Factors indicating conditions unduly impairing access

For the purpose of this part factors which would indicate the existence

of conditions created by foreign government action or action of a common

carrier acting alone or in concert with any person which unduly impair

access of a U S flag vessel engaged in or seeking access to ocean trade

between foreign ports include but are not limited to

a Imposition upon U S flag vessels or upon shippers or consignees

using such vessels of fees charges requirements or restrictions different

from those imposed on national flag or other vessels or which preclude

or tend to preclude U S flag vessels from competing in the trade on the

same basis as any other vessel

b Reservation of a substantial portion of the total cargo in the trade

to national flag or other vessels which results in failure to provide reasonable

competitive access to cargoes by U S flag vessels

c Use of predatory practices possibly including but not limited to

closed conferences employing fighting ships or deferred rebates which un

duly impair access of aU S flag vessel to the trade

d Any government or commercial practice that results in or may result

in unequal and unfair opportunity for U S flag vessel access to port or

intermodal facilities or services related to the carriage of cargo inland

to or from ports in the trade

e Any other practice which unduly impairs access of a U S flag vessel

to trade between foreign ports

587 3 Petitions for relief

a Filing

1 Any owner or operator of a liner bulk tramp or other vessel docu

mented under the laws of the United States who believes that its access

to ocean trade between foreign ports has been or will be unduly impaired

may file a written petition for relief under the provisions of this part

27 F M C
426 FEDERAL MARITIME COMMISSION

2 An original and fifteen copies of such a petition including any support

ing documents shall be filed with the Secretary Federal Maritime Commis

sion Washington D C 20573

b Contents Petitions for relief shall include the following and shall

also include an affidavit attesting to the truth and accuracy of the infonna

tion submitted

1 The name and address of the petitioner

2 The name and address of each party foreign government agency

or instrumentality thereof carrier or other person against whom the petition

is made and a statement as to whether the party is a foreign government

agency or instrumentality thereof

3 A concise description and citation of the foreign law rule or govern

ment or commercial practice complained of

4 A certified copy of any law rule regulation or other document

concerned when available and if not in English a certified English trans

lation thereof

5 Any other infonnation relating to any law rule or regulation or

indicating the existence of any government or commercial practice

6 A description of the service offered or proposed as a result of

which petitioner is alleging hann including infonnation which indicates

the ability of the petitioner to otherwise participate in the trade

7 A clear description in detail of the hann already caused or which

may reasonably be expected to be caused to the petitioner for a representa

tive period including

i Statistics documenting present or prospective cargo loss due to dis

criminatory government or commercial practices if hann is alleged on that

basis such statistics shall include figures for the total cargo carried or

projected to be carried by petitioner in the trade for the period and the

sources of the statistics

ii Infonnation documenting how the petitioner is being prevented from

entering a trade if injury is claimed on that basis

Hi Statistics or other infonnation documenting the impact of discrimina

tory government or commercial practices resulting in an increase in costs

service restrictions or other hann on the basis of which injury is claimed

and the sources of the statistics and

iv A statement as to why the period is representative

8 A separate memorandum of law or a discussion of the relevant

legal issues

9 A recommended action rule or regulation the result of which will

in the view of the petitioner address the alleged conditions unduly impairing

the access of petitioner to the affected trade

c Deficient petition A petition which substantially fails to comply

with the requirements of paragraph b of this section shall be rejected

and the person filing the petition shall be notified of the reasons for

27 F M C
CONDITIONS UNDULY IMPAIRING ACCESS OF U S FLAG 427

VESSELS TO OCEAN TRADE BETWEEN FOREIGN PORTS

such rejection Rejection is without prejudice to filing of an amended peti

tion

587 4 Proceeding

a Upon the Commission s own motion or upon the filing of a petition

which meets the requirements of 587 3 when there are indications that

conditions unduly impairing the access of a U S flag vessel to trade between

foreign ports may exist the Commission will institute a proceeding pursuant

to this part

b l Notice of the institution of any such proceeding will be published

in the Federal Register and that notice and petition if any will be served

on the parties

2 Interested or adversely affected persons will be alIowed a period

of time to reply to the petition by the submission of written data views

or legal arguments pursuant to 587 5 of this part Factual submissions

shalI be in affidavit form

3 An original and 15 copies of such submissions will be filed with

the Secretary Federal Maritime Commission Washington D C 20573

c FoIlowing the close of the initial response period the Commission

may issue a decision or order further hearings if warranted If further

hearings are ordered they will be conducted pursuant to procedures to

be outlined by the Commission in its order

587 5 Receipt of relevant information

a In making its decision on matters arIsmg under section 13 b 5

of the Act the Commission may receive and consider relevant information

from any owner operator or conference in an affected trade or from

any foreign government either directly or through the Department of State

or from any other reliable source AlI such submissions should be supported

by affidavits of fact and memorandum of law Relevant information may

include but is not limited to

1 Statistics with sources or if unavailable the best estimates pertaining

to

i The total cargo carried in the affected liner or bulk trade by type

source value tonnage and direction

ii Cargo carried in the affected trade on vessels owned or operated

by any person or conference by type source value tonnage and direction

iii The percentage such cargo carried is of the total affected liner

orbulk trade on a

tonnage and value basis

iv The amount of cargo reserved by a foreign government for national

flag or other vessels in the affected trade on a tonnage and value basis

and a listing of the types of cargo and specific commodities which are

reserved for national flag or other vessels

2 Information on the operations of vessels of any party serving the

affected trade including sailings to and from ports in the trade taxes

or other charges paid to foreign authorities and subsidies or other payments

received from foreign authorities

27 EM C
428 FEDERAL MARITIME COMMISSION

3 Information clarifying the meaning of the foreign law rule regulation

or practice complained of and a description of its implementation

4 Complete copies of all conference and other agreements including

amendments and related documents which apply in the trade

b Once introduced or adduced information of the character described

in paragraph a of this section and petitions and responses thereto shall

be made part of the record for decision and may provide the basis for

Commission findings of fact and conclusions of law and for the imposition

of sanctions under the Act and this part

587 6 Notification to Secretary of State

When there are indications that conditions unduly impairing the access

of a U S flag vessel to trade between foreign ports may exist the Commis

sion shall so notify the Secretary of State and may request that the Secretary

of State seek resolution of the matter through diplomatic channels Ifrequest

is made and the Commission will give every assistance in such efforts

and the Commission may request the Secretary to report the results of

such efforts within a specified time period

587 7 Decision sanctions effective date

a Upon completion of any proceeding conducted under this part the

Commission will issue and serve a decision on all parties

b If the Commission finds that conditions unduly impairing access

of a U S flag vessel to ocean trade between foreign ports exist any of

the following actions may be taken

I

Imposition of equalizing fees or charges applied in the foreign trade

of the United States

2 Limitation of sailings to and from United States ports or of amount

or type of cargo carried during a specified period

3 i Suspension in whole or in part of any or all tariffs filed with

the Commission for carriage to or from United States ports including

the carrier s right to use any or all tariffs of conferences in U S trades

of which it is a member for any period the Commission specifies or

until such time as unimpaired access is secured for U S flag carriers in

the affected trade

ii Acceptance or handling of cargo for carriage under a tariff that

has been suspended or after a common carrier s right to utilize that tariff

has been suspended pursuant to this part will subject a carrier to the

imposition of a civil penalty as provided under the Act 46 U S C app

1712 b 3 of not more than 50 000 per shipment and

4 Any other action the Commission finds necessary and appropriate

to address conditions unduly impairing access of a U S flag vessel to

trade between foreign ports

c If the Commission finds that conditions impairing access of a U S

flag vessel to ocean trade between foreign ports has not yet occurred

and punitive sanctions are warranted such sanctions will be imposed to

27 F M C
CONDITIONS UNDULY IMPAIRING ACCESS OF U S FLAG 429

VESSELS TO OCEAN TRADE BETWEEN FOREIGN PORTS

become effective simultaneously with the implementation of the action that

would unduly impair the access of aU S flag vessel

d lAll decisions will be published in the Federal Register

2 Decisions imposing sanctions except where conditions warrant and

for good cause will become effective 30 days after the date of publication

e Any party may file a petition to reconsider any decision under this

part Such a petition shall be served on all other parties to the proceeding

and shall not in and of itself stay the effective date of the Commission

action

587 8 Submission of decision to the President

Concurrently with the submission of any decision imposing sanctions

to the Federal Register pursuant to 587 7 d I the Commission shall

transmit that decision to the President of the United States who may

within ten days after receiving the decision disapprove it if the President

finds that disapproval is required for reasons of the national defense or

the foreign policy ofthe United States

587 9 Postponement discontinuance or suspension of action

a The Commission may on its own motion or upon a petition postpone

discontinue or suspend any action taken by it under the provisions of

this part Such a petition will be served on all other parties and will

not in and ofitself stay the effective date of Commission action

b The Commission shall postpone discontinue or suspend any action

provided for in its final decision if so directed by the President for reasons

of national defense or foreign policy of the United States as provided

in 587 8

NOTE In accordance with 44 U S c 3518 c l

B and except for inves

tigations undertaken with reference to a category of individuals or entities

egan entire industry any information request or requirement in this

part is not subject to the requirements of section 3507 f of the Paperwork

Reduction Act because such collection of information is pursuant to a

civil administrative action or investigation by an agency of the United

States against specific individuals or entities

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 572

DOCKET NO 8 26 AND DOCKET NO 8 32

RULES GOVERNING AGREEMENTS BY OCEAN COMMON

CARRIERS AND OTHER PERSONS SUBJECT TO THE SHIPPING

ACT OF 1984

November 14 1984

Final Rule

This Final Rule revises and supersedes the Interim Rule

on agreements which implemented those provisions of

the Shipping Act of 1984 governing agreements by or

among ocean common carriers as well as certain marine

terminal operator agreements This Rule modified by ad

dition deletion and revision the Interim Rule in the

areas of definitions exclusions and exemptions agree

ment format reporting and record keeping and the infor

mation requirements of the Information Form In addition

the transitional rules regarding mandatory provisions in

agreements are deleted in their entirety The Rule also

makes various editorial technical and clarifying changes

in the Interim Rule As of this publication all of the

Commission s interim regulations to implement the 1984

Act are finalized

DATE This Rule is effective on December 15 1984

SUPPLEMENTARY INFORMATION

ACTION

SUMMARY

IBackground

The Shipping Act of 1984 Public Law 98 237 98 Stat 67 46 U S c

app 1701 1720 the Act or the 1984 Act was signed into law on March

20 1984 with an effective date of June 18 1984 The 1984 Act superseded

the Shipping Act 1916 1916 Act 46 U S C app 801 et seq with

respect to the regulation of agreements by or among ocean common carriers

and certain other subject persons in the foreign oceanbome commerce

of the United States The Act makes significant changes with regard to

the kinds of agreements that are within its scope the mandatory content

of certain kinds of agreements the procedures for filing processing and

reviewing agreements and the parameters on the antitrust immunity which

it confers on agreements Other areas of significant change include new

statutory definitions and a somewhat modified exemption authority The

430 27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 431

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

Act authorizes the requiring of periodical or special reports as well as

the filing of conference minutes and provides for penalties for infringement

of its provisions

The Act and its legislative history sets forth certain policies to guide

regulation under the new statutory scheme One fundamental purpose of

the Act is to establish a nondiscriminatory regulatory process with a mini

mum of government intervention and regulatory costs Another is to provide

an efficient and economic ocean transportation system in harmony with

international shipping practices To these ends agreements are to be re

viewed and processed within a fixed period of time and generally will

become effective after a short waiting period Only those pending agree

ments which raise concern under the general standard or the conduct prohib

ited by section 10 of the Act are to be subjected to injunctive challenge

in federal court where the Commission has the burden of proof The Act

thereby places greater emphasis on the subsequent monitoring of an agree

ment after it has become effective in order to ensure that agreement oper

ations are conducted consistent with the requirements of the Act

On May 29 1984 pursuant to section 17 b of the Act 46 D S C

app 1716 b which authorizes the Commission to prescribe interim rules

without adhering to the usual notice and comment procedures under the

Administrative Procedure Act 5 D S C 553 the Commission published

an Interim Rule implementing those provisions of the Act which govern

agreements Rules Governing Agreements By Ocean Common Carriers and

Other Persons Subject to the Shipping Act of 1984 Docket No 8426

26 F M C 681 Interested persons were given 90 days to comment on

the Interim Rule In addition interested persons were afforded an oppor

tunity to submit emergency comments addressing any matters which might

warrant modification prior to the June 18 1984 effective date A number

of emergency comments were received and on June 14 1984 the Commis

sion published amendments to the Interim Rule 26 F M C 748 1

Subsequently during the comment period the Commission received peti

tions from a number of conferences to suspend certain record keeping

and reporting requirements in Subpart G On September 17 1984 the Com

mission published a further amendment to the Interim Rule which deferred

the implementation of certain of those requirements pending the issuance

of aFinal Rule 27 F MC 121

Thirty nine filings were received in Docket No 8426 14 emergency

comments filed prior to June 18 1984 23 final comments either timely

filed or filed shortly after the deadline and granted an extension of time

for filing 2 and two petitions seeking relief from certain requirements of

I The Office of Management and Budget OMB clearance number was also published in the Federal Reg

ister on June 14 1984 49 FR 24521

2

Several persons sought to file late comments in Docket No 8426 well after the close of the comment

period and these requests were denied For the most part these comments are either repetitious of points al

Continued

I71lIIr
432 FEDERAL MARITIME COMMISSION

Subpart G Because of the extensive number of parties that participated

in this proceeding comments are identified by number in the following

discussion A list of comments filed in Docket No 8426 is provided

in the conclusion to the Supplementary Information

On September 17 1984 again pursuant to the section 17 b rulemaking

authority the Commission published a third amendment to the Interim

Rule Amendments to Rules Governing Agreements by Ocean Common Car

riers and Other Persons Docket No 8432 27 F M C 121 This amend

ment added a new section 572 103 gto state Commission policy regarding

the completeness and definiteness with which agreement authority must

be described and a new section 572 406 to establish guidelines regarding

open ended authority and interstitial authority Interested persons were given

30 days to comment on this amendment Ten timely comments were re

ceived in Docket No 8432 These comments are also listed in the conclu

sion to the Supplementary Information

Many of the concerns raised in the emergency comments and in the

Subpart G petitions filed in Docket No 8426 have been addressed through

changes in the mandatory provisions of Subpart H and through the tem

porary suspension of certain requirements in Subpart G Matters raised

in the emergency comments and the petitions which were not addressed

in the June amendments or the September Order have been considered

in connection with the issuance of the Final Rule Thus all timely comments

received in Docket Nos 8426 and 8432 have been reviewed and consid

ered The Supplementary Information discusses significant matters raised

in the comments Any comments not expressly mentioned herein have

either been incorporated as a technical change without discussion or have

been found to be without merit or irrelevant

In the discussion which follows the term Interim Rule designated Part

572 refers to the rules issued in Docket No 8426 as subsequently amend

ed and suspended and the amendment to Part 572 issued in Docket No

8432 The rule which is now published is referred to as the Final Rule

II Discussion of Comments on Part 572 andAppendix A

A number of technical changes have been made throughout Part 572

and Appendix A Some changes were prompted by comments and others

are clarifying or technical changes made to improve this Part One change

made throughout has been the substitution of the phrase this part for

phrases such as this rule or these rules

ready raised in other comments or are rendered moot by the Commission s action regarding Subpart H For

a discussion of the reasons for rejecting these late filed comments see the Commission s Order of Denial

inDocket No 8426 dated October 17 1984

7PMr
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 433

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

SUBPART AGENERAL PROVISIONS

Subpart A contains provisions which are of general applicability to Part

572 Specific sections state the authorities purpose and policies of part

572 and define certain terms

Section 572 101 Authority

Section 572 101 states the statutory authorities for Part 572 No comments

were received on this section and no substantive changes have been made

to it in the Final Rule

Section 572 102 Purpose

Section 57210 states the purpose of Part 572 namely to implement

those provisions of the Act which govern agreements among ocean common

carriers and other subject entities Comment 38 states that the words other

entities should be changed to marine terminal operators because such

operators are the only entities other than ocean common carriers which

are required to file agreements under the Act This point is well taken

Therefore as a clarification section 572 102 is amended to recite the lan

guage of section 4 of the Act which states that the Act applies to agreements

by or among ocean common carriers and to agreements among marine

terminal operators and among one or more ocean common carriers Marine

terminal operator agreements subject to Part 572 must have a nexus with

foreign commerce

Section 572 103Policies

Section 572 103 sets forth the general policies to be followed in admin

istering the regulatory regime established by Part 572

Section 572 103 b

Section 572 103 b states that in reviewing agreements under the general

standard only that information which is relevant and necessary to a section

6 greview shall accompany particular types of agreements Comment 22

takes issue with section 572 1 03 b

specifically and section 572 103 gen

erally to the extent that they establish a basis fqr requiring the Information

Form with certain agreement filings The basis for the Information Form

requirement is discussed below in connection with the comments to Subpart

D Subpart F and Appendix A As indicated below some adjustments

have been made in the Information Form in response to comments How

ever the basic requirement of a Form is being retained Therefore there

is no need to modify the statement of policies with regard to informational

needs

Section 572 103 j

Section 572 103 t

states Commission policy regarding the need for and

means of achieving compliance with the Act s

requirement that mandatory

27 F M C
434 FEDERAL MARITIME COMMISSION

provisions be included in certain kinds of agreements Comment 22 urges

that conferences continue to be allowed to draft their own mandatory provi

sions As indicated below in the discussion of Subpart H the purpose

of requiring adoption of the model mandatory provisions in Subpart H

has been achieved and Subpart H is deleted from the Final Rule Appro

priate changes have been made in the statement of policy in paragraph

t

to indicate that parties to conference agreements may develop their

own mandatory provisions

Section 572 J03 g

Section 572 103 g together with section 572406 were added in Docket

No 8432 as new sections of Part 572 Section 572 103 g

states Commis

sion policy that agreements must be clear and definite must embody the

complete understanding of the parties and must set forth the specific au

thorities and conditions under which the parties to the agreement will

operate

Although Comment 102 expresses strong support for inclusion of section

572 103 ga number of other comments suggest that it is vague unneces

sary or inappropriate and should be deleted or modified The necessity

of such a policy statement was not apparent at the time the Interim Rule

was issued The principles set forth in the policy statement were well

settled under the administration of the 1916 Act and nothing in the 1984

Act or its legislative history indicated any departure from those established

principles However the early experience in the administration of the 1984

Act provided a number of significant instances in which filed agreements

contained unacceptably vague incomplete or indefinite statements of author

ity It was this experience that prompted the addition of section 572 103 g

and section 572 406 to Part 572

This statement of policy merely represents a codification of existing

policy As a point of clarification it should be noted that it is not the

intent of this section to provide a basis for imposing detailed limits on

every agreement Its purpose is to ensure that a complete agreement is

filed in sufficient detail to conduct a meaningful review However no

change in the language of section 572 103 g

is necessary and it is retained

in the Final Rule The other issues raised by the comments are addressed

below in the discussion of section 572 406

Section 572 104 Definitions

Section 572 104 lists definitions used in Part 572 Changes have been

made in response to comments to state more precisely particular definitions

Section 572 J04 a

Agreement

Section 572104 a recites the definition of agreement This definition

is amended to include cancellation thereby conforming the definition

to the statute

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 435

CARRIERS OTHERS SUBJECT TO SHWPING ACT OF 1984

Section 572 104 b Antitrust Laws

Section 572 l04 b recites the definition of antitrust laws found in

section 3 2 of the Act Comment 38 states that this definition is used

only once in the Interim Rule and should be eliminated or in the alter

native rephrased to provide the United States Code citations of the ref

erenced statutes This definition was included to improve the efficiency

of Part 572 as a complete document and for that reason it shall be retained

The definition however has been modified to use the United States Code

citations in order to make the definition more functional

Section 572 104 c Appendix

Section 572 1 04 c defines the additional material which is appended

to and constitutes a part of an agreement as an appendix Comment

22 suggests that the definition is so narrow as to preclude the use of

an appendix to publish provisions such as self policing rules which have

routinely been published in an appendix Comment 39 suggests that the

definition in conjunction with other sections of Part 572 would impose

the full 45 day waiting period on appendices contents

The use of an appendix is explained at section 572 402 t which governs

the contents of such an appendix Section 572 402 t is amended to permit

an expansion of the use of an appendix The appendix publication is

not mandatory nor is there any prohibition against the appendix publica

tion of other agreement provisions whose physical location in an agreement

is not otherwise specified in this part The period of review conducted

for such filings depends upon the substantive content of the appendix

and not its form Parties are not precluded from routine use of appendices

unless the particular provision is one whose placement is required elsewhere

in the agreement pursuant to sections 572 402 572 501 and 5720 The

Interim Rule definition fulfills these objectives and is retained

Section 572 104 eCommon Carrier

Section 572 104 e recites the definition of the term common carrier

which is set forth in section 3 6 of the Act The statutory definition

is stated conjunctively rather than disjunctively and requires both the as

sumption of responsibility for transportation and the utilization of a vessel

Comment 2

suggests that the word and be deleted from paragraph e I

and replaced with the word or Because this suggested change would

substantively alter the statutory definition of a common carrier the change

is not appropriate The Final Rule therefore continues to recite the statutory

definition

Section 572 104 jConference Agreement

Section 572 104 t defines a conference agreement as one which pro

vides for the collective fixing of rates an administrative structure and

the filing of a common tariff unless other features of the arrangement

27 F M C
436 FEDERAL MARITIME COMMISSION

bring it within the definition of a consortium joint service pooling sailing

or transshipment agreement Comment 22 suggests that the central organi

zation element of this definition does not clearly encompass simple admin

istrative structures Comment 28 also suggests that the minimal administra

tive structure of agreements previously designated rate agreements is

not clearly embraced by the definition This definition is intended to include

rate agreements The Interim Rule definition shall therefore be revised

to remove any implication that only a large complex administrative structure

would bring a ratemaking agreement within the scope of this definition

Section 572 104 gConsultation

Section 572 104 g

defines consultation as the process of conferring

between carriers and shippers for the purposes of resolving commercial

disputes or reducing malpractices Comment 39 suggests that the definition s

resolving commercial disputes language potentially oversteps the pro

mote commercial resolution language of the Act and could be inter

preted to impose a requirement of binding arbitration

In response to this suggestion the definition in the Final Rule shall

be clarified to state that consultation means a process whereby a con

ference and a shipper confer for the purpose of promoting the commercial

resolution of disputes andor the prevention and elimination of the occur

rence of malpractices

Section 572 104 iEffective Agreement

Section 572 107 i

defines an effective agreement as one approved

pursuant to section 15 of the 1916 Act or one permitted to become effective

pursuant to sections 5 and 6 of the 1984 Act Comment 38 states that

the term is not used in Part 572 and should be deleted Comment 24

contends that the definition does not encompass agreements which are

exempted under either the 1984 Act of the 1916 Act

The term effective agreement is used in the definition of modifica

tion in section 572 104 r which in turn supports sections 572 402 and

572 403 Definition of the term is retained but its scope is expanded

to include an agreement previously approved pursuant to section 15 of

the 1916 Act or effective pursuant to an exemption under the 1916 Act

or filed and effective pursuant to sections 5 and 6 of the 1984 Act or

exempt pursuant to section 16 of the 1984 Act

Section 572 104 mlnterconference Agreement

Section 572 104 m defined an interconference agreement as one be

tween conferences serving different trades Comments 22 and 28 contend

that the definition is unnecessarily restricted by the different trades

condition These Comments have merit Because there is no prohibition

against an agreement between two conferences in the same trade such

an agreement should be included in the definition of interconference agree

ments and made subject to the requirements placed on such agreements

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 437

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

by the Act and Part 572 The Final Rule therefore simply defines intercon

ference agreement to mean an agreement between conferences

Section 572 104 n Joint Service Consortium Agreement

Section 572 104 n Defines a joint service or consortium agreement

as a

price fixing arrangement between ocean common carriers wherein

the parties operate generally as a single carrier under a single operating

name and common operating management

Comment 27 suggests that the definition is too narrow and fails to

contemplate a situation where a joint service holds out service only through

its participation in a conference and does not independently fix its own

rates or publish its own tariff Comment 22 also contends that a joint

service does not always include all of the attributes prescribed by the

Interim Rule definition

The 1984 Act refers to joint service consortia but does not define these

terms In the interest of providing the industry same guidance in this

area we have developed a definition as consistent as possible with prior

convention We believe that agreements which engage in or have the

authority or potential to engage in the activities described in this definition

are properly treated as a single type of agreement and denominated a

joint service or consortium agreement for the purposes of the Act

and Part 572 We agree however that the joint service definition should

be amended to include those agreements in which the parties choose to

exercise their rate fixing and tariff authorities through participation as

a single entity in a conference or other duly authorized agreement Accord

ingly section 572 104 n 2 and 3 are revised to read 2 independently

fixes its own rates charges practices and conditions of service or chooses

to participate in its operating name in another agreement which is duly

authorized to determine and implement such activities 3 independently

publishes its own tariff or chooses to participate in its operating name

in an otherwise established tariff

Section 572 104 o Marine Terminal Facilities

Section 572 104 0 defines the term marine terminal facilities to in

clude off dock container freight stations at inland locations Comment 38

urges the deletion of this definition because the term does not otherwise

appear in Part 572

This term supports the definition of a marine terminal operator in section

572 104 p

It is appropriate therefore to define the facilities utilized by

marine terminal operators in order to resolve uncertainties as to the Commis

sion s jurisdiction over agreements governing the use or operation of such

facilities As indicated in some of the other comments there appears to

be some confusion concerning the facilities that are provided by the marine

terminal operator defined in section 3 of the 1984 Act

27 F M C
438 FEDERAL MARITIME COMMISSION

Comments 20 and 34 state that Commission jurisdiction is improperly

expanded by defining the term marine terminal facility to include off

dock container freight stations at inland locations or other similar facilities

from which cargo is tendered to a consignee or received from shippers

for vessel or container loading These Comments suggest that Congress

intended the reach of the 1984 Act to be no greater than that of the

1916 Act with respect to marine terminals Comment 22 argues that the

definition would subject importers and exporters to commission regulation

as marine terminal operators and enable them to obtain antitrust immunity

under the 1984 Act

Off dock container freight stations are properly included within the term

marine terminal facilities Both the 1984 Act and the 1916 Act refer

to terminal operators as persons furnishing wharfage dock warehouse

or other terminal facilities in connection with a common carrier by water

As Comment 20 acknowledges this phrase has been construed under the

provisions of the 1916 Act in Richmond Transfer and Storage Company

23 F M C 362 1980 to include marine terminal facilities not located

on the dock at the water s edge There is nothing in the 1984 Act or

its legislative history to indicate the Congress intended the Commission

to now construe marine terminal facilities so as to exclude off dock con

tainer freight stations Accordingly the Commission will not as urged

by some comments delete off dock container freight stations from the

marine terminal facility definition is section 572 104 0

Comment 28 is concerned that agreements for pure labor services

such as stevedoring contracts may be made subject to the filling require

ments of the 1984 Act because the phrase and services connected there

with is used in defining marine terminal facilities in section 572 104 0

Comment 28 misconstrues this definition The Supplementary Information

to the Interim Rule indicated that neither the term marine terminal facil

ity nor the term marine terminal operator would operate to extend

Commission jurisdiction over stevedoring or pure labor services The

phrase and services connected therewith is intended to refer to those

labor services that are incidental to terminal operators such as free time

checking or handling accordingly the suggestion that the above referenced

phrases be deleted has not been adopted

Section 572 104 p Marine Terminal Operator

Section 572 104 p which tracks the language of the 1984 Act defines

a marine terminal operator as a person

engaged in the business of furnishing wharfage dock

warehouse or other terminal facilities in connection with a com

mon carrier by water Emphasis added 3

3

There is asubtle but possibly significant difference between the 1984 Act s definition of marine terminal

operator and the 1916 Act s definition of aterminal operator as an other person Section I of the 1916

Act defines the term other person as any person carrying on the business of forwarding or furnishing

27 F M C
27 F M C

RULES GOVERNING AGREEMENTS BY OCEAN COMMON 439

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

This definition shall be modified to make clear that shippers or consignees

as well as their facilities are not made subject to Part 572 and the Commis

sion s

jurisdiction merely because the shippers or consignees facilities

are used to tender or receive proprietary cargo Shippers or consignees

who for their own or the carrier s convenience tender or receive proprietary

cargo at their owned or leased facilities are not engaged in the business

of furnishing terminal facilities in connection with a common carrier by

water Such shippers or consignees provide facilities to common carriers

only as an incidental element of their primary business concern Such

consignees and shippers do not meet the statutory definition of a marine

terminal operator and are not subject to Part 572 and the agreement provi

sions of the 1984 Act Accordingly section 572 1 04 p is amended by

adding a statement that the term marine terminal operator does not

include shippers or consignees who exclusively furnish marine terminal

facilities or services in connection with the tendering or receiving of propri

etary cargo from a common carrier by water

Section 572 1 04 r Modi fication

Section 572 104 r defines those changes which are interpreted to be

modifications to agreements and therefore subject to sections of Part

572 dealing with modifications Comment 22 contends that cancella

tions are not properly includable in the definition The Act at section

31 suggests a distinction between modification and cancellation Sec

tion 572 104 r is therefore amended to delete the reference to cancella

tions

Section 572 104 sNon Vessel Operating Common Carrier

Section 572 104 s defines a common carrier which does not operate

the vessels by which the ocean transportation is provided as a non

vessel operating common carrier NVOCC and establishes its relationship

to the underlying ocean common carrier as that of a shipper Com

ment 39 suggests that this definition be modified to expressly state that

an NVOCC is a common carrier in its relationship with the underlying

shipper The Interim Rule definition however recites the statutory definition

and shall be retained in the Final Rule

Section 572 104 x Port

Section 572 104 x defines the term port as the place at which an

ocean common carrier originates or terminates andor transships its actual

ocean carriage of cargo or passengers as to any particular transportation

wharfage dock warehouse orother terminal facilities in connection with a common carrier The term car

rying on the business of forwarding is defined separately in the 1916 Act Although the Commission has

previously referred to terminal operators as persons carrying on the business of furnishing wharfage dockage

etc the phrase carry on the business of does not clearly modify the language furnishing wharfage dock

age etc The 1984 Act on the other hand unequivocally requires marine terminal operators to be engaged

in the business of furnishing wharfage dockage etc
440 FEDERAL MARITIME COMMISSION

movement Comment 23 suggests certain revIsions to the definition of

port as well as to the instructions to part V A of the Information

Form Comment 23 objects that the way in which the term port call

is used in the Form is overly broad and imposes an enormous data collection

burden Certain revisions have been made to the Information Form which

should resolve this concern Therefore there is no need to change the

definition of port in section 572 104 x

Section 572 104 zService Contract

Section 572 104 z defines the term service contract as used in Part

572 This definition recites the definition set forth in the Act and makes

no express reference to service contracts with shippers associations Com

ment 39 states that this definition would be improved by expressly recogniz

ing the authority of conferences to enter into service contracts with shippers

associations Comment 39 states that this change would better reflect the

intent of the Act and its legislative history This suggestion has merit

and the definition shall be amended as suggested

Section 572 104 aaShipper

Section 572 104 aa tracks section 3 23 of the Act and defines the

term shipper as an owner or person for whose account the ocean transpor

tation of cargo is provided or the person to whom delivery is made

Comment 28 suggests clarification of the definition by the inclusion of

the word other after the words owner or Comment 33 suggests

the addition of a statement that the term shipper also includes shippers

associations The first suggestion is adopted This revision should also

accommodate the other suggestion that the term shipper be expanded

to include shippers association

Section 572 104 bbShippers Association

Section 572 104bb recites the statutory definition of a shippers associa

tion Comment 33 states that this definition should make clear that shippers

associations are included within the meaning ofthe term shipper wher

ever that term is used in Part 572 In view of the change made in the

term shipper no change in this definition is deemed necessary The

question of whether a shippers association should be composed only of

persons who are the beneficial owners of cargo as noted in Comment

22 is the subject of a pending petition and is not addressed here

Section 572 104 ccShippers Requests and Complaints

Section 572 104 cc describes the shipper conference communications

which constitute shippers requests and complaints and which are subject

to Part 572 Comment 39 suggests that the definition be limited to written

communications and exclude misrating claims

Limiting shippers requests and complaints to written communications

and excluding complaints pertaining to misratings is unduly restrictive and

27 F M C
27 F M C

RULES GOVERNING AGREEMENTS BY OCEAN COMMON 441

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

unwarranted The matter of written versus oral communications is a

proce

dural matter better dealt with in the context of the conference s rules

regarding shippers requests and complaints Moreover there appears to

be no reason for excluding misratings as a subject matter for shippers

requests and complaints The handling of misratings is a matter commonly

dealt with in tariff publications and as such should not be excluded Given

the nature of misratings and as long as the conference tariff provides

an efficient and fair mechanism for their resolution it is doubtful that

such matters would come to the conference as a shippers request or com

plaint However if the tariff fails to provide an appropriate remedy then

the tariff itself is open to criticism and is a valid subject for a request

or complaint

It is also suggested that section 572 104 cc be expanded to include

communications involving service contracts This suggestion has merit and

section 572 104 cc has therefore been revised to provide that shippers

requests and complaints includes a communication from a shipper to

a conference requesting to enter into a service contract

Section 572 J04 ddSpace Charter Agreement

Section 572 104 dd defines that combination of intercarrier aCtIvItIes

which constitutes a

space charter agreement Comment 28 suggests that

there is a possible overlap between the space charter and trans

shipment agreement definitions and suggests that the definition of a space

charter agreement expressly exclude transshipment agreements

There is indeed some overlap between the two definitions This occurs

because a transshipment agreement is a type of space charter To specifically

exclude them from the definition of space charter would confuse this rela

tionship The suggestion therefore is not adopted

Section 572 J04 ff Transshipment Agreement

Section 572 104 ft defines that combination of intercarrier activities and

authorities which are classified as transshipment agreements Apart from

the previously discussed comment relative to the overlap between space

charter and transshipment agreements Comment 38 contends that the

transshipment agreement definition is unused in Part 572 and should

be deleted The term transshipment agreement is used as an exclusion

in defining conference agreements in section 572 104 t

an exclusion cited

in section 37 of the Act The term is also used and components of

its definition are repeated in the exemption for non exclusive transshipment

agreements The definition therefore will be retained

SUBPART B SCOPE

The purpose of Subpart B is to set forth those agreements which are

subject to Part 572 and to specifically list certain kinds of agreements

to which the rules of Part 572 do not apply In response to certain comments
442 FEDERAL MARITIME COMMISSION

and in order to state the distinction between subject and non subject agree

ments more clearly Subpart B is being reorganized as two sections Section

572 201 of the Final Rule encompasses the agreements which were set

forth in sections 572 201 and 572 202 of the Interim Rule and is retitled

Subject Agreements Section 572 202 of the Final Rule includes those

agreements which were set forth in sections 572 203 through 572 208 of

the Interim Rule and is retitled Non subject agreements

Comment 38 proposes that Subpart B be expanded to include agreements

related to transportation to be performed within or between foreign coun

tries Comment 22 on the other hand urges that this same category

of agreements be added as an exclusion in Subpart C

Section 5 a of the Act expressly provides that foreign transportation

agreements are not required to be filed with the Commission Because

these agreements are not subject to filing Subpart B is being modified

to include them as agreements which are not subject to Part 572 Because

of this addition of the broad class of foreign transportation agreements

in Subpart B the inclusion of foreign inland agreements or foreign marine

terminal agreements in Subpart C has been eliminated from the Final Rule

Foreign transportation agreements are not subject to Part 572

Comment 22 argues that transshipment agreements fall within the class

of foreign transportation agreements specified in section 5 a of the Act

and should be excluded from filing The Comment objects to continued

regulation of transshipment agreements whether exclusive or non exclusive

To the extent that these agreements are not subject to this part under

section 572 202 c or fall within the exemption of section 572 306 they

need not be filed Other types of transshipment agreements however are

subject to filing requirements

Section 572 201 redesignated section 572 201 aAgreements By or

Among Ocean Common Carriers

Section 572 201 recites the listing of agreements in section 4a of the

Act No substantive changes have been made to this section in the Final

Rule

Section 572 202 redesignated section 572 201 b Marine Terminal Opera

tor Agreements Involving Foreign Commerce

This section is based on section 4b of the Act In conjunction with

section 572 202 e it clarifies and implements the distinction under the

Act between marine terminal operator agreements which involve foreign

commerce and those which are exclusively in interstate commerce The

suggestion in Comment 20 that further clarification of the status and treat

ment of marine terminal operator agreements is necessary has been ad

dressed above in discussing the definitions of marine terminal facility

and marine terminal operator

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 443

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

Section 572203 redesignated section 57220 e

t

Marine Terminal Opera

torAgreements Exclusively in Interstate Commerce

This section states that a marine terminal operator agreement exclusively

in interstate commerce is not subject to Part 572 Comment 38 suggests

that this section is superfluous and recommends that it be deleted Inasmuch

as this section together with section 572 20l b distinguishes those exclu

sively domestic marine terminal operator agreements which are outside

the scope of Part 572 from those terminal agreements involving foreign

commerce this section serves a useful purpose and shaH be retained Certain

technical changes suggested by Comment 38 however have been adopted

Comment 21 expresses concern about inadvertent antitrust exposure and

would prefer a procedure whereby parties could obtain antitrust immunity

under both the 1984 and 1916 Shipping Acts Parties that have such concern

may file an agreement under both the 1984 and 1916 Shipping Acts and

seek to obtain antitrust immunity under both Acts

Section 572204 redesignated 57220 d fCommon Carrier Marine Termi

nal Agreements

This section provides that Part 572 does not apply to common carrier

terminal agreements Comment 38 suggests that the word marine should

be added before the word terminal This change would bring the language

of this section into conformity with section 7 b 3 of the Act and therefore

it is adopted

Section 572205 redesignated 572 202 fNon Vessel Operating Common

Carrier Agreements

This section states that agreements solely and exclusively between non

vessel operating common carriers are not subject to Part 572 Comment

38 states that this section is superfluous and should be deleted The purpose

of this section is to provide guidance with regard to agreements between

or among NVOCC s Such agreements were subject to the 1916 Act but

are not within the Commission s

jurisdiction under sections 4 and 5 of

the 1984 Act An express statement that these agreements are not subject

to Part 572 is therefore appropriate and will be retained in the Final

Rule

Two technical changes shaH be made in this section Comment 38 be

lieves that the use of the word by in this section might be read to

exclude a three party space charter and sailing agreement between one

NVOCC and two ocean common carriers To avoid this unintended interpre

tation the word by has been deleted from the Final Rule In addition

the phrase solely and exclusively is added in order to further clarify

the status of agreements among NVOCC s under the Act

27 F M C
444 FEDERAL MARITIME COMMISSION

Section 572206 redesignated section 572 202 gOcean Freight For

warder Agreements

This section states that ocean freight forwarder agreements are not subject

to Part 572 Comment 38 argues that this section is superfluous and should

be deleted Again there would appear to be a useful purpose served by

retaining this section in order to provide guidance on those maritime industry

agreements which were subject to the 1916 Act but not subject to sections

4 and 5 of the 1984 Act The technical change suggested in Comment

38 would improve this section and the words by or are deleted In

addition the phrase solely and exclusively is added to further clarify

this section

Section 572 207 redesignated section 572 202 b Maritime Labor Agree

ments

This section is a restatement of section 5 e of the Act No comments

were received on this section and no substantive changes have been made

to it in the Final Rule

Section 572 208 redesignated section 572 202 a Acquisitions

This section is a restatement of section 4c of the Act No comments

were received on this section and no substantive changes have been made

to it in the final Rule

SUBPART C EXEMPTIONS

Subpart C treats those agreements which have been exempted from filing

or other requirements by the Commission pursuant to section 16 of the

Act In response to certain comments Subpart C has been reorganized

to deal solely with Commission ordered exemptions The statutory exclu

sions formerly listed in this subpart have been relocated in Subpart B

as discussed above Section 572 301 sets forth the procedures applicable

to exemptions Thereafter each separate exemption is listed in a separate

section This arrangement will facilitate the orderly addition of any new

exemptions to this subpart

Section 572301 Exemption Procedures

Section 572 301 sets forth procedures for exempting agreements subject

to the Act from any requirement of the Act

Section 572301 aAuthority

Section 572 301 a concludes with the statement that The antitrust laws

do not apply to any agreement exempted from any requirement of the

Act including filing and Information Form requirements Comment 38

states that this sentence should be deleted because the Commission does

not have jurisdiction over the antitrust laws This language was suggested

by section 7 of the Act which states that the antitrust laws do not apply

to certain agreements Its purpose was merely to indicate as provided

1F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 445

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

in the Act that agreements exempt pursuant to section 16 enjoy antitrust

immunity It was not the intention of this statement to assert or imply

Commission jurisdiction over the antitrust laws In order to eliminate any

confusion this sentence shall be deleted Deletion of course does not

in any way affect whatever antitrust immunity attaches to exempt agree

ments

Section 572301 c Application for Exemption

Comment 38 suggests that in the first sentence of section 572 30l c

the words or revocation should be changed to read or revocation

of an exemption This suggested change clarifies this section and is adopt

ed

Section 572 30I jRetention ofAgreement by Parties

Section 572 30l f requires that any agreement which has been exempted

pursuant to section 16 of the Act shall be retained by the parties and

be made available upon request for inspection during the term of the

agreement and for a period of three years after its termination

Comments 22 and 38 object to the requirement that copies of exempt

agreements be retained for a three year period These Comments do not

question the Commission s authority to require retention of agreements

but argue that the Commission should not as a matter of policy impose

an across the board requirement for agreements with a de minimis impact

This record keeping requirement is necessary to ensure that the Commis

sion is able to carry out its trade monitoring responsibilities under the

Act Should a question of violation of the Act arise the exempt agreement

must be available for review Moreover a three year period does not appear

to be unreasonable Finally it does not appear to be a significant burden

for parties to retain a

copy of an agreement for a period of three years

after its expiration The record retention requirement therefore shall be

retained as to exempt agreements

Section 57230 Foreign Inland Transportation Agreements Exclusion

This section in the Interim Rule stated an exclusion from filing for

foreign inland transportation agreements Comment 38 states that such agree

ments are not statutorily excluded from filing but should nevertheless be

exempt from filling pursuant to section 16 of the Act Section 5 a of

the Act excludes from filing agreements related to transportation to be

performed within or between foreign countries The Commission interprets

this broad class of agreements to include foreign inland transportation agree

ments Because of the inclusion of foreign transportation agreements in

Subpart B there is no longer any need to retain this section and it is

deleted from the Final Rule

27 F M C
446 FEDERAL MARITIME COMMISSION

Section 572 303 Foreign Marine Terminal Agreements Exclusion

Section 572 303 in the Interim Rule states the statutory exclusion from

filing for foreign marine terminal agreements Comment 38 states that these

agreements should be treated as exemptions rather than as exclusions For

eign marine terminal agreements however are also a specific type of

the foreign transportation agreement referred to in section 5 a of the Act

They are therefore included within the scope of section 572 202 c in

the Final Rule and are deleted from Subpart C

Section 572304 redesignated section 57230 Non Substantive Modifica

tions to Existing Agreements Exemption

This section is based on the exemption which formerly appeared at

46 CPR 524 3 d The former exemption covered three specific kinds of

agreements or modifications 1 technical changes to the text of the agree

ment itself 2 changes in titles of persons or committees and 3 agree

ments and changes affecting office facilities furnishings supplies and other

housekeeping matters The exemption in the Interim Rule narrowed the

former exemption by eliminating the first two types of changes

Comments 22 24 26 38 and 39 urge that the full scope of the former

exemption be restored in the Final Rule The reason for restricting the

former exemption was to ensure that certain changes to the text of the

agreement or in the personnel of the agreement administration would be

filed so that the agreement on file with the Commission would accurately

reflect the actual agreement currently in effect among the parties

These Comments have merit and the full scope of the former exemption

is restored The purposes to be achieved by limiting the exemption can

still be achieved if all such non substantive agreements or modifications

are filed with the Commission for informational purposes Finally this

section is amended as suggested by Comment 26 to allow parties to

seek a determination from the Director Bureau of Agreements and Trade

Monitoring as to whether a particular agreement or modification is non

substantive

Section 572305 redesignated section 572303 Husbanding Agreements

Exemption

This section in the Interim Rule clarified and continued the exemption

of husbanding agreements No comments were received on this section

J and no substantive changes have been made to this section in the Final

Rule

Section 572 306 redesignated section 572304 Agency Agreements Ex

emption

This section in the Interim Rule clarified and continued the exemption

for agency agreements pursuant to section 16 of the 1984 Act Comment

19 states that a blanket exemption for agency agreements is not appropriate

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 447

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

This comment filed by the Port of Los Angeles notes that in Docket

No 83 48 Alaska Maritime Agencies Inc et at v Port of Anacortes

et at agents took the position that they should not be responsible for

certain charges where they act for disclosed principals The Port however

states that it is not always clear for whom an agent is working or whether

the agent is authorized to make certain representations The Port therefore

seeks some modification of the exemption to address the alleged need

of marine terminal operators to know the scope of the authority of the

parties with whom they are dealing

Subsequent to the filing of Comment 19 a settlement was reached and

approved by the Presiding Officer in Docket No 83 48 which may address

the Port s concern See Alaska Maritime Agencies Inc et al v Port of

Anacortes et at 27 F M C 137 1984 In addition section 572 301 f

requires that exempt agreements be retained for a period of three years

Should any problems develop an affected party could bring them to the

Commission s attention Finally ports or other parties may seek modification

or revocation of this exemption at any time in aseparate proceeding under

the procedures of this subpart Such modification if warranted would then

be based upon a

proper factual record Neither substantive modification

nor revocation however would appear to be warranted at this time

Section 572306 a

redesignated section 572304 a

Comment 22 believes that the comma following an agent where it

first appears in this section might imply that the agent is subject to the

Act rather than merely state the type of agent whose agreement is subject

to the Act In order to remove any implication that all agents are subject

to the Act the recommended change shall be made and the comma shall

be deleted

572306 b redesignated section 572304 b

Comment 22 also believes that a change is necessary to paragraph b 2

This Comment suggests that the words do not may have been omitted

from paragraph b 2 and therefore suggests that the paragraph be revised

to read except those 2 which do not permit an agent to enter

into similar agreements with more than one carrier in the trade

There was no omission in the Interim Rule The language in the Interim

Rule carried over the exemption as it was formerly stated in 46 CFR

520 12 b The former exemption did not apply to agency agreements which

permit an agent to enter into similar agreements with more than one carrier

in the trade Because of the potential competitive significance of such

agreements an exemption from filing would not be appropriate This sugges

tion therefore has not been adopted

27 F M C
448 FEDERAL MARITIME COMMISSION

Section 572307 redesignated section 572305 Equipment Interchange

Agreements Exemption

Section 572 307 in the Interim Rule clarified and continued the exemption

for equipment interchange agreements No comments were received on this

section and no substantive changes have been made to it in the Final

Rule

Section 572308 JointPolicing Agreements Exemption

Section 572308 continued the 1916 Act exemption for joint policing

agreements only for the period of the Interim Rule This exemption termi

nates thirty days after the issuance of the Final Rule and thereafter joint

policing agreements must be filed pursuant to the requirements of the

Act and Part 572 Comment 33 supported the termination of this exemption

Comments 22 and 38 are opposed to termination Comment 22 questions

whether joint policing arrangements are even subject to filing

Joint policing agreements at a minimum come within section 4 a 5

of the Act which applies to agreements among ocean common carriers

to engage in an exclusive preferential or cooperative working arrangement

In addition sections 4 a 1 and 2 of the Act might also apply under

certain circumstances Joint policing arrangements are therefore clearly with

in the scope of the Act

Comment 22 argues further that even if such arrangements are subject

to sections 4 and 5 of the Act they should nevertheless be exempt from

filing Comment 22 as does Comment 38 maintains that this exemption

may not be terminated at this time without further notice and opportunity

for hearing

This rulemaking proceeding was instituted among other authorities pursu

ant to section 16 of the 1984 Act See 46 CPR 572 101 The Interim

Rule published in the Federal Register on May 29 1984 49 PR 22300

notified all interested parties pursuant to the Administrative Procedure Act

APA 5 U S C 552 b of the proposed elimination of this exemption

All interested parties have had an opportunity to be heard through the

filing of written comment in accordance with section 16 of the Act and

the APA 5 U S C 552 c Having provided the parties notice and oppor

tunity for hearing the Commission may properly terminate the exemption

of joint policing agreements Finally no adequate reason not to terminate

this exemption has been provided

Comment 38 questions the rationale provided for terminating the exemp

tion on joint policing agreements As noted in the discussion of the Interim

Rule there are potential adverse effects on shippers resulting from a joint

policing agreement Joint policing arrangements may involve significant

numbers of carriers and consequently may have a widespread effect on

shippers utilizing these carriers The Commission believes that these arrange

ments are significant enough to require that they they be filed and reviewed

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 449

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

Comment 38 argues that joint policing arrangements are beneficial in

that they promote cost savings Elimination of the exemption however

will not destroy this benefit The only result of terminating the exemption

is to subject such arrangements to the Acts

filing requirements Given

the fact that such arrangements need not be accompanied by elaborate

information and the relatively short waiting period before effectiveness

the burden of requiring that they be filed is minimal This exemption

therefore is terminated in the Final Rule In light of the fact that this

exemption is being terminated it is unnecessary to address changes to

section 572308 suggested in the comments

Section 572309 CreditInformation AgreementsExemption

Section 572 309 continued the 1916 Act exemption for credit information

agreements only for the period of the Interim Rule This exemption termi

nates thirty days after the issuance of the Final Rule and thereafter these

agreements will be subject to the filing requirements of sections 4 and

5 of the Act and Part 572 Comment 33 supported the termination of

the exemption for credit information agreements Other comments Com

ments 22 24 38 39 urged that it be retained

One misconception seems to be common to the comments opposed to

termination of the exemption The result of eliminating the exemption will

not be to bar the formation of credit information agreements but merely

to require the parties to comply with the filing requirements The filing

requirements should not present a significant barrier to the formation of

these agreements and the parties will be free to share credit information

as they did under the 1916 Act

Comments 24 and 38 take issue with the Commission s statement in

the Supplemental Information that credit is an important factor in price

competition Comment 24 maintains that this exemption does not authorize

the collective pricing of credit Comment 38 asserts that the limitation

contained in section 572 309 c barring the discussion of any matter which

is required to be published in a tariff ensures that these agreements will

not result in antitrust abuses

Credit information agreements must be filed because the distinction be

tween the sharing of credit information and the collective formation of

credit policy and pricing can easily become blurred Accordingly these

agreements should be filed and reviewed in order to ensure that the direc

tives ofthe Act are satisfied

Similar to its position taken with respect to joint policing agreements

Comment 22 asserts that there is no requirement that credit information

agreements be filed and that if the Commission wishes to terminate the

exemption it must provide for additional notice and comment

The Commission s position on this issue is the same as it is with respect

to joint policing agreements A credit information agreement is a

coopera

tive working arrangement within the meaning of section 4 a 5 of the

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Act and therefore is an agreement within the scope of the Act Con

sequently the filing requirements of section 5 and Part 572 must be met

In addition adequate notice and comment has been provided The termi

nation of the exemption was duly noticed in the Federal Register with

the publication of the Interim Rule 49 FR 22301 1984 Parties were

given an opportunity to comment and the Commission has considered these

submissions in accordance with the provisions of the APA

Comment 24 asserts that the authority to set credit terms is interstitial

to collective ratemaking authority Therefore according to this Comment

the exemption for credit information agreements should be continued where

the parties already have collective ratemaking authority

Although the establishment of credit rules is interstitial to collective

ratemaking authority establishment of credit rules is not within the scope

of activity permitted by a credit information agreement The two activities

are distinct As mentioned earlier the purpose of a credit information

agreement is the sharing of credit information not the formation of credit

rules The Commission recognizes however that the sharing of certain

credit information is inherent in the process of forming collective credit

rules Therefore where the parties already have collective ratemaking author

ity and wish to form a credit information agreement depending on the

contents of that agreement they may already have all the authority they

require and may not need an additional agreement

Finally Comment 24 maintains that the expiration of this exemption

is contrary to the provisions of section 2 1 of the Act to achieve a

regulatory system involving a minimum of government intervention and

regulatory costs

The Commission disagrees This is not an example of the agency arbitrar

ily increasing the regulatory burden upon parties subject to the Act Credit

information agreements are properly within the scope of the Act and their

significance to price competition requires that they not be exempted from

the filing requirements Because this exemption is being terminated it is

unnecessary to discuss the various suggested modifications to this section

Section 572310 redesignated section 572306 Nonexclusive Trans

shipment AgreementsExemption

Section 572 310 continues the exemption under the 1916 Act for non

exclusive transshipment agreements pursuant to section 16 of the 1984

Act The exemption in the Interim Rule made a number of changes to

the previous exemption in 46 CFR Part 524 The requirements appearing

at section 572 310 a 2 and 3 were added to the definition of the

agreements which fall within the exemption The specific items which must

appear in a tariff were generally retained in section 572 31O c Section

572 31O d replaced the former mandatory agreement language with a de

scription of the required and permissive contents of such agreements

Section 572 31O a

redesignated section 572 306 a

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Comment 28 objects to the requirement in section 572 31O a 2 which

limits the class of exempt agreements to those which among other things

do not guarantee any particular volume of traffic or available capacity

Comment 28 explains that often when a publishing carrier solicits the

participation of a

connecting or feeder carrier in meeting the needs of

a developing trade or carrying cargoes of opportunity the connecting carrier

does not have sufficient unused vessel capacity in place and is obliged

to charter additional vessel capacity The connecting carrier however may

be reluctant to charter additional capacity unless the publishing carrier

agrees to guarantee a minimum volume of cargo In order to facilitate

such arrangements Comment 28 urges the deletion of the second disqualify

ing element in paragraph a 2

This exemption indeed is intended to be limited to arrangements that

do not guarantee any particular volume of traffic or available capacity

Agreements that contain such guarantees may have anticompetitive con

sequences and are more akin to space charter arrangements and therefore

are subject to all requirements applying to those arrangements Accordingly

this suggested change is not made in the Final Rule

Sections 572310 c d and e redesignated sections 572306 c d

and e

Comment 24 suggests that paragraphs c 2 and d 4 which refer to

origin transshipment and destination ports should be modified to make

clear that such agreements can apply to intermodal cargo Transshipment

arrangements by their nature are limited to the all water movement of

cargo The suggested change therefore is not appropriate This does not

in any way however preclude the filing of through intermodal rates by

participants in such arrangements

Comment 38 urges certain substantive modifications to section 572 310

c d and e and a conforming technical change in section 572 310 b

Comment 38 would delete the reference to the required tariff provisions

cited in section 572310 b and enumerated in section 572 31O c This

Comment believes that the tariff regulations are sufficient in this regard

Comment 38 states that making the filing of a tariff a condition to the

existence of an exemption is logically inconsistent because there can be

no tariff provision until the agreement is effective and no such agreement

can be effective unless it is exempt The provision of section 572 310 c

will be retained in the Final Rule There would appear to be no harm

in having these tariff items enumerated in this exemption section as well

as in the tariff rules Moreover this is a condition which will only be

complied with subsequent to the effectiveness of a nonexclusive trans

shipment agreement The apparent dilemma posed by Comment 38 is artifi

cial

Finally Comment 38 suggests that section 572310 d and e be deleted

as unnecessary restrictions on the commercial arrangements of agreement

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parties Section 572 31O d requires that nonexclusive transshipment agree

ments contain a declaration of the nonexclusive character of the arrangement

and lists 13 permissible terms or specifications in such agreements Section

572 31O e states that no other subject other than those listed in section

572 31O d shall be included in an exempted nonexclusive transshipment

agreement

The requirements of section 572 310 d and e shall be retained Those

provisions are necessary in order to ensure with some degree of specificity

the exact parameters of the exemption Only agreements which meet these

requirements need not be subject to the usual filing and review Parties

that wish to have terms other than those permitted under the exemption

may draft their agreements accordingly Such agreements however will

be subject to filing and review

SUBPART D FILING AND FORM OF AGREEMENTS

Subpart D implements the filing requirements of section 5 of the Act

It establishes filing and form requirements defines and establishes proce

dures for filing modifications of agreements and specifies those agreements

which must be accompanied by an Information Form Subpart D also pro

vides for a waiver of certain form requirements upon a showing of good

cause

Section 572401 Filing ofAgreements

Section 572 401 specifies the time and place for submitting an agreement

describes the contents of the transmittal letter and provides that any agree

ment and accompanying Information Form which does not meet the require

ments of filing shall be rejected in accordance with section 572 60I

Section 572401 a

Several comments Comments I 22 24 28 34 38 suggested changes

in the filing specifications of section 572 401 a Comment 38 states that

this section should fully carry out the terms of the Act and should therefore

provide for the filing of a complete memorandum which specifies the

substance of any oral agreement subject to the Act This suggestion has

merit and is adopted Section 572 401 a now makes it clear that all agree

ments including oral agreements reduced to writing in accordance with

the Act are subject to Part 572 and must be filed

Comments 24 28 and 38 contend that the requirement regarding authority

to file is cumbersome or unnecessary Comments 1 and 34 suggest that

consistent with 46 CPR 502 24 an attorney should be allowed to file

without further statement of authority The purpose of the authority to

file requirement as set forth in the Interim Rule was to ensure that persons

purporting to represent a group of principals did in fact have the authority

to do so There have been some instances in the past where the submissions

tendered by parties allegedly on behalf of a group of principals were

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questionable representations of the intentions of the principals In addition

there have been occasional failures under the Interim Rule and under prede

cessor agreement rules to provide verification of the authority to file Upon

inquiry however these deficiencies have been found to be an oversight

or a technical failing and have been quickly remedied In the case of

a possible misrepresentation there appear to be sufficient safeguards e

g

public notice of filing and penalties for misrepresentation in the Final

Rule to protect against or remedy any serious filing abuse Therefore

the requirement for specification of authority to file has been deleted in

the Final Rule

Comment 22 notes that section 572 401 a does not distinguish between

a subscribing and filing party Comments 22 and 38 take exception

to the reference in this section to the Information Form Inasmuch as

this section is not intended to address the requirements governing the execu

tion i e

subscription of agreements or the required supporting docu

ments those matters being addressed at section 572 402 d and Appendix

A Part IXc no change has been made in response to these comments

Finally section 572 401 a has been changed to require only an original

and two copies of the Information Form rather than 15 as in the Interim

Rule thereby alleviating the paperwork requirements for parties to agree

ments

Section 572401 b

Section 572 401 b describes the contents of the transmittal letter which

accompanies an agreement filing Its purpose is to describe the minimum

information that is necessary to assure the timely and proper receipt ac

knowledgement public notice and initiation of the review process associated

with a filed agreement

Comment 24 suggests that this section unnecessarily requires the repetition

of the submitting party s address and telephone number beneath the letter

signature when that information is already provided in the letterhead An

appropriate change has been made to eliminate repetition

Comment 34 contends that this section should not require that the person

executing the agreement and the person signing the transmittal letter be

the same In order to clarify section 572 401 b in this respect an appro

priate change has been made

Comment 38 suggests that this section be amended to make clear that

the transmittal letter is submitted rather than filed An appropriate

change has been made

In addition to these changes this section has been reorganized to more

clearly set forth the contents of the transmittal letter

Section 572401 c

Section 572 401 c provides that any agreement and accompanying Infor

mation Form which does not meet the requirements of filing shall be

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rejected in accordance with section 572 601 Comment 38 contends that

the reference to the Information Form and any filing deficiencies therein

as a basis for rejection of a filing exceeds the authority granted in section

6b of the Act Comment 34 criticizes section 572 401 c as an imprecise

paraphrase of the statutory language and redundant of section 572 601 and

urges its deletion

The purpose of section 572 401 c is to emphasize the consequences

of failure to meet the submission requirements of the Act and Part 572

to include both those requirements applicable to the filed agreement itself

and those applicable to any submissions required in support of that filing

The authority to include deficiencies in the Information Form as a basis

for rejection is clearly provided in section 5 a of the Act which empowers

the Commission by regulation to prescribe the form and manner in which

an agreement shall be filed and the additional information and documents

necessary to evaluate the agreement Section 6 b of the Act directs the

rejection of any agreement that does not meet the requirements of section

5 The Information Form is by the regulations of Part 572 part of the

requirements referenced in section 5 of the Act and any substantive

failure in its submission is a failure to meet the requirements of section

5 and therefore an appropriate basis for rejection While section 572 401 c

does to some extent repeat the requirements expressed in section 572 601

early experience in the administration of the 1984 Act has shown a need

for the additional cautionary emphasis Section 572 401 c is therefore re

tained without change

Section 57240 Form ofAgreements

Section 572 402 prescribes the form of agreements with the exception

of marine terminal and assessment agreements filed with the Commission

pursuant to section 5 of the Act The provisions of this section were

applicable to new and initial or replacement agreements filed on or after

June 18 1984 They were also made voluntarily applicable to modifications

or restatements of agreements in effect before June 18 1984 until such

time as the Commission specifies a schedule for all governed agreements

to be in conformity The Commission s Interim Rule specifically solicited

comments as to the compliance schedule to be established

Comment 28 contends that the form requirements may be impractical

and requests their voluntary application rather than their requirement Com

ment 34 takes issue with the manner of page numbering specified at section

752 402 b and the manner of page titling specified at section 572 402 c

stating that it would be preferable to begin the numbering of agreement

pages with the first page after the required Title Page and Table of Contents

This Comment further submits that there is no basis for requiring an agree

ment to have both a full name and a doing business as name

The purpose of section 572 402 is to establish a uniform format for

agreements in order to facilitate 1 timely accurate execution of the

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preliminary review imposed by section 6 b of the Act and the substantive

review and disposition directed generally by section 6 of the Act 2

orderly maintenance and use of Commission records in support of the

performance of its statutory obligations and 3 eventual conversion of

these records to a digitalized andor micrographic form to enhance their

cost effective use through computer assisted retrieval techniques The brief

experience under the Interim Rule has already served to demonstrate the

utility of the new format in pursuing the first two of these objectives

Significant portions of the gains in processing efficiency can be directly

attributed to this standardization

With the eventual extension of these format requirements to all agree

ments even greater economies may reasonably be expected With respect

to the numbering of the pages of an agreement the division of an agreement

into discretely numbered sections should enhance the efficiency with which

an agreement can be compiled and maintained and will improve the effi

ciency with which an agreement is utilized As regards the matter of page

titling the purpose of this section is to avoid the identification problem

that arises should the pages of a loose leaf document become separated

The Interim Rule requirement to use the agreement s doing business

as name was primarily intended to minimize the space required to title

the page because dba names are generally shorter than the full name

However upon further consideration we believe that it is preferable to

require each page of an agreement to be titled with the name that appears

on the Title Page and the Rule is modified accordingly

The Supplementary Information to Interim Rule section 572 402 invited

comment as to the time frames for making the format requirements of

section 572 402 applicable to agreements existing prior to June 18 1984

Comment 24 contends that the format requirements should not be made

applicable to existing agreements prior to June 18 1986 Comment 29

suggests a period of ninety days presumably ninety days after publication

ofthe Final Rule

As indicated above the Commission has already experienced significant

benefit from the standardized format in terms of administrative efficiency

in processing and reviewing agreements The standardized format should

also facilitate the implementation of the other record management initiatives

discussed above A fixed deadline for achieving compliance however might

produce a crush of filings which would overtax the Commission s resources

Conformance to the format requirements therefore shall be achieved accord

ing to the following schedule 1 all new agreements shall be submitted

in the required format when initially filed 2 any restatement of a pre

viously effective agreement filed subsequent to December 15 1984 shall

be submitted in the required format 3 any effective agreement which

is modified to any degree and for whatever purpose subsequent to December

15 1984 shall be restated in its entirety and filed in the required format

including the modification and 4 all other governed agreements not other

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wise brought into compliance shall be conformed to the required format

and filed with the Commission by not later than October 1 1985 This

schedule is set forth in section 572 402 h Finally we have amended

section 572 402 to state that the form requirements do not apply to cancella

tions of agreements

Section 572403 Modijication ofAgreements

Section 572 403 establishes requirements with respect to modifications

to agreements Section 572 403 a indicates which modifications are so

significant as to require an accompanying Information Form Section

572 403 d provides a procedure for indicating textual changes in agreements

and section 572 403 g prescribes a two year republication requirement The

comments addressing each of these sections are discussed below

Section 572 403 a

Section 572 403 a defines significant modifications as those changes in

an agreement that may result in a significant reduction in competition

Where the competitive consequences of an agreement modifieation are likely

to be minor the Information Form usually would not be required For

example the addition of a single port to the geographic scope of an

agreement would not be a significant modification but the addition of

an entire port range may have such a competitive impact as to be a

significant modification The June 12 1984 amendment to the Interim Rule

dropped the specification that the addition of members to a conference

constitutes a significant modification This amendment also added the word

significant to changes in geographic scope to reductions in service levels

and to changes in pool penalty provisions or varying charges where such

changes would require the filing of the Information Form

Nine comments address section 572 403 Comment 18 argues that for

joint service agreements the Information Form should only be required

where the modification entailed the addition of new parties to the agreement

but not for the addition of ports or vessels

A joint service agreement may result in a substantial reduction in competi

tion when two or more existing carriers in a trade consolidate their otherwise

competing service Modifications to a joint service agreement that add

vessels or extend the port coverage of the agreement are not likely to

lead to a substantial reduction in competition except where the expansion

of port coverage includes pons currently served outside the joint service

by two or more of the parties Modification to a joint service agreement

that increases the number of parties and therefore increases the potential

market power of the joint service may have a substantial competitive impact

on the trade and raise questions under the general standard Consequently

the Commission is persuaded that significant modifications to a joint service

agreement also include those that add parties to the agreement An appro

priate change is made in the Final Rule

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Comment 22 argues that the Commission is not authorized to require

an Information Form either for the initial filing of any agreement or for

a modification of an agreement The Commission addresses the question

of its authority to require an Information Form in the discussion ofAppendix

A

Comment 26 argues that for conference agreements the only modifications

that should require the submission of an Information Form would involve

a substantial expansion of geographic scope The requirement that an Infor

mation Form be filed with any modification that results in a significant

reduction in competition is argued to be too broad and vague

The Commission generally concurs that as a practical matter modifica

tions of conference agreements which do not add new authorities will

ordinarily only require the Information Form where they substantially in

crease the geographic scope of the agreement This requirement is outlined

in the Commission s June 12 1984 amendment to the Interim Rule How

ever if a conference agreement is amended to add or expand authority

authorizing reductions in service then such a modification would likely

be viewed by the Commission as a significant modification requiring the

submission of an Information Form

The concerns raised by Comment 28 regarding section 572 403 are dis

cussed under Appendix A

Comment 30 in addition to arguing for the requirement that equal access

agreements and modifications thereto be accompanied by an Information

Form an argument that has been addressed along with the concerns of

Comment 28 under the Commission s discussion of Appendix A also

urges express reference to specific types of modifications that might result

in a significant reduction in competition These would include changes

in cargo categories and descriptions that result in significant increases in

cargo that is subject to a pooling equal access joint service or consortium

agreement significant increases in the cargo or revenue share of a national

flag line in a pooling or equal access agreement or a significant decrease

in the cargo or revenue shares of a third flag line in a pooling or equal

access agreement

The purpose of requiring an Information Form with significant modifica

tions is to obtain needed information in order to properly and adequately

review such modifications under the general standard The Commission

has specified certain modifications that may result in a significant reduction

in competition thereby requiring an Information Form The Commission

has not attempted to provide a comprehensive list of all such modifications

Because a pooling agreement is viewed as potentially substantially anti

competitive any modification to such an agreement that reduced competition

would likely be a significant modification requiring the Information Form

The modifications to a pooling agreement referred to by Comment 30

would also likely result in a significant reduction in competition Accord

ingly as a clarification section 572 403 a is amended to state that signifi

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cant modifications also include changes in cargo categories or descriptions

that result in a significant increase in the amount of cargo subject to

the pool or changes in the allocation of cargo or revenue that significantly

change the cargo or revenue shares of national or non national flag lines

Comment 30 also argues that the change effected by the June 12 1984

amendment to the Interim Rule requiring the Information Form only for

those modifications that result in significant changes in geographic scope

significant reductions in service levels and significant changes in

penalty provisions allows the parties excessive discretion to determine what

modifications are in fact significant

We do not agree While parties to agreements are allowed some discre

tion in the first instance to determine which modifications to their agree

ments are significant the Commission retains the option to request additional

information from the parties under section 6 d where the modification

appears significant and the Information Form has not been filed The Com

mission does not wish to impose burdensome filing requirements for each

and every change regardless of its competitive significance Parties should

contact the Director Bureau of Agreements and Trade Monitoring for advice

as to whether or not a particular modification requires the filing of an

Information Form

Comment 34 urges that amendments to conference agreements which

add authority to establish through intermodal rates should not be considered

significant modifications

One of the objectives of the 1984 Act is to clarify regulatory authority

concerning conference intermodal authority The Conference Report explic

itly states that no special stigma should attach to conference agreement

amendments that establish intermodal authority H R Report 98600 98th

Cong 2d Sess 34 1984 This does not mean however that conference

intermodal amendments which extend the scope of price fixing agreement

and raised concerns under the general standard should not be scrutinized

An Information Form therefore is required This should not place an

excessive burden on the parties because the market share information re

quired in the Form applies only to the relevant trade s as determined

by the parties Market share data need not be provided for interior points

to be served

Comment 37 argues that the Commission has no authority to request

an Information Form for any conference agreement or modification and

that in any event it should not require the Form where the modification

solely provides for the addition of members

The Commission rejects the argument that it has no authority to require

an Information Form for reasons stated in its discussion of Appendix A

In regard to the second point the Commission has in its June 12 1984

amendment already deleted the requirement that a modification adding

members to conferences be accompanied by an Information Form

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Comment 38 makes two technical suggestions First it is suggested that

the second paragraph of the Instructions in Appendix A be conformed

with section 572 403 a

repeating the requirement that the Information

Form is to be filed with significant modifications Second the Commission

is urged to list in one place all agreements that require the Information

Form The first change is adopted The second recommendation is not

practicable at least for significant modifications under section 572 403 a

because not all the modifications encompassing various combinations of

authorities that will be filed can be anticipated A filing party may contact

the Director Bureau of Agreements and Trade Monitoring for advice in

this regard For the purposes of an initial agreement filing the Instructions

specify that parties to all agreements with the exception of marine terminal

agreements assessment agreements and agreements exempted from filing

under Subpart C of Part 572 are required to file an Information Form

in conjunction with the agreement

Section 572403 d

Section 572 403 d establishes a mechanism for indicating textual changes

in the language of an agreement Comment 38 believes that the method

of indicating changes is unnecessary and cumbersome This comment sug

gests that parties should have the option of submitting separately for infor

mation purposes a

copy of any agreement modification showing the dele

tions and new provisions

Section 572 403 d is intended to avoid any ambiguity as to what is

being changed deleted or added in an agreement and thereby facilitate

the review of modifications to that agreement This purpose may be equally

achieved by the alternative method suggested by Comment 38 Section

572 403 d therefore shall be amended to provide as an alternative for

the informational filing of a page or pages indicating the proposed modifica

tion in the manner prescribed in sections 572 403 d 1 and 572 403 d 2

Section 572403 g

Section 572 403 g requires the republication of an agreement under cer

tain circumstances but exempts such republication from certain requirements

of Part 572 when no substantive changes are involved Comments 24 and

26 contend that the republication requirement is unnecessary and wasteful

The purpose of section 572 403 gis to provide for the periodic republica

tion of the entire text of an agreement and to remove those portions

of the agreement which have been deleted through prior modifications

Removal of obsolete language enhances the readability of the agreement

This section however has been amended so that the republication require

ment applies only to those agreements which retain deleted language within

the text of the agreement Agreements which make changes by indicating

the change on a separate page filed for information purposes as provided

for in section 572 403 d 3 need not republish the entire agreement

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Section 572 404 Application for Waiver

Section 572 404 provides for a waiver upon a showing of good cause

of the form requirements of sections 572 401 572 402 and 572 403 and

establishes the procedure and content for waiver requests No comments

were received on this section

Upon further consideration the Commission believes that the scope of

section 572 404 should be enlarged to provide for a waiver under appro

priate circumstances from the agreement organization and content require

ments of sections 572 501 and 572 502 There is a direct connection between

section 572 402 on the one hand and sections 572 501 and 572 502 on

the other Any waiver associated in particular with section 572 402 e 2

would almost certainly require relief from all or portions of sections 572 501

and 572 502 This broadening of the waiver provision should not be inter

preted as a lessening of the importance of these form and manner require

ments The purpose of expanding the waiver provision is to provide for

the exceptional situation where some relief may be justified Accordingly

section 572 404a is amended to include sections 572 501 and 572 502

within the matters for which a waiver may be sought

Section 572 405 lnformation Form

Section 572 405 requires that a completed Information Form accompany

certain agreements at the time of their filing Complete responses are re

quired for each item on the Information Form Section 572 4OS b and

the instructions to the Information Form require that where the party is

unable to provide a complete response the party should provide either

estimated data with an explanation of why precise data are not available

or a detailed statement of reasons for noncompliance and the efforts made

to obtain such information

Because certain parts of the Information Form have been made voluntary

or are only required to be completed for certain types of agreements

section 572 405 b is amended to indicate that a complete response to

the Information Form shall be supplied in accordance with the Instructions

In addition in order to relieve any paperwork burden on the parties and

to enhance the ability of the Commission to protect the confidentiality

of the Information Form only an original and two copies of the Information

Form are required to be filed

Several comments object to the required explanation for noncompliance

including the use of estimates as a basis for rejection of the agreement

under section 572 601 Comment 37 questioned whether the Commission

would use the explanation to reject the agreement on the basis of for

example the accuracy of estimates or the adequacy of sources Comment

39 suggests that where explanations are meritorious they should be

accepted

In order to effectively and efficiently utilize the data provided on the

Information Form it is necessary for the Commission to assess the accuracy

27 F M C
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of such data The identification of the sources of estimates allows the

Commission to detennine the extent to which such data should be incor

porated in the analysis of the agreement An explanation of why precise

data are not available is required for certain parts of the Infonnation Fonn

in order to ensure that the parties make a reasonable attempt to provide

data that is available to them Available data as addressed later in the

discussions of Parts III and IV of the Infonnation Fonn are derived from

data that the parties already have available or would ordinarily acquire

in the course of making the commercial decisions underlying the proposed

agreement The Commission has however deleted the requirement that

an explanation of why precise data are not available accompany estimates

in Parts III and IV and the change is indicated in the relevant sections

of the Final Rule Reasonable explanations for the lack of availability

of precise data will continue to be required for the remaining parts of

the Infonnation Fonn which require data and which are not voluntary

Where estimates are not provided a statement of reasons for not providing

estimates and the efforts made to obtain such infonnation is required

Six comments on section 572405 address the issue of the Commission s

authority to require the Infonnation Fonn Four comments took the position

that the Commission does not have such authority under the Act These

Comments are addressed in the discussion of sections 572 401 c and

572 601 and in the discussion of Appendix A Infonnation Fonn and In

structions

Section 572406 Complete and Definite Agreements

Section 572 406 provides that any agreement filed under the Act and

Part 572 shall be the complete agreement among the parties and shall

specify in detail the substance of the understanding of the parties This

section provides that open ended provisions will be permitted only if the

enabling agreement indicates that any further agreement cannot go into

effect unless filed and effective under the Act Finally this section describes

matters which are interstitial to the basic agreement authority Ten comments

were filed in Docket No 8432 addressing this section

The Supplementary Infonnation to Docket No 8432 stated

The rule does not state how the Commission will treat an

agreement that is not sufficiently specific complete and definite

In most cases such deficiencies could probably be corrected

through infonnal discussions between the Commission s staff

and the parties An agreement which is severely deficient how

ever may be rejected investigated or subject to a fonnal request

for additional infonnation or to challenge in the court under

section II h of the Act

A number of comments Comments 101 105 106 107 108 objected

to the discussion insofar as it suggested that an agreement which was

severely deficient under the criteria of section 572 406 could be rejected

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These Comments argue that the Commission does not have the authority

to reject an agreement because it is unclear or indefinite Such agreements

allegedly may only be investigated subjected to a request for additional

information or challenged in court under section I

Ih of the Act Comments

107 and 110 propose the addition of a new paragraph which would expressly

limit the Commission s action on deficient agreements to such an investiga

tion an information request or an injunction

As the Supplementary Information in the Interim Rule indicated the

Commission would in most cases seek to resolve deficiencies through infor

mal negotiations and discussions between its staff and parties Rejection

of an agreement would only occur in a rare case where an agreement

is so severely deficient that on its face it could not be construed as

complete and where even the most basic analysis under the general standard

would not be possible Moreover in such a case it would not be possible

to determine whether sections lO a 2 and lO a 3 were complied with

Finally agreements should be sufficiently precise and definite to determine

whether a particular activity is within the scope of the antitrust immunity

conferred upon them by section 7 of the Act The fact that there are

other avenues available for dealing with deficient agreements as suggested

does not preclude the use of rejection Clearly an informal resolution

of such deficiencies is preferred In other cases requests for additional

information investigation or court challenge under section 11h of the

Act may be appropriate However where even the most minimal require

ments with regard to definiteness and completeness are not met rejection

may be appropriate The Commission does not believe that it is necessary

to formally state the actions which might be available within the text

of section 572 406

Section 572406 a

Section 572 406 a states that a filed agreement shall be the complete

agreement among the parties and shall specify in detail the substance of

their understanding Comment 102 supported this section as it appeared

in the Interim Rule Comment 105 urges that this section be eliminated

or alternatively amended

The Commission believes that section 572 406 a adequately states the

general rule that agreements must be complete and definite and this section

remains unchanged in the Final Rule

Section 572406 b

Section 572 406 b establishes guidelines concerning open ended authority

in agreements Comment 102 supports this section in the Interim Rule

Comment 104 favors the elimination of this section but alternatively pro

poses certain modifications assuming that section 572 406 c is not elimi

nated Comment 105 considers sections 572 406 b and c to be intertwined

and proposes modifications to both sections

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Section 572 406 b provides that agreement clauses which contain ena

bling authority expressly state that such authority may not be implemented

unless the more specific implementing understanding or agreement is filed

and effective under the Act To that extent this section merely states

what the Act otherwise requires Accordingly section 572 406 b is retained

in the Final Rule However the phrase open ended or vague is deleted

Section 572A06 c

Section 572 406 c is intended to provide a guideline regarding interstitial

agreement authority The comments were unanimous in expressing concern

with this provision A majority of comments favor the elimination of para

graph c from the Final Rule Others as an alternative propose modifica

tion to eliminate phrases such as routine and ordinary anticompetitive

effect and routine operational Some comments suggest that this para

graph would revive certain antitrust issues which were intended to be

put to rest by the 1984 Act Other comments suggest that it would erode

the reasonable basis to conclude defense under section 7 a 2 of the

Act

Section 572 406 c is retained in the Final Rule but is amended along

the lines suggested in several of the comments The standard of this section

is one that will be applied on an ad hoc basis and is not intended to

preclude parties from taking interstitial action

SUBPART ECONTENT AND ORGANIZATION OF AGREEMENTS

Subpart E provides for the standardization of the organization of an

agreement specifying the name number and order of particular agreement

articles

Comment 38 argues that the requirements of Subpart E exceed the Com

mission s authority and should be deleted Comment 34 urges that a period

of at least six months subsequent to the adoption of the Final Rule be

permitted to conform agreements to the requirements of Subpart E Com

ment 28 suggests that the requirements of Subpart E may not be suitable

for all agreements and that alternative formats should be permitted Com

ment 39 urges that the Commission continue its policy of not specifying

the language of agreement provisions It also urges the Commission to

reconsider making the requirements of Subpart E applicable to agreements

which were approved prior to June 18 1984 However two conferences

subscribing to Comment 39 did not object to Subpart E requirements pro

vided that republication is not required prior to June 17 1985

The objectives of Subpart E are to 1 ensure that the text of an agree

ment contains the essential articles which are likely to appear in all agree

ments in a prescribed order and 2 further support the standardization

of agreement format and its associated goals and objectives as discussed

above in connection with section 57240 Nothing in the Act or its legisla

27 F M C
i

i

464 FEDERAL MARITIME COMMISSION

tive history prohibits the Commission from establishing an orderly minimum

structure or organization for agreements filed with the Commission

Upon consideration of the various proposed compliance schedules and

available resources and obligations the Commission has determined that

a phased implementation schedule both for sections 572 402 and 572 403

and sections 572 501 and 572 502 would minimize any burden by allowing

up to ten months to achieve compliance The elements required by section

572 501 are generally found in most agreements and provide the minimum

information necessary for a general understanding of an agreement These

requirements as revised below shall continue for all agreements except

cancellations marine terminal agreements and assessment agreements In

the event that awaiver from these requirements is deemed necessary section

572 404 has been expanded to permit application to be made for a waiver

from the requirements of sections 572 501 and 572 502

Section 572 501 Agreement Provisions Organization

Section 572 501 provides a uniform organization for all agreements ex

cept marine terminal agreements and assessment agreements

Section 572 501 a

Section 572 501 a imposes a minimum organization and subject matter

outline on filed agreements except for those which are exempted and

reserves the use of certain article numbers Comment 29 contends that

section 572 501 a should be modified to provide that the content of a

specified article is not required to be published unless that content has

been commercially agreed to contending that some of the articles do not

otherwise ordinarily exist in some forms of agreements

Section 572 501 a states that article numbers are reserved for the particu

lar provision or authority as indicated in this section Experience with

agreements filed pursuant to the Interim Rule indicates that this statement

has not clearly communicated its intended meaning Some filing parties

who perceive that they have no need for a particular article have simply

omitted the subject matter of the article and assigned its number to another

subject Each of the articles enumerated in section 572 50I is generally

found in nearly all types of agreements The enumerated Articles 1 through

13 are reserved for the specified subject matter shown in sections 572 501

and 572 502 and may not be used for any other subject or purpose regard

less of the type of agreement Where an article is legitimately not applicable

as for example a charter agreement which is not likely to have a neutral

body policing provision the article number and name is to either be omitted

altogether or to preserve the sense of the article numbering in the agree

ment to be included in the text of the agreement followed by the word

None Accordingly appropriate revisions have been made in section

i

I

572 501 a to clarify the use of the reserved article numbering system

Section 57201 b

27 F M C
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CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

Section 57201 b sets forth the specific order and describes generally

the subject matter of the articles of an agreement

Certain inquiries received by the Commission s staff suggest that some

parties interpret the enumeration ofArticles 1 through 13 in sections 572 501

and 572 502 to mean that these articles are the only articles or subject

matter which may be included in an agreement Section 572 402 e 2 clearly

states that any additional material provisions shall be set forth as consecu

tively numbered articles Moreover an agreement that contained only

Articles 1 through 13 would in most instances not contain the full under

standing between the agreement parties expressed in the filed agreement

In order to eliminate any further confusion section 572 501 b has been

amended to state that additional articles required to express the complete

understanding between the parties to the agreement and not otherwise incor

porated in appendices to the agreement shall immediately follow the enumer

ated articles Such articles shall be numbered consecutively commencing

with Article 14

Section 57201 b 1

Section 572 501 b 1 requires the publication of the full name of the

agreement in Article 1 of the agreement Comment 34 suggests that the

parties to an agreement be permitted to use an abbreviation acronym

or doing business as name We are not adopting this suggestion Article

1 is the appropriate place in an agreement to identify that agreement by

its complete legal name We find this requirement to be administratively

necessary and not to impose any particular burden on the agreement parties

It therefore shall be retained

Section 57201 b 2

Section 572 501 b 2

requires a statement of the Purpose of the Agree

ment in Article 2 Comment 34 contends that the elaboration on the

meaning of the term purpose is unnecessary While paragraph b 2

will be retained because section 5 b 1 of the Act requires an agreement

to state its purpose the elaboration objected to is deleted

Section 57201 b3

Section 572 501 b 3 requires the statement of the name address and

corporate domicile nationality of each party to the agreement in Article

3

Five comments Comments 22 24 26 34 38 question the need for

this requirement Comments 26 and 38 contend that the requirement is

burdensome and contrary to the Act and should be deleted Comment

24 states that this section should be amended to avoid delays in the admis

sion or resignation of agreement members Comment 22 questions the rel

evance of stating the parties nationality

The purpose of section 572 501 b 3 is to ensure that the Commission

has accurate and current information with respect to the agreement s mem

27 F M C
466 FEDERAL MARITIME COMMISSION

bership The lack of such information has been a long standing problem

It is not the purpose of this section however to unreasonably delay the

effectiveness of changes in membership to unnecessarily burden the agree

ment document itself or to collect unneeded information Therefore appro

priate changes have been made to section 572 501 b 3 and to section

572 605 to provide for expedited review of modifications effecting change

in conference membership

Section 57201 b 4

Section 57201 b 4 requires a statement of the geographic scope in

Article 4 Comment 34 states that agreement members do not necessarily

serve their respective trades pursuant to the authority of an agreement

and that the implication that they do so serve should be eliminated It

is not the purpose of section 572 501 b 4 to capture any more than the

geographic breadth of the basic agreement Certain changes have therefore

been made in this section

Comment 28 states that section 572 501 b 4 as well as 572 501 b 5

should expressly require consortium agreements to specify the level and

scope of service otherwise such agreements may contain open ended

or blank check authority The fundamental concern of this Comment

i e open ended authority has been addressed in section 572 103 g

and

section 572 406 As this concern would appear to be met by these sections

of the Final Rule the suggested modifications to section 572 501 b 4

or 57201 b

5 do not appear necessary

Section 572 501 b 5

Section 572 501 b 5 requires in Article 5 a statement of the authorities

permitted by the Act and intended to be exercised by the parties to the

agreement Comment 24 states that this requirement creates a risk that

persons opposing an action taken pursuant to an agreement may argue

that the only authority of the agreement is that stated in Article 5 This

Comment suggests the addition of a statement that the parties authority

is to be derived from the entire agreement

The purpose ofArticle 5 is to provide a general statement of the activities

which the parties are authorized to engage in Section 572 501 b 5 has

been revised to make this clear and that except for the specification of

fundamental matters it will require that additional articles be provided

which are more specific as to the authority to be exercised and the mechan

ics of that exercise Finally this section is revised to state that the parties

may rely on the contents of the entire agreement as authority for their

activities

Section 57201 b 6

Section 572 501 b 6 requires the titles and respective authorities of

any agreement officials designated by the agreement parties be provided

in Article 6

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Comment 38 contends that the requirements of section 572 501 b 6

improperly prescribe substantive agreement content exceed the authority

of the Act and should be deleted Comment 34 requests the clarification

of the language and intent of the section with respect to the specification

of agreement officials and their duties

The purpose of section 572 501 b 6 is to ensure that the Commission

the agreement parties and any other interested parties be informed as to

who by organizational title is empowered to act on behalf of the agreement

parties and in what capacity This information is necessary to the effective

and efficient administration of the Commission s agreement program both

with respect to the pre effectiveness review of an agreement and the post

effectiveness monitoring of the activities of an agreement It is not the

purpose of this section however to unnecessarily delay the effectiveness

of changes in such provisions or complicate the agreement document There

fore section 572 605 has been amended to provide for expedited review

ofmodifications to Article 6

Section 572 501 b 7

Section 572 501 b 7 requires that the terms and conditions of member

ship to the agreement be provided in Article 7 Comment 26 contends

that this requirement is overly detailed and in some cases too trivial

to be included in the basic agreement

Section 572 501 b 7 is an extension of the requirements of section

5b 2 of the Act which mandates that conference agreements provide

reasonable and equal terms and conditions for conference membership Of

the nine required articles in section 57201 it is the least likely to apply

to all agreements The requirements of section 572 501 would only apply

to certain rate agreements and would not have application to transshipment

equipment interchange or charter agreements Section 572 501 b 7 there

fore has been revised to indicate that its provisions do not apply to certain

agreements

Section 5720 Organization of Conference and Interconference Agree

ments

Section 572 502 implements section 5 b of the Act by requiring the

inclusion of neutral body policing prohibited acts consultation shippers

requests and complaints and independent action provisions in conference

and interconference agreements

Section 5720 a

Section 572 502 a specifies the scope and application of the section

with respect to conference agreements Certain clarifying editorial changes

have been made to the section In addition the section has been revised

to provide for the inclusion in agreements of provisions in addition to

those prescribed in sections 572 501 and 5720

27 F M C
468 FEDERAL MARITIME COMMISSION

Section 572 502 a l

Section 572 502 a I

requires a statement that at the request of an agree

ment member the conference shall engage the services of an independent

neutral body The section further requires the inclusion of any neutral

body procedures established

Seven comments Comments 22 25 26 27 34 35 39 were received

on this section None of the comments take exception to the requirement

for an agreement to provide an affirmative statement that a single agreement

member may request neutral body policing However some contend that

there is no statutory authority for requiring that once implemented the

neutral body policing procedures have to be incorporated into the text

of the agreement Of those three propose that if the procedures are required

they should be included in an appendix It is also suggested this section

use the term self policing rather than the term independent neutral

body policing

Section 5720 a I

implements section 5b 4 of the Act which pro

vides for an independent neutral body to police the obligations of a

conference and its members if requested by a member line The section

will therefore continue to refer to an independent neutral body The

requirement that any neutral body policing procedures be included in the

agreement derives from the general requirement that an agreement contain

the full understanding of the parties To the extent that these procedures

reflect concerted action by the parties they are part of the agreement

and must be filed

Section 572 605 is amended however to provide for expedited review

of neutral body policing procedures excluding any modification of the

triggering provision stemming directly from section 5b 4 of the Act

Section 572 502 a 1 is also modified to allow neutral body procedures

to be included in a designated appendix to the agreement which is cross

referenced in Article 10

Section 5720 a 2

Section 572 502 a 2 requires an affirmative statement that a conference

will not engage in conduct prohibited by section lO c 1 or IO c 3 of

the Act Comment 33 requests that section 5720 a 2 be expanded to

incorporate the prohibition on refusals to negotiate with shippers associa

tions contained in section 1O b 13 of the Act

Section 572 502 a 2 implements section 5b 5 of the Act which insofar

as section 10 prohibited acts are concerned requires conference agreements

to expressly reference only those prohibitions specified in sections lO c 1

and 1O c 3 of the Act We note however that section IO c 1 of the

Act prohibits a conference from boycotting or taking any other concerted

action resulting in an unreasonable refusal to deal While not addressing

itself directly to shippers associations the prohibition against boycotting

27 F M C
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CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

and other concerted actions may encompass the concern of Comment 33

No change has been made to section 5720 a 2

Section 5720 a 3

Section 5720 a 3 requires that conference agreements provide proce

dures for consultation with shippers and for handling of shippers requests

and complaints Comment 33 suggests that section 5720 a 3 should

prescribe minimum time frames and other procedures for the consideration

of shippers complaints and requests in a manner similar to that of the

mandatory provisions of Subpart H

Section 5720 a 3 implements sections 5 b 6 and 7 of the Act

which require conference agreements to contain consultation and request

complaint handling procedures The mandatory provisions of Subpart H

including sections 572 801 c and d served the purpose of bringing

agreements into compliance with section 5 b of the Act during the transition

period As discussed more fully below in connection with the disposition

of Subpart H that purpose has been served and the Commission is removing

the mandatory provisions of Subpart H from the Final Rule At this time

there does not appear to be a need to require parties to agreements to

adopt Commission prescribed provisions Provisions drafted by parties to

agreements are carefully reviewed to ensure that they contain sufficient

specificity and detail Accordingly the changes to this section suggested

in Comment 33 are not adopted

Section 5720 a 4

Section 572 a 4 requires that conference agreements specify its inde

pendent action procedures Comment 34 proposes that this section be revised

to permit 1 independent action procedures which allow for the exercise

of such action on less than 10 calendar days notice and 2 a conference

member to independently elect to provide more than 10 calendar days

notice of its intention to exercise independent action

Section 5720 a 4 tracks the language of section 5 b 8 of the Act

which in relevant part provides that conference agreement independent

action provisions may not impose a notice period of more than

10 calendar days for the exercise of independent action The revisions

suggested by Comment 34 are unnecessary because their intended purpose

is presently being served by section 572 502 a 4 Therefore no change

to this section has been made

Section 5720 b

Section 5720 b requires every interconference agreement to contain

independent action procedures in addition to the enumerated Articles 1

through 12 Comment 24 contends that interconference agreements should

not be required to contain the provisions of Articles 10 11 and 12 specified

in section 5720 a

27 F M C
470 FEDERAL MARITIME COMMISSION

Interconference agreements are generally types of conference agreements

and as such should be subject to the same requirements Therefore the

argument that the requirements of section 572 502 a should not apply

to interconference agreements is not persuasive and is rejected However

a waiver of this requirement may be applied for pursuant to the new

provisions of section 572 404 Such a waiver would be available where

any or all of Articles 1 through 12 would not be applicable or appropriate

given the particular interconference agreement Finally it should be noted

that provisions which appeared in section 572 802 have been relocated

in this section

SUBPART F ACTION ON AGREEMENTS

Subpart F implements section 6 of the Act which establishes procedures

under which agreements are reviewed and acted upon by the Commission

The statutory model for review of agreements is the premerger clearance

procedures set forth in the Hart Scott Rodino Antitrust Improvements Act

of 1976 Pub L 94435 90 Stat 1390 The procedures of Subpart F

are intended to facilitate the expeditious review of agreements based on

necessary and relevant information within the time allowed by the Act

Section 572 601 Preliminary Reviewejection ofAgreements

Section 572 601 b provides for the rejection of any agreement that fails

to comply with the filing and information requirements of the Act and

Part 572 Comments 13 17 38 and 39 question the Commission s authority

to reject an agreement for failure to meet filing and format requirements

Comments 29 34 and 38 specifically challenge the authority to reject

an agreement after preliminary review pursuant to section 572 601 a on

the ground that the Information Form is not submitted or is incomplete

and an adequate explanation is not provided They argue that only a defi

ciency in the agreement itself provides the basis for rejection According

to these Comments an incomplete Information Form lacking an adequate

explanation should be remedied by a request for additional information

Section 5 a of the Act authorizes the Commission to prescribe the addi

tional information that should accompany an agreement These requirements

are contained in section 572 405 pertaining to the Information Form Section

6b of the Act provides for rejection of a submission which does not

meet the requirements of section 5 a of the Act Section 572 601 imple

ments this rejection authority An agreement which is submitted with an

incomplete Information Form lacking an adequate explanation where re

quired by section 572 405 fails to comply with section 572 405 and may

be rejected Moreover the purpose of a request for additional information

is not to obtain information which all parties are required to submit with

an agreement in the first instance but to acquire in special circumstances

further information

27 F M C
27 F M C

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Comment 39 suggests that before an agreement is rejected the filing

party should have an opportunity to correct any deficiencies within a speci

fied time without suspending the 45 day waiting period It is further pro

posed that this section be clarified to explain that agreements may only

be rejected for nonconformance with technical filing requirements rather

than for substantive deficiencies Comment 39 also suggests that section

572 601 b be amended to provide that rejection must occur within 20

days of filing and that prior to rejection the filing parties should be

notified and given an opportunity to correct any deficiency Finally Com

ment 39 proposes that this section be amended to expressly provide for

appeal to the Commission itself when an agreement is rejected

Most of these concerns expressed in these comments are as a practical

matter met under the existing Bureau of Agreements and Trade Monitoring

procedures for processing agreements Filing parties presently are given

the opportunity to make minor corrections without suspending the 45 day

waiting period These corrections are usually speedily made because of

their technical nature

Every effort is made to review an agreement and accompanying Informa

tion Form for deficiencies as expeditiously as possible In most situations

this preliminary review is completed within a few days after the agreement s

receipt at the Commission In the case of particularly complex agreements

slightly more review time may be needed A

specific time period for

rejection therefore does not appear to be necessary or appropriate and

could under certain circumstances deny the Commission and the filing

parties necessary flexibility

As to Comment 39 s concern about rejection for other than filing defi

ciencies the nature of the preliminary review provided for in section 6 b

of the Act and section 572 601 a makes clear that this rejection is not

based on a substantive review of the agreement

Decisions on rejection of agreements are presently made by the Commis

sion and not the staff There is therefore no need to provide for an

appeal procedure to the Commission because they have already considered

the matter If in the future this procedure is changed then at that time

it would be appropriate to consider an appeal mechanism to provide for

Commission review

Section 572 602 Federal Register Notice

Section 572 602 implements section 6 a of the Act which requires the

Commission to transmit notice of the filing of an agreement to the Federal

Register within seven days ofreceipt

Section 572 602 a

Comment 38 suggests that the words A notice of be added at the

beginning of section 572 602 a This clarifying change is made in the

Final Rule
472 FEDERAL MARITIME COMMISSION

J

I

Section 572 602 b

Section 572 602 b

describes the contents of the notice to appear in

the Federal Register Comment 19 suggests the use of a standardized form

of notice which would be completed and filed by the parties with the

agreement Present procedures appear to be adequate and little or no savings

in time would appear to result from the suggested change Accordingly

a standardized form for notice is not adopted

Comments 24 and 28 suggest that the notice in the Federal Register

identify the filing party This suggestion has merit This information is

submitted with the agreement and its publication in the Federal Register

would facilitate the effort of interested persons to communicate with the

filing party This section is amended accordingly

Section 572 603 Comment

Section 572 603 provides for comment by any interested person to an

agreement and addresses the status and confidentiality of such comments

Section 572 603 a

Section 572 603 a allows third parties to submit comments to filed agree

ments No limitations except the response period indicated in the Federal

Register notice attach to the filing of such comments Confidential treatment

will be afforded comments where the commenter so requests and there

exists a proper legal basis for nondisclosure

This provision attracted a number of comments Comments 19 20 24

25 26 30 34 39 both supporting and opposing confidential treatment

of third party comments The majority of these Comments 19 20 24

25 26 34 39 believe that confidentiality where appropriate for third

party comments is contrary to the provisions of the Act It is asserted

that the disclosure exemptions of the Freedom of Information Act FOIA

5 USC 552 are the exclusive avenue for withholding third party comments

Some comments Cornments 19 20 24 34 39 suggest that the filing

parties be provided with copies of third party comments This would alleg

edly ensure administrative efficiencies avoid the filing and processing of

FOIA requests and allow the filing party the opportunity to confront adverse

information On the other hand Comment 30 submits that all information

filed with an agreement either by a filing party or third parties is protected

under section 6j

of the Act It is asserted that confidentiality for third

party comments will encourage submission of more complete comments

Comment 28 suggests that persons commenting on agreements be allowed

to waive confidentiality and Comment 20 proposes that claims of confiden

tiality be supported by precise statutory grounds Comment 20 further sug

gests that the parties be provided with all non confidential comments It

is suggested that if complete confidentiality is claimed for all parts of

a comment notice of the filing and claimed exemptions be provided to

the parties Comment 20 requests that non confidential oral communications

27 F M C
7 P IVIr

RULES GOVERNING AGREEMENTS BY OCEAN COMMON 473

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

with Commission staff by persons in opposition to an agreement be made

publicly available

Many of these comments misconstrue both this section and the Act

First third party comments are not protected by the confidentiality provi

sions of section 60 of the Act Only information and documentary material

filed with the Commission under section 5 or 6 is exempt from disclosure

46 V S C app 1705 jThis information is solely provided by the filing

parties No mention is made in sections 5 and 6 of the Act of information

to be submitted by third parties Comments on agreements however may

in appropriate circumstances be protected under the disclosure exemptions

of FOIA 5 V S c 552 b C 1 7 the Trade Secrets Act 18 V S C

1905 or other similar statutes Although third party comments are not

protected under section 6j

of the Act it would be inappropriate and

improper particularly where a request for confidentiality has been received

to routinely make them available to the agreement parties without prior

Commission review

Requiring commenting parties to provide the agreement parties with the

non confidential portions of comments or notice where the whole comment

is claimed to be confidential appears unnecessary This information would

be available from the Commission upon request Nor do we believe this

procedure whereby non privileged comments will be available from the

Commission upon request will lead to unnecessary FOIA requests A FOIA

request is not required to obtain clearly non confidential information It

is properly used in close situations where the Commission and requester

may differ on the confidentiality of certain information and it accords

the requesting party certain procedural and legal rights Finally it is both

administratively burdensome and not required by law to incorporate all

oral comments into a publicly available written record

As to the suggestion that agreement parties should be allowed to rebut

comments the Commission will provide the opportunity for rebuttal only

where the comments become part of the record in a Commission or court

proceeding Prior to the institution of a proceeding no right of rebuttal

is provided

The Commission is adopting the recommendations of Comment 20 that

all requests for confidentiality be accompanied by citation and explanation

of relevant legal authority for witholding In the event the Commission

determines that it is proper to release information for which confidentiality

has been claimed it will notify the submitter prior to such release

Comment 38 suggests that the words a written statement in the first

sentence of section 572 603 a be changed to written comments This

modification is also made in the Final Rule

Section 572 603 b

Section 572 603 b provides that filing of comments does not entitle

a party to a Commission reply institution of a proceeding discussion
474 FEDERAL MARITIME COMMISSION

of the comment in any Commission or court proceeding or participation

in a proceeding

Comment 34 while not taking issue with the substance of this paragraph

suggests that the Commission further limit all substantive communications

regarding pending agreements between any third person and any Commis

sion employee

The body of law pertaining to ex parte communications only applies

when a formal proceeding has been instituted and the Commission is acting

as decisionmaker 5 D S C 557 a The waiting period prior to the effective

date of an agreement is not such a legal proceeding and no ex parte

rights attach In any formal proceeding involving an agreement the present

Commission rules embodied at 46 CPR 502 11 and 502 61 appear sufficient

It therefore is unnecessary to further provide for ex parte restrictions in

this section

Comment 28 states that the provisions of section 572 603 b when read

in conjunction with the rules on negotiations in section 572 609 flatly

bar commenters from participating in negotiations While Comment 28 rec

ognizes that commenters have no right to participate in negotiations it

requests that the section be amended to allow such participation where

appropriate Comment 28 also proposes that the section be clarified to

permit a commenter to engage in follow up communications with the Com

mission at the Commission s discretion

No change to section 572 603 b will be made The legislative history

indicates that the role of third parties should be limited to submitting

comments Conf Rept No 600 98th Cong 2d Sess 31 1984 Moreover

the involvement of third parties could complicate and delay the negotiation

process by introducing irrelevant or parochial interests However the infor

mation provided in a comment may be considered by the Commission

in the negotiations process The Commission however does interpret the

present language of section 572 603 b and section 572 609 to permit follow

up communications between Commission staff and third party commenters

Section 572 604Waiting Period

Section 572 604 sets forth technical provisions governing the statutory

waiting period

Section 572 604 b

Section 572 604b provides that unless a request for additional informa

tion is made or a court order obtained an agreement becomes effective

45 days after filing with the Commission or on the 30th day after publication

in the Federal Register Comment 28 proposes that the Commission publish

a notice when it reaches a final determination on a filed agreement and

that any commenters receive a

copy of the determination

Currently the Commission issues a notice of an agreement becoming

effective pursuant to section 6 c of the Act This notice is not published

7ttl r
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 475

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

in the Federal Register but is available to the public in the Office of

the Secretary This procedure appears to be sufficient with respect to inform

ing the public of the Commission s action Accordingly the suggested

change is not adopted

Section 572 604 c

Section 572 604 c provides that the waiting period before an agreement

becomes effective is suspended when the Commission makes an oral or

written request for additional information The waiting period resumes at

the time of the receipt of the requested additional material or an adequate

statement of the reasons for noncompliance

Comment 38 urges the deletion of section 572 604 c on the grounds

that it is duplicative and less clear than similar provisions in section 572 606

A request for additional information is pertinent to this section because

it has an effect on the waiting period before an agreement becomes effective

Paragraph c therefore is retained

Comment 19 suggests that parties be notified within 15 days of receipt

of an agreement if additional information will be needed While the goal

is to review all agreements expeditiously and where necessary notify parties

as soon as possible of the need for additional information a 15 day limit

on requests would not allow sufficient flexibility in reviewing complex

agreements

Comment 39 proposes that the parties be allowed to request an extension

or suspension of the waiting period This procedure would be utilized

where an agreement was particularly complex and additional time was

needed for review or where negotiations were continuing between the parties

and the Commission Alternatively Comment 39 proposes that the parties

be allowed to postpone the waiting period by submitting amendments delay

ing the agreement simplementation date to a date beyond the 45 day statu

tory period

We believe that it would be contrary to the provisions of the Act to

extend the waiting period for other than a request for additional information

or court order The parties are also always free to include within the

terms of the agreement a date for implementation subsequent to the expira

tion of the 45 day waiting period to defer implementation of the agreement

or to withdraw the agreement altogether without prejudice to refiling

Several comments Comments 22 27 34 39 urge that the procedures

for requests for additional information be clarified Comments 27 and 39

are concerned that routine communications between Commission staff and

the agreement parties may be misconstrued as a request for additional

information Similarly Comment 34 suggests that confusion could be avoid

ed by having one Commission official preferably the Secretary responsible

for issuing requests for additional information The Comment also proposes

that this section be amended to require a specific authorization statement

from an appropriate Commission official to accompany each request which

27 F M C
476 FEDERAL MARmME COMMISSION

would expressly identify the communication as a request for additional

information

Comments 22 27 and 34 maintain that oral requests for additional infor

mation may be problematic It is argued that the seven day period for

written confirmation of oral requests is too long The concern is that the

Parties might not receive written confirmation of an oral request for addi

tional information made after the 38th day of the waiting period until

after they had begun to implement the agreement Comments 22 and 27

suggest abandonment ofthe use of oral requests and Comment 34 proposes

that an oral request be made only simultaneously or subsequent to the

mailing of the written request

The present procedures contained in section 572 604 c governing requests

for additional information appear adequate When either an oral or written

request for additional information is made it will be unambiguously identi

fied There is no need either to have only one official make the requests

or to include a specific authorization statement In any situation where

an oral request is intended to suspend the effective date of an agreement

that fact will be made clear to the filing parties

Comment 24 argues that the resumption of the waiting period begins

automatically after filing of the response to the request or submission

of the statement of noncompliance This Comment argues that the Commis

sion has no authority to evaluate the adequacy of the response and only

the United States District Court for the District of Columbia can further

suspend the waiting period The Commission did not intend the language

adequate statement of reasons for noncompliance to affect the resumption

of the running of the waiting period We have adopted the suggested

change and the word adequate has been deleted

Section 572 605 Request for Expedited Approval

Section 572 605 implements section 6 of the Act and sets forth grounds

and procedures for applying for and granting expedited approval

Comment 39 proposes that section 572 605 be amended to permit parties

to request expedited approval after filing a response to a request for addi

tional information under the same procedures for expedited approval other

wise applying

The Commission concurs with this suggestion It is clearly proper under

section 6 e of the Act to consider expedited approval for agreements

whose effective date is suspended by the filing of a requests for additional

information An appropriate modification has been made in section 572 605

ofthe Final Rule

The Commission is also adding a new paragraph c to this section

to provide for expedited approval of cancellations of agreements and modi

fications which reflect changes in conference membership officials of the

agreement and neutral body authority and procedures This addresses the

desire expressed in comments that these matters be effectuated without

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unnecessary delay The Commission will consider the institution of a sepa

rate proceeding to exempt these categories of agreements from the waiting

period requirements of section 5 of the Act and allow them to become

effective upon filing However given the notice requirements of section

16 of the Act that relief cannot be granted within the scope of this

proceeding

Section 572 606 Requests for Additional Information

Section 572 606 implements section 6 d of the Act which authorizes

requests for additional information

Section 572 606 a and c

Section 572 606 a provides that the Commission may request additional

information prior to the expiration of the waiting period When a full

response is not supplied the filing party must submit a statement of reasons

for noncompliance

Section 572 606 c provides that a request for additional information

may be made orally or in writing but when made orally written confirma

tion will be mailed within seven days of the request

Comment 26 proposes that this section be amended to provide a statement

that the Commission will attempt to make requests for additional information

early in the waiting period Only in exceptional circumstances would re

quests be made in the final days prior to the effective date

There is no need to amend paragraph a as suggested All requests

for additional information will be made as promptly as possible Of course

the timing of such requests will necessarily vary with the complexity of

the agreement

Several comments Comments 22 24 27 38 objected to the use of

oral requests for supplementary information The comments express concern

with the ambiguities associated with oral requests particularly when the

request is made in the last days prior to the effective date and the parties

are making plans to implement the agreement Comments 22 and 24 submit

that the parties are entitled to the certainty of a written request which

would be addressed to specific relevant and readily available material and

be specifically identified Comment 24 suggests that an oral request for

additional information only be permitted if written confirmation is received

prior to the 45th day of the waiting period

Section 6 c of the Act does not require requests for additional informa

tion or documentary matter under section 6 c 2 to be made in writing

It only requires that they are made within the 45 day period The Commis

sion therefore retains the option to use oral requests followed by written

confirmation for further information When an oral request for additional

information is issued the Commission will as a matter of course advise

the parties of the consequences of this procedure In the unlikely event

parties are unsure of the nature of an oral request for further information

27 F M C
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prior to receipt of written confirmation they may contact the Director

Bureau ofAgreements and Trade Monitoring for clarification

Section 572 606 d

Section 572 606 d provides that the Commission will specify a reasonable

period for a party to reply to a request for additional information

Comments 24 and 27 assert that the Commission does not have the

authority to set a time limit for response They submit that there is no

burden on the Commission until the information is supplied and therefore

the Commission should not be concerned when if ever the information

is supplied They propose that section 572 606 d be deleted

The purpose of providing for a reasonable period to respond is to conserve

the Commission s resources Once the Commission undertakes the review

of a filed agreement it is beneficial to complete the review process and

not have filed agreements pending indefinitely while awaiting responses

to requests This provision is necessary to maintain the orderly management

of the agreement review process In all cases parties will be provided

ample time in which to respond Parties may always petition for more

time if necessary

Section 572 606 e

Section 572 606 e is added to the Final Rule to provide for notice

to commenting parties of a request for additional information The purpose

of this provision is to allow for further comment

Section 572 607 Failure to Comply With Requests for Additionallnforma

tion

Section 572 607 implements section 6 i of the Act which authorizes

the Commission to seek court enforcement of its information requests

Section 572 607 a

Section 572 607 a of the Interim Rule provides that a failure to comply

results when the party responsible for filing the request fails to substan

tially respond Comment 34 suggests that the reference should be to a

person filing an agreement or an officer director partner agent or an

employee thereof This suggestion would clarify this section and has been

adopted

Comment 24 suggests that the word satisfactory be deleted on the

ground that if a statement of reason for noncompliance is submitted only

a court can evaluate its acceptability

When the Commission believes a statement of reasons for noncompliance

is inadequate it may bring an action in court pursuant to section 6 c 2 B

of the Act The court s function will be to evaluate the sufficiency of

the statement of reasons for noncompliance and take appropriate remedial

action This section is not intended to supplant the court s function This

suggested change however is not necessary

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Comments 27 and 34 assert that the Commission is not authorized to

prescribe a period of time for reply to requests for additional information

and thus cannot pursuant to section 572 607 a deem that a failure to

reply has resulted when a response is not received within that time period

Comment 34 maintains that the only applicable time period is that provided

for in section 6 c of the Act

These arguments are not convincing The time periods provided for in

section 6 c of the Act only apply after a response has been received

They do not pertain to the period between the request and the response

As indicated with respect to section 572 606 d above the establishment

of a time period for response to a request for additional information is

necessary to the orderly administration of the agreements program This

does not mean however that the Commission will bring a court action

pursuant to section 6i of the Act when no information has been filed

thereby compelling the parties to file a response and start the running

of the waiting period on an agreement they may prefer to withdraw Finally

where the parties have filed a response to a request for information which

is inadequate the Commission may bring an action pursuant to section

6 i

to compel a more responsive reply and extend the waiting period

Section 572 607 b

Section 572 607 b implements the provisions of section 6 i of the Act

which permits the Commission to bring an action in District Court where

there has been a failure to substantially comply with a request for additional

information

Comment 24 would remove the word where from the first sentence

of this section and substitute the words when it considers that Comment

24 seeks a clarification that the Commission is not asserting authority

reserved for a court under section 6 i of the Act

Before the Commission brings an action pursuant to section 6 i of

the Act it must first reach its own finding on the substantiality of a

reply to a request for additional information This finding does not substitute

for the court s determination of the adequacy of the reply To clarify

the Commission s function the recommended change in language has been

made

Section 572 608 Confidentiality of Submitted Material

Section 572 608 implements section 6jof the Act which provides that

all information submitted by a filing party other than the agreement itself

shall be exempt from disclosure under the FOIA

Section 572 608 a

Section 572 608 a provides a general grant of confidentiality to the

filing parties for all information submitted to the Commission and lists

particular categories of protected information including the Information
480 FEDERAL MARITIME COMMISSION

i

Form voluntary submissions of additional information reasons for non

compliance and replies to requests for additional information

Comment 30 consistent with its recommendations concerning section

572 603 pertaining to comments from third parties suggests that confiden

tiality be extended to third parties who submit information Comment 30

submits that nondisclosure will encourage better quality and more detailed

comment

As indicated above the Commission does not have authority under the

1984 Act to exempt third party comments from disclosure except in con

formance with FOIA and the Trade Secrets Act

Section 572 608 b

Section 572 608 b provides for the statutory exception to the overall

policy of nondisclosure of information submitted by parties filing an agree

ment Such information may be disclosed in an administrative or judicial

proceeding or in response to a proper request from Congress

Comment 24 suggests a change in section 572 608 b l by adding the

phrase but only if disclosure takes place in the course of such proceed

ings after the words relevant to The purpose of the change is to

allow information to be released only in the course of a proceeding and

not just where that information may be relevant to that proceeding

The language which Comment 24 objects to relevant to administra

tive or judicial proceeding is adopted verbatim from section 6j

of the

Act In order to preserve the full scope of this statutory provision no

change in section 572 608 b is made

Section 572 608 c

Comment 28 suggests that this section be amended to allow a filing

party to waive nondisclosure Although the Commission itself may not

disclose information filed by the parties to an agreement the parties them

selves are not bound by the provisions of section 6j

of the Act This

section therefore has been amended to add a new paragraph c which

expressly recognizes the parties right to make a voluntary disclosure The

rule requires however that parties making such a disclosure promptly

inform the Commission of their action

Section 572 609 Negotiations

Section 572 609 makes clear that the negotiation process may take place

at any time after the filing of an agreement up to the conclusion of

an injunctive proceeding The negotiation process will thus be available

throughout the pendency of an agreement to resolve differences over an

agreement The negotiation process is limited to the filing party and Com

mission personnel Shippers other government departments or agencies

and other third parties may not participate in negotiations

The most significant issues concerning this section focus on whether

a modification which is the result of negotiations must be published in

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the Federal Register and the proper role of third parties in the negotiation

process Comment 28 submits that modifications which expand the parties

authority must be published in the Federal Register Comment 26 takes

the opposite view and further asserts that the waiting period should not

be suspended

It is unlikely that as a result of negotiations an agreement s authority

would be expanded However in the event that expansion of authority

does result from the negotiations the agreement would be subject to filing

as a new agreement pursuant to section 5 of the Act and the provisions

of this part Notice of the filing of the new agreement would therefore

be published in the Federal Register pursuant to section 572 602 provided

it was notrejected for filing or technical deficiencies

Comment 39 supports the present version of section 572 609 and notes

that third parties are properly excluded from negotiations Conversely Com

ment 28 maintains that third parties should not be flatly barred from involve

ment in negotiations The issue of involvement of third parties in negotia

tions has already been discussed in connection with section 572 603 b

No changes are warranted

Finally Comment 24 suggests a change in section 572 609 to clarify

that negotiations concerning injunctive proceedings pertain exclusively to

injunctions brought pursuant to section 6h of the Act

Because negotiations pursuant to section 572 609 are not intended to

be limited to section 6 h injunctions the suggested change has not been

made The Commission is not only authorized to seek injunctive relief

pursuant to section 6 h of the Act for violation of the general standard

but also pursuant to section 6ifor failure to substantially comply with

a request for additional information and section l1 h for actions in violation

of the Act

SUBPART G OF THE RULES REPORTING AND RECORD

RETENTION REQUIREMENTS

Subpart G contains rules which implement the reporting and record reten

tion provisions of the Act Its purpose is to ensure that the Commission

has sufficient information to adequately monitor the concerted activities

ofregulated parties

A number of comments object to the reporting and recordkeeping require

ments of Subpart G They object to the broadened definition of meeting

for which minutes are required the identification of documents circulated

to the members in connection with meetings and the filing of an index

on a quarterly basis of all documents distributed to the members and

not otherwise filed with the Commission These comments contend that

in many instances the list of documents would be massive and that to

require their filing would be an unwarranted intrusion on due process

rights These requirements are said to be an undue and unreasonable burden
482 FEDERAL MARITIME COMMISSION

upon the industry and to be contrary to the legislative intent of the 1984

Act

It is clear that Congress intended a law which would enable the ocean

shipping industry to fashion agreements in a manner which meets their

commercial needs and to have such agreements become effective within

a

relatively short period unless there is an indication that such agreements

might be contrary to the standard set forth in section 6 g

of the Act

However it is also clear that Congress intended that the Commission main

tain a degree of surveillance over the concerted activities of ocean common

carriers and marine tenninal operators adequate to ensure that they do

not violate the standards and prohibitions set forth in the Act and that

they comply with the mandatory provisions expressly set forth therein

This imposes a greater rather than a lesser surveillance responsibility on

the Commission when compared with the provisions of the 1916 Act

Upon consideration of the comments submitted and reevaluation of its

information needs the Commission has made several revisions to its Pinal

Rule which relax the record reporting and retention requirements The Pinal

Rule requires the filing of minutes on the same basis as minutes were

required under 46 CPR 537 3 of the former regulations namely for meetings

where the parties are authorized to take final action as opposed to being

authorized to take any action The requirement that the minutes specify

any documents distributed to inform or assist the members is deleted

In addition the index of documents requirement is being modified to include

only those documents which are circulated to members and used to reach

a final decision on specified matters

These amendments strike a balance between the enhanced freedom the

ocean shipping industry enjoys and the need to ensure that the Commission

has the information needed to fulfill its responsibilities under the 1984

Act

Several comments Comments 16 17 22 34 allege that the information

collection requirements of Subpart G violate the Paperwork Reduction Act

of 1980 44 U S C 3501 The United States Office of Management and

Budget OMB is charged with the responsibility of reviewing agency regu

lations for compliance with the Paperwork Reduction Act The Commission

has followed the proper procedures for clearance of Part 572 by OMB

The collection of information requirements contained in this part have been

submitted to the Office of Management and Budget under the provisions

of the Paperwork Reduction Act and have been assigned an OMB control

number See section 572 991

Comment 28 contends that consortium agreements should be included

within the coverage of Subpart G and subjected to reporting and indexing

requirements Many consortia and joint service agreements are by their

own terms required to submit reports The addition of such agreements

within the coverage of Subpart G would appear to be beyond the scope

of this rulemaking proceeding Should there develop a need to obtain such

27 F M C
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information in order to effectively monitor consortia then the Commission

will consider an appropriate amendment to this subpart at that time

Section 572701 General Requirements

Section 572 701 contains certain general requirements which apply to

all reports required by this subpart

Section 572701 bSerial Numbers ofReports

Section 572 701 b provides that each filed report should be assigned

a serial number Comments 13 and 34 state that the serial numbering

system should be made optional and that conferences should be allowed

to continue to use their established numbered minute systems It was not

the purpose of this requirement to impose a precise numbering system

but rather to establish a system for identifying minutes which might be

missing Accordingly this section is being amended to add a provision

which allows any conference or rate agreement which has its own sequential

numbering system to continue to use that system in lieu of the system

set forth in this section

Section 572701 cRetention of Records

Section 572 701 c provides that a

copy of each document referenced

in the index of documents submitted pursuant to section 572 704 must

be retained by the parties for as period of three years and be made available

to the Commission upon request As indicated below the volume of docu

ments required to be indexed has been substantially reduced However

the retention of documents is of such importance for surveillance purposes

that this requirement shall be retained without change in the Final Rule

Three comments Comments 13 34 39 object to the provision in this

section which states that the Commission may obtain documents upon writ

ten request This objection similarly pertains to section 572 701 d which

also states that documents shall be made available upon request The com

ments maintain that the judicial precedent pertaining to section 21 a of

the 1916 Act 46 V S C app 820 which is similar to section 15 a

of the 1984 Act 46 V S C app 814 and forms the basis for this subpart

should be followed

The procedures used for requests for documents under the 1916 Act

will be continued and in situations pertaining to issuance of a request

for documents pursuant to section 572 701 c and section 572 701 d the

Commission will state its basis for seeking the documents

Section 572701 d

Section 572 701 d provides that the Director Bureau of Agreements

and Trade Monitoring may request that documents be furnished within

a specified time These documents will be received in confidence

Comments 13 22 and 34 maintain that the requirement that documents

must be produced upon request is contrary to due process of law They

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484 FEDERAL MARITIME COMMISSION

submit that parties should be permitted an oppol tUnity to oppose the request

Comment 39 maintains that this record production requirement constitutes

an unreasonable search and seizure This objection is without merit Notice

and opportunity for hearing are not a prerequisite to issuance of a request

for documents pursuant to section 572 701 d Montship Lines Ltd v Fed

eral Maritime Board 295 F 2d 147 DC Cir 1961

Comment 26 objects to the fact that the Director Bureau ofAgreements

and Trade Monitoring issues a request for documents It is urged that

former procedures applying to section 21 a of the 1916 Act under

ich the Commission itself issued the request for documents be continued

No modification to this section is necessary Requests for documents made

by the Director may be appealed to the Commission

Finally Comment 34 points out that privileged documents such as attor

ney client cOminunications are not exempted from the scope of a request

for documents There is however no need to amend this section to specifi

cally exclude information which may already be protected by law

Section 572 701 e

Section 572 701 e specifies times when documents must be filed one

of which is after the issuance of a request for documents Comment 34

refers to its objections pertaining to sections S72 70l c and 572 701 d

and asserts that this section should be deleted These concerns have already

been addressed above and no change is required in this section

Section 572 702 Filing ofReports Related to Shippers Requests and Com

plaints and Consultations

Section 572 702 further implements section Sb of the Act which requires

conferences to provide for a consultation process and to establish procedures

for considering shippers requests and complaints

Section 572 702 aShippers Requests and Complaints

Section 572 702 a provides that conferenees shall annually file with

the Commission a statistical report summarizing activity in several areas

pertaining to shippers requests and complaints Comment 33 suggests that

these reports should identify shippers associations requests separately from

those of individual shipper requests Thischarrge is said to be necessary

so that the Commission may carry out its responsibilities to administer

and enforce section 1Ob l3 of the Act which prohibits common carriers

from refusing to negotiate with a shippers association Comment 27 on

the other hand contends that reports on the number of shipper complaints

is unnecessary

The contents of reports required under this section has been kept to

a minimum Only statistical totals without specific details are required

However these statistics are important to determine the degree of conference

responsiveness to sections 5b 6 and 7 as well as to section 1Ob l3

of the Act With regard to section 10b 13 it would be useful to have

27 F M C
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the statistical reports separately indicate shippers associations or groups

and section 572 702 a has been amended accordingly in the Final Rule

Section 572 702 bConsultations

Section 572 702 b requires each conference to file an annual report

setting forth a statistical summary of the number of consultations requested

and conducted during the calendar year Several of the comments already

discussed in connection with section 572 702 a make similar arguments

with regard to this section Comment 33 believes that this section also

should provide for the separate compilation of statistics on consultations

with shippers associations Comment 27 argues that this section is unneces

sary Comment 24 contends that the requirement to report on consultations

should be eliminated because it will not produce any meaningful information

and because it is contrary to the statutory goal of minimizing government

intervention

The reports required by section 572 702 a are necessary and useful statis

tical information on the responsiveness of conferences to shippers concerns

which would enable the Commission to determine whether a closer scrutiny

of conference consultation activities might be warranted This section is

however modified in the Final Rule as was section 572 702 a to require

that reports separately identify shippers associations and shippers groups

Section 572703 Filing of Minutes

Section 572 703 defines the term meeting and requires certain types

of agreements to file minutes of meetings Certain matters such as purely

administrative discussion are exempt from the filing requirements of this

section

Section 572703 aMeetings

Section 572 703 a defines meetings within the meaning of this section

It was initially considered desirable to have minutes of all meetings regard

less of whether final action was contemplated Upon further consideration

and in light of the comments received there would appear to be no need

to require the submission of minutes of meetings which do not contemplate

the taking of final action

Therefore this section is amended to provide that minutes need only

be provided for meetings which authorize the taking of final action This

modification in effect continues the previous requirements under the 1916

Act This amendment should satisfy the concerns of those comments Com

ments 13 25 26 34 38 39 which argued that the proposed definition

of a meeting was too broad

Section 572 703 bContent of Minutes

Section 572 703 b of the Interim Rule required that the minutes identify

all documents distributed at the meeting to inform or assist the members

This requirement is deleted from the Final Rule and the Commission will

27 F M C
486 FEDERAL MARITIME COMMISSION

rely primarily on the index of documents required by section 572 704

This change should meet the concern of those comments Comments 17

24 25 26 29 34 38 39 objecting to the minutes content requirement

in the Interim Rule

Comment 29 states that the minutes requirement should not apply to

meetings of pooling and equal access agreements in this section This

would have the effect ofeliminating not only the minute filing requirements

for such agreements but all reporting and record keeping requirements

under Subpart G Comment 38 states that the reference to pooling equal

access and discussion agreements should be deleted

Adequate surveillance under the 1984 Act is of particular importance

with respect to pooling and equal access agreements Therefore it is nec

essary to obtain minutes from the parties to such agreements as part of

that surveillance program Final action taken by members of discussion

agreements may also have significance for a particular trade Therefore

the reference to pooling equal access and discussion agreements is retained

in the Final Rule

Section 572 704 lndex ofDocuments

Section 572 704 requires that agreements covered in section 572 703 a

index all documents which are distributed Section 572 704 b further re

quires this index to be filed with the Commission on a quarterly basis

This section evoked considerable comment Nine comments were received

in objection Comments 13 16 17 25 26 29 34 38 39 Seven of

these comments Comments 13 16 17 26 34 38 39 urge that the

indexing requirement be deleted because it is unduly burdensome unclear

in its application and contrary to one of the purposes of the Act namely

minimizing of government regulation Comment 25 objected to the index

but in the alternative suggested that if retained the Commission eliminate

the double reporting of documents which must be identified in conference

minutes and which also must be indexed

The index requirement is modified to include only documents leading

to final decision on specified matters This should reduce the volume of

materials to be indexed and limit the indexed documents to those which

have substantial regulatory significance The concern about double reporting

expressed by Comment 25 has been addressed by eliminating the require

ment in section 572 703 b that minutes identify documents which are dis

tributed

Comment 29 requests that pooling and equal access agreements be per

mitted to submit in lieu of the index periodic and final accounting state

ments

The requirement that pooling and equal access agreements must where

applicable submit an index of documents distributed to members is retained

Accounting statements are not the equivalent of or a substitute for indexing

of documents The specificity of a document index is necessary to fulfill

27 F M C
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monitoring responsibilities under the Act Parties need only identify the

documents not furnish the documents themselves unless specifically re

quested

Section 572705 Waiver ofReporting and Record Retention

Section 572 705 provides for a waiver of any provision of Subpart G

upon a showing of good cause No comments were received on this section

and no substantive changes have been made to this section in the Final

Rule

SUBPART H TRANSITIONAL RULES

Subpart H of the Interim Rule prescribes mandatory provisions in existing

conference and interconference agreements and addresses expiration dates

in existing agreements As discussed more fully below the mandatory provi

sions in section 572 801 are deleted from the Final Rule Those portions

of sections 572 802 and 572 803 which have a continuing purpose are

transferred to other subparts of Part 572 All of the sections of Subpart

H are therefore either deleted or relocated and the Subpart H

designation

shall be reserved for possible future use

Section 572 801 Mandatory Provisions in Existing Conference Agreements

The purpose of section 572 801 was to facilitate the transition from

regulation of agreements under the 1916 Act to the regulatory regime

of the 1984 Act In particular it was important during the transitional

phase to establish a mechanism to achieve compliance with section 5 b

of the Act on or before June 18 1984 the effective date of the Act

To this end the Commission required that conferences indicate their adop

tion of certain mandatory provisions set forth in section 572 801 This

procedure worked to assure that conference agreements achieve compliance

with section 5 b of the Act4Because the purpose of this section has

been achieved there is no need to retain it in the Final Rule

Conferences have been permitted to draft their own amendments to super

sede the Commission prescribed provisions and to comply with the statu

torily mandated requirements This procedure is continued in the Final

Rule Because this section is being deleted there is generally no need

to address the comments Comments 22 30 31 38 which proposed specific

changes to this section One comment however does merit further discus

sion at this time

The U S Department of Justice DOJ submitted an extensive comment

which focused on the right of independent action under section 5 b 8

of the Act DOJ contends that the model independent action provision

4

A number of persons filed emergency comments Comments 3 4 5 6 7 11 14 and 18 which either

in whole or in part sought modifications of these mandatory provisions On June 12 1984 the Commission

made certain amendments to the mandatory provisions in the Interim Rule in response to the concerns ex

pressed in the emergency comments

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contained in section 572 801 e of the Interim Rule should be strengthened

and made mandatory for all conference agreements in order to ensure

that independent action fulfills its purpose under the 1984 Act Moreover

DOJ urges the Commission by rule to expressly prohibit 1 all collusion

among carriers concerning any carrier s decision to exercise or not exercise

its right of independent action 2 the imposition of procedural barriers

on the right of independent action and 3 acts of retaliation against carriers

who exercise their right of independent action To that end DOJ s comment

includes a proposed model conference agreement independent action clause

which contains extensive safeguards for the exercise of independent action

DOJ s proposal is not adopted in the Final Rule First this proposal

is so far reaching as to be clearly beyond the scope of the current rule

making proceeding A separate rulemaking proceeding would be necessary

with full opportunity for comment before such a comprehensive rule could

be adopted Second there is no factual record to provide a basis for

the DOJ proposal Unlike the situation in the motor carrier industry cited

by DOJ where the Interstate Commerce Commission imposed procedures

for independent action after it found that the statute was being frustrated

the Commission has only limited experience with independent action under

the 1984 Act At this time the Commission believes that conferences

should be free to draft their own independent action provisions and that

such freedom is consistent with the deregulatory spirit of the Act The

Commission is aware of the critical role that independent action plays

under the statutory scheme as a counterbalance to conference economic

power Therefore such provisions receive close scrutiny in the review proc

ess

Where it appears that a particular independent action provision may

inhibit independent action the Commission has sought and obtained modi

fication of the provision by the parties through the negotiation process

These negotiations have led to the deletion from agreements of independent

action provisions which mandate that a member taking independent action

attend a meeting and explain the independent action before the action

may go into effect and also provisions which provide for mandatory com

promise of independent action The negotiation process has worked thus

far to remove objectionable independent action procedures from agreements

At this time it therefore does not appear necessary to undertake arulemaking

proceeding regarding independent action However should there be any

indication that the right of independent action is being interfered with

in any way such a rulemaking proceeding will be considered

Section 572 802 Mandatory Provisions in Existing Interconference Agree

ments

Section 572 802 in the Interim Rule provided that existing interconference

agreements and agreements between carriers not members of the same

conference must provide for independent action Comment 38 suggests that

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RULES GOVERNING AGREEMENTS BY OCEAN COMMON 489

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

section 572 802 be transferred to section 572 502 b This suggestion has

been adopted

Section 572 B03 Expiration Dates inExisting Agreements

Section 572 803 provides that expiration dates in existing agreements

remain in effect on and after June 18 1984 The section further provides

that parties to agreements with expiration dates must file any modification

seeking renewal for a specific term or elimination of the expiration date

in sufficient time to accommodate the waiting period required under the

Act Comment 38 suggests that section 572 803 b should be transferred

to section 572 401 This suggestion is adopted

SUBPART I PENALTIES

Subpart Iprescribes penalties for violations of Part 572 as provided

for in section 13 a of the Act

Section 572 901 Failure to File

Sections 4 and 5 a of the Act provide for the filing of certain agreements

with the Commission Failure to file such an agreement is a violation

of section 5 a of the Act and Subpart D This failure to file is subject

to the penalties of section 13 a of the Act 46 US C app 1712 a

Maximum penalties are 5 000 for each violation unless the violation was

willfully and knowingly committed in which case the maximum penalty

is 25 000 for each violation

Section 572 901 is amended to add the phrase pursuant to sections

4 and 5 a of the Act and this part and not exempted pursuant to section

16 or excluded from filing by the Act This change clarifies that only

agreements subject to the Act and requiring filing can be penalized for

failure to file as opposed to agreements subject to the Act but which

do notrequire filing This responds to Comments 34 and 38 which suggested

these changes

Section 572 902 Falsification ofReports

Falsification of any report required by the Act and Part 572 including

falsification of any item on the Information Form is made subject to

the civil penalties set forth in section 13 a of the Act Such violations

may also be subject to criminal sanctions under 18 U S C 1001

Comment 29 challenges the Commission s authority to provide by rule

for penalties for falsification of reports when the Act does not specifically

proscribe such activity

Section 17 a authorizes the Commission to prescribe rules necessary

to carry out the Act and section 13 a in turn establishes penalties for

violations of the Act and regulations issued thereunder It is essential that

information submitted to the Commission be truthful information if it is

27 F M C
490 FEDERAL MARITIME COMMISSION

to adequately administer the Act The penalty provision furthers this fun

damental purpose

Comment 29 further asserts that this section is unnecessary because 18

U S C 1001 already makes it a violation of the criminal code of the

United States to intentionally make false statements within the context

of any matter arising within the jurisdiction of a federal agency

Section 572 902 is not superfluous To supplement the criminal penalties

under 18 U S C 1001 it provides for civil penalties pursuant to section

13 a Not all situations involving falsification of reports might merit the

imposition of criminal penalties In some situations civil penalties may

be appropriate Moreover the reference to 18 U S C 1001 in section

572 902 is a useful reminder of possible criminal liability

Finally Comment 29 maintains that the choice of the word falsification

makes section 572 902 overbroad It is submitted that unintentional

misstatements could be construed as falsifications and thereby made

subject to penalties

Section 572 902 is amended by adding the word knowing before

the word falsification where it appears This modification clarifies that

only parties who intentionally and not mistakenly submit false information

will be subject to penalties

Comment 22 submits that the penalties provided for in section 572 902

are excessive when considered in light of the difficulty of ascertaining

some of the data required on the Information Form

This Comment appears to be primarily addressed to the content of the

Information Form There should be no misunderstanding however of the

application of the penalties provisions except in cases where parties know

ingly falsify information Parties will not be subject to penalty under Subpart

Iwhere they are unable to supply data required on the Information Form

APPENDIX A TO PART 572 INFORMATION FORM AND

INSTRUCTIONS

Commission Authority to Require Filing of the Information Form

Section 572 405 requires the party filing certain agreements to provide

with the agreement information that is necessary under the Act to review

the agreement The required information is to be provided in the Information

Form set forth in Appendix A Where the filing party is unable to supply

a complete response the party should submit either estimated data with

an explanation as to why the precise data are not available or a detailed

statement of the reasons for noncompliance and the efforts made to obtain

the required information

Six comments address the issue of the Commission s authority to require

the filing of the Information Form Four comments disagree that the Com

mission has the authority to require the Information Form to accompany

the filing of certain agreements These comments make two related argu

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 491

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

ments in support of their position one there is no explicit obligation

for parties filing agreements under section 5 a of the Act to submit supple

mental detailed information concerning competitive factors with every agree

ment at the time of its filing and two the Information Form which

requests information relevant to the general standard cannot be the basis

for rejection of an agreement under section 5 a of the Act which contains

no reference to the general standard

Authority to require the Information Form is manifest for three main

reasons First the statute clearly and explicitly authorizes the Commission

to require that information accompany the filing of agreements and that

agreements that do not meet this requirement may be rejected Specifically

section 5 a of the Act authorizes the Commission to prescribe the

additional information and documents necessary to evaluate the agreement

46 D S C app 1704 a The legislative history to section 5 of the Act

specifies that the filing requirements are intended only for information

relevant to the Commission evaluation of an agreement rather than for

information based on broad standards unrelated to that agreement H R

Report 98600 98th Cong 2d Sess 28 1984Section 6b of the Act

authorizes rejection of any agreement filed under section 5 a of the Act

that does not meet the requirements of section 5 of the Act

Congressional intent concerning the evaluation of an agreement prior

to the agreement s effective date is interpreted to require not only a review

pursuant to the section 6b standard for compliance with section 5 require

ments but also an analysis based on the section 6 g general standard

for substantially anticompetitive agreements Moreover the authority under

section 5

a to prescribe information to be filed with the agreement

differs from the authority under section 6 d to require additional informa

tion to be submitted after the agreement has been filed but prior to its

effective date The initial information filing requirements are designed to

provide only the information needed to determine whether or not the agree

ment raises substantial issues of unreasonable and anticompetitive effects

under the section 6 g general standard Where such anticompetitive effects

are likely additional information that is necessary in order to make a

determination under section 6 g whether or not to seek to enjoin the

agreement may be requested under section 6 d

Second Congress has specifically cited in legislative history relevant

portions of the Hart Scott Rodino Antitrust Improvements Act of 1976 as

the model for the Commission s agreement review procedures Pursuant

to the Hart Scott Rodino Act the Federal Trade Commission FTC devel

oped a report form for information to aid the FTC in its preclearance

review of proposed acquisitions and mergers Antitrust Improvements Act

Notification and Report Form for Certain Mergers and Acquisitions

Third Congressional policy pronouncements in the Act and the legislative

history indicate that one of the purposes of the Act was to end the delay

in the processing of agreements and to provide a streamlined regulatory

27 F M C
492 FEDERAL MARITIME COMMISSION

process Submission of relevant information at the time an agreement is

filed that is not available to the Commission but is readily available to

the filing party will expedite the processing of agreements

Two comments specifically refer to the Commission s authority to require

an initial Information Form related to the general standard Comment 23

states that if an information filing requirement is prescribed it must be

limited to those instances where the agreement or modification raises a

question under the general standard Comment 34 accepts the premise that

useful information not available to the Commission but readily available

to the parties filing substantially anticompetitive agreements may be re

quired in conjunction with such filings Such requirements according to

Comment 34 will significantly reduce the need to request additional infor

mation from the filing parties thereby aiding the review process

In consideration of the above it is concluded that the 1984 Act does

confer the authority to require the submission of the Information Form

in conjunction with the filing of certain agreements

General Discussion ofthe Information Form

A number of comments argue that the Information Form is excessive

and irrelevant burdensome and unnecessary seeks information not

readily available or resuscitates the Svenska standard Specific com

ments will be addressed in the discussion of the particular part of the

Information Form However it should generally be stated that the require

ments outlined in the Information Form are within the statutory limits

on information gathering powers granted the Commission under sections

5 and 6 of the Act The data requirements in the Information Form conform

to the complicated decision calculus described in the legislative history

that is required in order to render a determination that an agreement is

or is not violative of the section 6 g general standard In the Interim

Rule the Commission stated

The Commission recognizes that the amount of information re

quested on the Information Form is significant These information

needs may be refined as the Commission gains experience under

the general standard and determines what is relevant and essential

to that review In addition the Commission plans to develop

its own internal sources of trade information and as this informa

tion becomes available may be able to reduce the amount of

information requested on the Form

Since the publication of the Interim Rule valuable experience has been

gained in applying the Information Form to the analysis of agreements

under the general standard Moreover the Commission has acquired and

begun to utilize Journal of Commerce and Bureau of Census data sources

which when used in conjunction with its trade monitoring capabilities

provide a better picture of the competitive implications of ocean carrier

agreements

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 493

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

Moreover the Information Form as promulgated in the Final Rule is

not set in concrete but will in all probability continue to evolve in order

to appropriately reflect the Commission s

regulatory needs in light of its

data resources and changes in the regulated industry Therefore in the

Final Rule there has been a general reduction in the amount of information

required in the Form Specific changes to the Information Form are indicated

in the particular Part together with a discussion of the comments and

the amendments to the Information Form

PART BY PART DISCUSSION

Part I Agreement Name

Part I

requires the filing party to provide the full name of the agreement

One comment addressed this part simply to indicate that this requirement

along with Part II was not objectionable as a quick identifier of the

agreement Accordingly Part I will remain unchanged in the Final Rule

Part II Agreement Type

Part II requires the filing party to indicate whether or not the agreement

authorizes the parties to collectively fix rates Part II A to pool cargoes

or revenues Part II B or to establish a joint service or consortium Part

II C

In the Interim Rule the instructions to the Information Form state that

the nature of the agreement determines the extent of information required

Specifically the instructions require only those agreements that provide

for rate fixing pooling or joint servicesconsortia to complete Parts III

and IV which seek information on market share and market competition

Such requirements are justified in the instructions on the basis that these

three types of agreements of all agreements historically filed with the

Commission are the most likely to trigger the 6 gstandard because of

their potential to create excessive market power

Part II and the Instructions have been amended to clarify and conform

Part II with the intention that only those agreements that provide for rate

fixing pooling or joint services consortia or significant modifications to

such agreements are required to complete Parts III and IV Parties filing

amendments to agreements should refer to section 572 403 a for guidance

as to which amendments require the Information Form Furthermore the

requirement that a completed Information Form include Part VIII Reports

Studies of Other Research for all filing parties has been limited to only

those parties that have answered yes to any question in Part II see

the discussion under Part VIII

Comment 23 states that only those types of agreements mentioned in

Part II that could raise questions under the general standard should be

required to file the Information Form In particular the comment argues

that the Information Form should only be required for those agreements

27 F M C
494 FEDERAL MARITIME COMMISSION

or modifications that authorize or directly increase the authority of the

parties to I

fix ocean rates 2 allocate cargo or revenue between or

among them or 3 reduce service at United States ports and which

may also result in a significant reduction in competition

The Commission generally agrees with the comment The Information

Form as formulated in the Final Rule essentially conforms to the comment s

suggestion Part IT identifies three types of agreements the first two of

which are identical to the first two agreement categories cited by the

comment Part V requires those agreements with service authority to specify

any reduction in service that is likely to occur as a result of the agreement

Thus Part V addresses those agreements in the comment s third agreement

category

Moreover for all other agreements the requirements imposed by the

Information Form are minimal In particular the only parts of the Informa

tion Form required under the Final Rule for parties filing agreements

other than rate fixing pooling and joint service agreements or agreements

with service authority or those agreements exempted from the filing require

ment are Parts I

II VI and IX For most agreements all that these

parts require is checking a box or entering name address and signature

Other than those Part II agreements discussed above the only other

substantive requirement would be imposed upon those agreements that are

required to complete Part VI Because restrictions imposed by governments

are the most effective limitations on competition in the ocean liner trades

Part VI captures important information for analysis under the general stand

ard For example certain agreements that facilitate access to cargoes subject

to foreign cargo preference laws or decrees which are not otherwise required

to indicate any market information on the Form would be required to

complete Part VI

Five comments address the requirement that certain types of agreements

must complete Parts III and IV of the Information Form

Two comments refer specifically to the inclusion of joint service agree

ments in Part II Comment 18 argues that the implication that joint service

agreements are likely to be violative of the general standard should be

rejected Comment 30 supports the requirement that joint service consortium

agreements complete Parts III and IV citing the potential for this type

of agreement to reduce competition especially if the cooperating carriers

dominate the relevant trade

There are two major concerns with joint services under the general

standard The first which was mentioned in Comment 30 involves a situa

tion where two or more of the parties to the proposed joint service currently

have an existing service in the trade Thus the formation of the joint

service eliminates the existing competition between or among the parties

in the relevant trade s The second concern involves the entry into a

trade of a new joint service which is so large as to be able to exercise

market dominance in the trade it plans to enter

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 495

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

In order to assess the competitive impact of a new joint service agree

ment the filing of an Information Form with such agreements will continue

to be required Therefore no change is made in the Final Rule in this

regard

Comments 26 28 and 38 argue that conference agreements are less

likely to raise issues under the general standard than service coordination

pooling and joint service agreements They also argue that the information

required for conference agreements is excessive and should be deleted

or reduced

The Commission concurs in part with these comments that conference

agreements apart from extraordinary circumstances are not likely to be

violative of the general standard and that the specific statutory restrictions

on conference activities diminish the ability of a conference to abuse its

position of dominance in a trade However such a view which appears

to comport with Congressional intent does not remove the Commission s

responsibility under the Act to review conference agreements for possible

violations of the Act Such a review must consider accepted economic

principles which hold that explicit collusion in the form of price fixing

agreements may result in prices that are higher than competitive levels

There is however no presumption that conference agreements will violate

the general standard In setting out the requirements for completing the

Information Form in particular Parts III and IV concerning market share

and market competition the Commission considered those agreements

among all the types of agreements with which it was familiar that had

the greatest potential to reduce competition and create market power in

such a manner as to raise concerns under the general standard The Commis

sion adheres to its belief that in the unusual and severe cases where the

general standard may be violated either one or a combination of rate

fixing pooling or joint service agreements will be involved Consequently

the Commission will continue to apply the more rigorous data requirements

contained in Parts III IV and VIII for conference agreements

Two comments argue that certain classes of agreements should be added

to those having potential substantial anticompetitive implications and that

further information filing requirements should be imposed Comment 28

specifically criticizes the failure to subject service coordination agreements

Le cross chartering combined with joint control over sailings and

itineraries to greater scrutiny than conference agreements The comment

urges that service coordination agreements be required to complete Parts

III and IV and Part VII Benefits of the Agreement the completion

of which is now voluntary for all types of agreements Comment 30 pro

poses the addition of all equal access agreements to those agreements

required to complete Parts III and IV

In partial response to Comment 30 it should be noted that equal access

agreements invariably arise in response to the actions of a government

and therefore require the completion of Part VI However in considering

1
496 FEDERAL MARITIME COMMISSION

these and other recommendations for inclusion in the Final Rule 

must be taken to ensure that all parties affected by the Final Rule 

the opportunity to comment The Commission cannot create new 

requirements for a class of agreements without first availing the aff

parties with the opportunity to comment The Commission may in a sep

rulemaking procedure consider and propose rules that would address 

issues raised in Comments 28 and 30 Accordingly the Commission 

withholds any further discussion of these aspects of Comments 28 

30

Comment 39 recommends that the requirement to submit an Inform

Form together with the required information contained therein shoul

tailored to the type of agreement filed

The Commission concurs with this comment The Commission has 

sistent with its agreement review responsibilities under the Act req

the Information Form only for new agreements excluding marine term

agreements assessment agreements and exempted agreements and mod

tions of agreements that may present substantial issues of competitive 

under the general standard Moreover the requirement to complete ce

parts of the Form eg Parts III IV V and VIII is in fact tai

to the type of agreement involved

Part III Market Share Information

Part III requires those parties answering yes to Part II A B 

C to provide the combined market share of all parties to the agree

Part III Cby providing the amount of liner cargo carried by all pa

to the agreement in each sub trade Part III Aand dividing this am

by the total amount of cargo carried on all liner vessels operatin

each sub trade Part IIIBBackground Information to Parts III and 

indicates that the amount of cargo is to be given in both weight 

and on a dollar value basis Subtrade is defined as liner movements betw

each foreign country and each US port range within the scope of 

agreement where a port range is identical to the Bureau of Census 

Coastal District Liner service refers to a definite advertised sche

giving relatively frequent sailings at regular intervals between specific 

ports or port ranges and designated foreign ports or port ranges

A number of comments address this part They express a common con

that the information required in Part III is irrelevant excessive burdens

and meaningless The earlier discussion of the authority to require f

parties to submit an Information Form with certain agreements addre

the question of the relevancy of the Information Form

A number of comments generally recommend that carriers be allo

to submit data in the form in which they actually keep it and use 

Several comments urge that market share should be requested as a g

faith estimate based on available data and an explanation of the estima

process Comments on specific data filing requirements in Part III 

27FMC
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 497

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

statement

summarized

of

below

its course

The discussion

of action

of

will

the

not

comments

allow the

and

summary

the Commission s

of each

topic but will pertain to all comments to Part III at the end of this

section

Sub trade

Comments referring to the requirements that data be given by subtrade

generally object to it on the grounds that trade data is not kept by carriers

on a subtrade basis and therefore such data is not readily available

or within the parties grasp Cargo data according to several comments

is kept by carriers on a port or port range or rate group basis Moreover

according to two comments 23 26 the separation of foreign port ranges

into foreign countries and the division of US port ranges along the lines

of Customs districts does not reflect the markets or trade routes over

which carriers actually compete With intermodalism Comment 26 argues

the US West Coast should be one port range not two because of the

ease with which interior point and minilandbridge traffic can shift from

one state to another

Amount of Cargo on a Weight Ton and Dollar Value Basis

Six comments object to the requirement that cargo data be given in

dollar value two of which also object to a weight ton basis requirement

These comments generally argue that the dollar value of the cargo is

not a significant statistic to the carriers so they do not ordinarily keep

records of the cargo s dollar value The dollar value is available through

the Bureau of Census but it is not within the parties grasp Comment

36 states that because cargo data compiling methods differ from trade

to trade parties should be permitted to specify the unit of measurement

in submitting cargo data if weight ton and dollar value measures are unavail

able

NonParty Cargo Data Part III B

Comments generally argue that the cargo data collection problems for

parties are increased when they are applied to nonparties to the agreement

Several comments maintained that the carriers do not have ready access

to cargo information relating to their competitors in a trade The most

reliable information on carrier cargo statistics is Bureau of Census which

should according to Comment 34 be purchased by the Commission directly

instead of being purchased by the parties and then submitted to the Commis

sion This comment urges that Part III Bbe eliminated along with Part

III C

Liner Service

Comment 30 recommends that the Commission specify in the Instructions

to the Form where it defines liner terms that these definitions and descrip

tions apply only in the context of the Information Form Such a clarification

27FMC
498 FEDERAL MARITIME COMMISSION

would preclude any confusion as to what persons are subject to the Act

For example bulk parcel tankers may meet the definition of a liner service

but according to the comment are not subject to the Act

The Commission generally agrees with the comments to Part III The

Commission does not wish to impose excessive burdens on the filing parties

or to require the submission of data not within the parties grasp Moreover

the data submitted should be meaningful that is the data should not be

an artificial manipulation of disparate data e g

a combination of parties

business records and Census data in order to derive market share More

importantly the Commission which now has access to both the Bureau

of Census and Journal of Commerce data bases is aware as several com

ments argued that these data bases contain weight and dollar value data

which are not perfect indicators of market share More relevant and pref

erable as a measure of market shares are revenue tons which may include

measurement tons or weight tons or containers statistics measured in TEU s

Such data where provided can augment internal data sources

Accordingly the Final Rule will indicate that market share data provided

in Parts III A B and C may be estimated based on data available

to the filing party All estimates should be accompanied by an explanation

indicating how the estimates were derived an explanation of why precise

data are not available is no longer required for Parts III or IV see discussion

of section 572 405 Available data is data within the parties grasp

that is data that the parties have already acquired or would ordinarily

acquire in the course of undertaking such commercial decisions embodied

in their proposed agreement The Instructions and Explanation and the

Information Form will be amended to require that market share data be

provided for such sub trade within the scope of the agreement only where

such data is available to the parties of where sub trades represent the

relevant market for liner service Where the relevant market for liner service

is more accurately represented by the entire geographic scope of the agree

ment or by certain foreign port ranges rather than foreign country or

by combinations of U S port ranges the parties may provided market

share on that basis The geographic scope for which market share informa

tion is provided should be clearly defmed

Market share data may be provided in units that are ordinarily kept

and used by the parties The data is to be provided for the most recent

twelve month period for which data are available Where estimates have

been made the filing party should so specify and indicate the basis of

their derivation Units of measurement should be clearly indicated for all

data provided

The Instructions and Explanation will also indicate that the definition

of liner service and other liner terms is relevant only to the Information

Form and does not affect the determination of persons subject to the Act

based on the Act itself or the Final Rule
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 499

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

Part N Market Competition

Part IV requires the filing party to provide the names of all non party

liner operators currently serving each sub trade Part IV A l

the names

of all liner operators serving alternative liner routings competing for cargoes

carried in each sub trade Part IV A 2 and a description of the extent

of competition offered by such liner operators e g

estimates of market

share or underutilized capacity in alternative liner routings Part IV A 3

This part also requires the identification of all nonliner competitive sub

stitutes e g bulk or air freight Part IV B l and estimates of the percent

age of liner cargo that is currently carried by nonliner operators Part

IV B 2

Eight comments address this part Five comments argue that much of

the data required in this part is not known and not readily obtainable

or if provided by the parties is not meaningful or accurate These comments

generally indicate that data provided in this part would be only an educated

guess or a matter of judgment

Several comments address the relevance of the information required Com

ment 28 argues that non party liner market share adds nothing to market

share analysis Comments 28 and 39 state that data on non liner competition

are not meaningful or helpful to the review of the agreement However

Comment 38 maintains that such data for liner and non liner competition

would only be relevant to a market share analysis Comment 34 contends

that the need for such data is specified in the legislative history to the

Shipping Act of 1984 but the Congressional intent is that such information

would be better provided by third party sources Comment 27 in arguing

that the required information is not readily available to carriers states

that the Commission should recognize the fact that liner and nonliner com

petition make liner freight rates reasonable

Comments 23 and 34 recommend that Parts IV A 2 3 and IV B

should be optional because the data provided serve the parties interests

Comments 27 and 36 recommend that Parts IV A and IV A l be deleted

Comment 36 requires the addition of certain qualifying terms that would

make the data requirements less precise and more at the discretion of

the parties

The Commission recognizes the difficulty of providing precise data in

response to the requirements of Part IV The instructions to this part in

the Interim Rule allow the use of estimates in the determination of percent

ages indicating the extent of liner and non liner competition in Parts IV A

and B respectively Parties are expected to have some knowledge of

the identity of their competitors and at least approximately the degree

to which non party liner operators and certain non liner operators are com

petitive with the parties

The Commission agrees with one comment that the presence of liner

and non liner competition should militate against unreasonably high rate

levels Moreover the need and relevance of such information to the review

27 F M C
500 FEDERAL MARITIME COMMISSION

of agreements under the general standard is clearly indicated in the legisla

tive history The extent of liner and non liner competition aids in the

determination of the relevant market share and is necessary in order to

determine the potential market power of parties to an agreement operating

in that market The specification of such liner and non liner competition

may tend to decrease the market share of the parties to their benefit in

the analysis under the general standard

The Commission is developing or acquiring data sources that should

enable it to supplement the parties data on the competitive conditions

in most ocean trades However the Commission in order to assist and

expedite its preliminary review of agreements under the general standard

requires information that the parties could be expected to have concerning

their competitors that would complete or support the Commission s data

Because of the relevance of this information to the preliminary review

of an agreement the Commission continues to require in the Final Rule

parties with affirmative answers to Part II A B or C to complete

Part IV The Final Rule will indicate that the data required can be estimated

Parties should continue to identify the sources for such estimates The

units of measurement to be used in providing cargo data are at the discretion

of the parties However all units of measurement must be clearly identified

The parties need not for their responses to Part III or Part IV utilize

any data sources that they have not already acquired or would not ordinarily

acquire in the course of undertaking such commercial decisions embodied

in their proposed agreement

Part VService to the Shipping Public Under the Agreement

Part V requires the filing party to identify all U S ports expected to

be served under the agreement Part V A to specify each party s reduction

in frequency to each port within the scope of the agreement part V B

and to specify any elimination of service to any U S port within the

scope of the agreement which occurs as a result of the implementation

of the agreement Part VC

Six comments address Part V The consensus of the comments is that

information concerning the reduction or elimination of service should be

required only of agreements that have the authority to reduce service

Ratemaking agreements that do not according to Comment 32 seek to

control the fact or frequency of any member line s service should not

be required to complete Part V

The intent of Part V is to obtain information not otherwise available

that is essential to an analysis under the general standard of reductions

in service resulting from the agreement Clearly agreements with no service

authority cannot be construed as having the potential through a reduction

in competition to unreasonably reduce service levels Consequently the

completion of Part V will be required only for those agreements that

have service authority Service authority is defmed as including either or

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 501

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

both of the following authorities allowing parties to agree between or

among themselves to allocate or otherwise provide tonnage or capacity

between or among carriers serving the trade s to establish a schedule

of ports or otherwise allocate ports which each carrier will serve and

or the frequency of each carrier s calls at those ports

Comment 27 indicates that Part V is relevant but Part V s emphasis

on service to ports is contrary to the Act s intent which is to permit

carriers to structure their own affairs and thereby provide more efficient

service to shippers Because it does not follow that a reduction in service

to ports is a reduction in service to shippers the Commission should

according to this comment readjust its focus on ports to address the issue

of service to shippers

The frequency of port calls is used because it is a

readily available

index of service to shippers There are of course other indices that indicate

the service to shippers including for example capacity type of vessel

transit time number of handlings However to require such data would

likely present filing parties with an unduly burdensome data collection

task Moreover such data would likely be of marginal use for the analysis

of most agreements under the general standard Ifreductions in frequency

or the elimination of service to ports are indicated in Part V which

when combined with the Commission s general knowledge of trade condi

tions are sufficient enough to present questions under the general standard

the Commission may at that time seek additional information either infor

mally or under the authority of section 6 d of the Act in order to more

specifically address the impact of the agreement on service to shippers

Consequently in lieu of any specific suggestions in the comment as to

how service to shippers could be more accurately and practicably determined

and obtained the Commission will continue to utilize port calls as one

initial proxy for service to shippers

Comment 23 maintains that the reference to indirect port calls via surface

carriage in the instructions to Part V A implies that for the purposes

of responding to Part V A a port could include inland points and

that port calls could include pick up or delivery at such inland points

by railcars and trucks Comment 23 also recommends that port calls required

by Part V B refer only to direct or indirect calls by vessels under the

direct operational control of the parties

The Commission is persuaded that potential problems may exist involving

excessive data required in Part V for indirect intermodal service and for

service by vessels not under the operational control of the parties Con

sequently the use of the term port calls in the Information Form and

Instructions is changed to delete reference to surface carriage and to account

only for port calls by vessels under the direct operational control of one

or more parties to the agreement For the purpose of the Information

Form the term port means the place with a harbor that an ocean

carrier serves either directly by oceangoing vessel or indirectly by feeder

27 F M C
502 FEDERAL MARITIME COMMISSION

service The use of this information is applicable only to the Information

Form and in no way changes the meaning of port as referenced elsewhere

in the Final Rule The identification of other forms of indirect service

such as intermodal service e ginterior point or minilandbridge service

or transshipment may be provided on a voluntary basis by the parties

where such data may assist and expedite the analysis of the agreement s

impact on service but it will not be required with the initial filing The

Commission may however request such data pursuant to its authority

under section 6 d of the Act where substantial reductions in service are

indicated both by the agreement and by the analysis under the general

standard of the agreement and the relevant trade s

Comment 36 recommends that Part V A be changed to require only

the identification of those ports expected to be served and that Part

V B be amended to require an estimate of any change in the frequency

of port calls rather than reduced sailings

With regard to the comment s concerns with Part V B the analysis

of services under the general standard pertains to unreasonable reductions

in the level of service The Commission need only therefore require parties

to provide reductions in service that will occur as a result ofthe implementa

tion ofthe agreement With regard to the suggestion that Part V A indicates

those ports expected to be served the instructions to Part V A already

so state Consequently Part V A will be changed to conform to the instruc

tions

Comment 26 refers to Part V B 2 which specifies that the elimination

of service to any port need only be indicated where it occurred as a

result of the implementation of the agreement This comment urges that

similar restrictive language be applied to Part V B l

as well

Part VB seeks information concerning the reduction or elimination of

service at any port within the scope of the agreement for the purpose

of analyzing the impact of an agreement under the general standard Con

sequently the Commission is only interested in Part V B l

as it is

in Part V B 2 insofar as the specified reduction of service is likely

to occur as a result of the implementation of the agreement The Final

Rule will therefore reflect the change in language urged by Comment

26

Part VI Foreign Government Involvement in the Liner Market

Part VI requires the filing party to indicate whether or not the agreement

was entered into as a direct or indirect response to any law decree or

other action promulgated or otherwise implemented by a foreign government

Part VI A Where the filing party has so indicated then all such govern

mental actions that have led to the agreement should be specified Part

VI B The filing party is also required to indicate whether or not the

governmental action limits access to the carriage of liner cargoes Part

VI C and if so to explain how access is limited Part VI D and to

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 503

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

provide the percentage of liner cargo carried within the scope of the agree

ment to which access is limited Part VI E

Four comments address Part VI Comment 22 has no quarrel with

this part Comment 26 states that the instructions to this Part should be

clarified so that Parts VI C 0 and E are required only where Part

VIA is answered in the affirmative The concerns of Comment 26 can

be alleviated by reference in the Information Form to Part VI C which

clearly refers to Part VI A and to Parts VI D and E which clearly

refer to Part VI C

Comment 34 argues that Part VI is not relevant with respect to ratemaking

agreements and therefore should not be applicable The Commission con

curs that most conference agreements have not usually been established

in direct or indirect response to government laws decrees etc Nonetheless

certain laws of foreign governments do require that a carrier in order

to carry cargo in that country s oceanborne foreign commerce be a con

ference member The Commission will retain the requirement that parties

filing conference agreements or significant amendments to such agreements

answer the pertinent portions of Part VI

Comment 38 states that government laws are not relevant to any standard

pertaining to the rejection of an agreement under sections 6 b or 6 g

ofthe Act Moreover even if such laws were relevant no reason is given

according to this comment as to why Part VI should apply to foreign

government and not U S laws

The inclusion of Part VI as explained in the Interim Rule is based

on the premise that given the contestability of the liner shipping industry

in all but the rarest cases only the actions of governments can effectively

restrict entry to a trade In such cases where entry is so restricted excessive

market power is most likely to arise and present significant issues of

potential competitive harm under the general standard Thus the Commis

sion rejects the claim made by Comment 38 that information concerning

foreign government involvement in the liner trades is not relevant to the

preliminary review of an agreement under the general standard The general

authority to reject agreements under section 6 b is addressed earlier in

the discussion of Appendix A

It may be helpful to reiterate and further clarify what is meant by

an agreement that is a direct or indirect response to a governmental law

decree or other action Where for example laws of a foreign government

require that a carrier in order to carry cargo in that country s oceanborne

foreign commerce must be a conference member then an agreement that

establishes a conference in order for the parties to enter that trade would

be a direct response to such governmental laws and thus would be required

to answer Part VI Moreover a commercial agreement that was in response

to a governmental action that was itself in response to the concerted actions

of other governments would also be required to complete Part VI For

example any commercial space charter agreement that was filed in response

27 F M C
504 FEDERAL MARITIME COMMISSION

to laws promulgated by a government that sought to impose cargo sharing

schemes through such space chartering agreements and in such a fashion

implement the UNCTAD Code of Liner Conduct would be required to

complete Part VI

In addition the treatment of equal access agreements should be clarified

in light of Comment 30 which states that equal access agreements may

not be in response to the actions of governments Such agreements which

facilitate access by certain carriers to cargoes subjected to government

preference laws decrees or other practices necessarily interject a foreign

government into liner shipping and therefore require the completion of

Part VI which the instructions to the Information Form in the Final Rule

will state

An agreement that was an indirect response to a governmental action

would be any agreement that facilitated the implementation of government

laws decrees etc or an agreement that flowed from such governmental

action An indirect response to the example stated above would be the

creation of a pool that facilitates cargo sharing within the conference even

though the pool was not per se required by such governmental action

Only foreign government laws have been addressed in Part VI because

the Commission is either familiar with or can easily obtain the information

it requires concerning U S cargo preference laws The involvement of

foreign governments in liner markets is not necessarily so easily determined

Part VIl Benefits ofthe Agreement

Part VII requests the filing party to indicate the benefits of the agreement

that will accrue to the parties to the agreement part VII A and to shippers

and U S commerce generally Part VII B In response to emergency com

ments the Information Form was amended to make the completion of

Part VII voluntary

Seven comments address this part Three comments are generally support

ive of this part s inclusion in the Form Comments 22 and 34 assert

that the provision of the agreements benefits will generally bolster the

parties case Comment 26 concurs with the amendment to the Interim

Rule that makes the completion ofPart VII voluntary

The three comments that oppose Part VII Comments 27 32 37 gen

erally take the position that a statement of benefits and substantiating data

is a request for an advance justification of the agreement placing the

burden of proof on the parties to an agreement These comments believe

that Part VII reinstitutes the Svenska standard and subverts the intent of

the Act

The Commission included Part VII in the Information Form in order

to allow the parties to provide any information concerning increases in

efficiency that may offset any reduction in competition resulting from the

agreement Such information would assist the Commission in its review

of an agreement under the general standard which as outlined in the

27 F M C
27 F M C

RULES GOVERNING AGREEMENTS BY OCEAN COMMON 505

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

legislative history compels the consideration of efficiency benefits Such

benefits may offset any negative effects of an agreement that are found

likely to result in a substantial reduction in competition Part VII allows

those persons filing the agreement who are likely to be most knowledgeable

about the agreement s

resulting efficiencies to demonstrate those benefits

The completion of Part VII should be to the advantage of the filing parties

Moreover it is not a mandatory requirement

The Commission will make no a priori judgments concerning the benefits

of an agreement based on the completion or lack of completion of Part

VII In the absence of the completion of Part VII the Commission where

it is deemed necessary will on its own undertake the determination of

the agreement s benefits Where Part VII has been completed the Commis

sion will determine the validity of the efficiencies claimed and enter again

where necessary its assessment of the agreement s benefits into its analysis

of the agreement under the general standard The Commission does not

therefore view Part VII as a reinstitution of any aspect of the Commission s

agreement approval standards under the Shipping Act 1916 Part VII will

remain unchanged in the Final Rule

Part VIII Reports Studies or Other Research

Part VIII requires the filing party to identify any reports studies or

other research that were prepared in order to determine the need for the

proposed agreement

Nine comments address this part All oppose the requirement These

comments contend that it is an unnecessary regulatory requirement irrele

vant to the general standard so broad as to be incomprehensible an invasion

of confidential business information a reinstitution of the Svenska test

the first leg of a fishing expedition that is arbitrary and capricious because

of the absence of any exploration in the public record an unnecessary

processing delay discoverable under 6 t but not 6b and finally a return

to existing law requiring the parties to show that less anticompetitive alter

natives exist

The Commission believes that a clarification of Part VIII may adequately

respond to these comments objections The Commission s goal in requiring

parties to identify any reports made in conjunction with the proposed agree

ment is to avail the Commission staff of information within the parties

grasp that would assist and expedite the preliminary review of the agreement

under the general standard The use of the word need in the phrase

for the purpose of analyzing formulating or assessing the need

for the proposed agreement is perhaps unfortunate The Commission

does not desire nor does it view as a proper burden to be placed on

filing parties an a priori justification for the agreement on the basis of

the commercial need for the agreement or on the basis that no less anti

competitive alternatives to the agreement exist The Commission is interested

in any data the parties have gathered relevant to the competitive conditions
506 FEDERAL MARITIME COMMISSION

in the relevant trade s and the competitive implications of the agreement

Specifically this part is intended to solicit information on any studies

commissioned or carried out by the parties pursuant to the agreement that

examine rates service levels and number and strength of competition in

the relevant trades or that forecast the effect of the agreement on such

parameters

In light of the comments and in order to clarify Commission intent

with respect to Part VIII the Commission is amending Part VIII and

all references to this Part in the Instructions and Explanations to the Form

to conform to the amended language In order to minimize the burden

on filing parties only where the filing party has answered yes to Part

II A B or C will Part VIII be required to be completed The instruc

tions to Part VIII will now read as follows

Part VIII requires a filing party that has answered YES to

Part II A B or C to identify any reports studies or other

research that were prepared by or for any or all of the parties

for the purpose of analyzing formulating or assessing the competi

tive conditions in the relevant trade s affected by the agreement

or the competitive impact of the agreement on the relevant trade s

affected by the agreement

Part IXldentification of Person s to Contact Regarding the Information

Form and Certification ofAuthenticity

Part IX solicits the name s of the person s that the Commission may

contact regarding any questions concerning the Information Form or a re

quest for additional information This part also requires a certification of

the authenticity by the filing party of the information provided in the

Form

Three comments address Part IX These comments generally oppose the

certification requirement in Part IX C as burdensome and redundant Com

ment 23 claims that the specific instructions for certification in Part IX C

require an unreasonable confirmation of factual and legal conclusions regard

ing the accuracy and completeness of the Form All comments refer to

18 U S C 1001 which is itself specifically referenced in section 572 902

of the Rules These comments urge the elimination of Part IX or the

modification of its text to allow the filing parties to draft the certifications

The Commission is persuaded that the text of Part IX C may present

the parties with burdensome certification requirements The Commission

views however that a separate certification of the accuracy and complete

ness of the Information Form is important to the enforcement of the general

standard In order to relieve the filing parties of burdensome requirements

the Commission is simplifying the certification oath and eliminating the

notarization requirement The certification oath will read as follows

This Information Form tlPgether with any and all appendices and

attachments thereto was prepared and as mbled in accordance

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 507

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

with the instructions issued by the Federal Maritime Commission

Subject to the recognition that where so indicated reasonable

estimates have been made the information is to the best of

my knowledge true correct and complete

Name please print or type

Title

Relationship with parties to agreement

Signature

Date

III Conclusion

This Final Rule and the accompanying Information Form are intended

to implement the various agreements provisions of the Act in accordance

with the 1984 Act s guiding policies The changes made to the Interim

Rule in response to the comments filed in Dockets Nos 8426 and 84

32 are intended further to facilitate the filing of agreements by parties

and the review and monitoring of agreements by the Commission These

changes generally have reduced the regulatory burden on the ocean shipping

industry and have retained only those requirements which are essential

to the fulfillment of the Commission s regulatory responsibilities The Com

mission believes that the Final Rule establishes a nondiscriminatory regu

latory process with a minimum of government intervention and regulatory

costs

The Chairman of the Commission certifies pursuant to section 605 b

of the Regulatory Flexibility Act 5 U S C 601 et seq that these rules

will not have a significant economic impact on a substantial number of

small entities within the meaning of that Act The primary economic impact

of these rules would be on ocean common carriers which generally are

not small entities A secondary impact may fall on shippers some of

whom may be small entities but that impact is not considered to be

significant

List of Comments and Pleadings Filed in Docket No 8426

1 Hoppel Mayer Coleman May 30 1984

2 Philadelphia Port Corporation May 31 1984

3 Trans Pacific Freight Conference of JapanKorea JapanKorea Atlantic

and GulfFreight Conference June 4 1984

4 Associated Latin American Freight Conferences United States Atlantic

Gulf Panama Freight Conference Atlantic Gulf West Coast of South

America Conference East Coast Colombia Conference United States Atlan

tic Gulf Southeastern Caribbean Conference United States Atlantic

Gulf Jamaica and Hispaniola Steamship Freight Association United States

Atlantic Gulf Ecuador Freight Conference United States FloridaEcuador

27 F M C
508 FEDERAL MARITIME COMMISSION

J

i Steamship Conference South Atlantic GulfPanama Costa Rica Rate

Agreement South Atlantic Gulf Guatemala EI Salvador Honduras

Rate Agreement June 1 1984

5 Inter American Freight Conference Inter American Freight Conference

River Plate Puerto Rico and U S Virgin IslandsRiver Plate Pacific Coast

River Plate Brazil Conference June 1 1984

6 Australia Eastem U S A Freight Conference The 8900 Lines

GreecelU S Atlantic Rate Agreement IberianU S North Atlantic West

bound Freight Conference MarseillesNorth Atlantic U S A Freight Con

ference IsraelU S North Atlantic Ports Westbound Freight Conference

Med Gulf Conference Mediterranean North Pacific Coast Freight Con

ference North Atlantic IsraellEastbound Freight Conference North Atlantic

Mediterranean Freight Conference U S Atlantic Gulf Australia New Zea

land Conference United States Atlantic PortsItaly France and Spain Freight

Conference West Coast of Italy Sicilian and Adriatic Ports North Atlantic

Range Conference June 4 1984

7 Thailand Pacific Freight Conference June 5 1984

8 Pacific Westbound Conference Pacific Straits Conferences Pacific

Indonesian Conference June 1 1984

9 Graham James June 4 1984

10 Inter American Freight Conference Puerto Rico and U S Virgin Is

lands June 5 1984

11 Chemical Manufacturers Association June 6 1984

12 U S Flag Far East Discussion Agreement June 8 1984

13 North AtlanticlUnited Kingdom Freight Conference North Atlantic

French Atlantic Freight Conference North Atlantic Continental Freight Con

ference North AtlanticBaltic Freight Conference Scandinavia Baltic U S

North Atlantic Westbound Freight Conference Continental North Atlantic

Westbound Freight Conference North Atlantic Westbound Freight Associa

tion United Kingdom U S A Gulf Westbound Rate Agreement Continen

tal U S Gulf Freight Association Gulf United Kingdom Conference Gulf

European Freight Association June 11 1984

14 U S Department of Justice June 15 1984

15 National Maritime Council July 24 1984

16 Australia Eastem U S A Freight Conference The 8900 Lines

GreeceU S Atlantic Rate Agreement IberianU S North Atlantic West

bound Freight Conference MarseillesNorth Atlantic U S A Freight Con

ference Med Gulf Conference Mediterranean North Pacific Coast Freight

Conference New Zealand Rate Agreement North AtlanticMediterranean

Freight Conference U S Atlantic GulfAustralia New Zealand Con

ference U S South AtlanticPortuguese Moroccan and Mediterranean Rate

Agreement United States Atlantic PortsItaly France and Spain Freight

Conference West Coast of Italy Sicilian and Adriatic Ports North Atlantic

Range Conference WINAC August 6 1984

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 509

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

17 North AtlanticUnited Kingdom Freight Conference North Atlantic

French Atlantic Freight Conference North Atlantic Continental Freight Con

ference North Atlantic Baltic Freight Conference Scandinavia Baltic U S

North Atlantic Westbound Freight Conference ContinentalNorth Atlantic

Westbound Freight Conference North Atlantic Westbound Freight Associa

tion United Kingdom U S A Gulf Westbound Rate Agreement Continen

tal U S Gulf Freight Association Gulf United Kingdom Conference Gulf

European Freight Association North Europe South Atlantic Rate Agreement

U S South Atlantic Europe Rate Agreement August 10 1984

18 Johnson Scanstar August 15 1984

19 City of Los Angeles Harbor Department August 20 1984

20 Trans Freight Lines Inc August 23 1984

21 Port of Sacramento August 24 1984

22 North Europe U S Pacific Freight Conference Pacific Coast European

Conference Latin AmericaPacific Coast Steamship Conference Pacific

Coast River Plate Brazil Conference Pacific Australia New Zealand Con

ference and their respective member lines August 27 1984

23 AustraliaEastern U S A Freight Conference The 8900 Lines

Greece U S Atlantic Rate Agreement IberianU S North Atlantic West

bound Freight Conference Marseilles North Atlantic U S A Freight Con

ference Med Gulf Conference Mediterranean North Pacific Coast Freight

Conference North Atlantic Mediterranean Freight Conference US Atlantic

GulfAustralia New Zealand Conference U S South Atlantic Portuguese

Moroccan and Mediterranean Rate Agreement United States Atlantic Ports

Italy France and Spain Freight Conference West Coast of Italy Sicilian

and Adriatic Ports North Atlantic Range Conference WINAC Comment

on Information Form August 27 1984

24 AustraliaEastern U S A Freight Conference The 8900 Lines

Greece U S Atlantic Rate Agreement Iberian U S North Atlantic West

bound Freight Conference Marseilles North Atlantic U S A Freight Con

ference Med Gulf Conference Mediterranean North Pacific Coast Freight

Conference North Atlantic Mediterranean Freight Conference US Atlantic

Gulf Australia New Zealand Conference U S South Atlantic Portuguese

Moroccan and Mediterranean Rate Agreement United States Atlantic Ports

Italy France and Spain Freight Conference West Coast of Italy Sicilian

and Adriatic Ports North Atlantic Range Conference WINAC Comment

on Proposed Rule August 27 1984

25 U S Flag Far East Discussion Agreement August 27 1984

26 MalaysiaPacific Rate Agreement Pacific Indonesian Conference Pa

cific Straits Conference Pacific Westbound Conference August 27 1984

27 Council of European Japanese National Shipowners Associations

August 27 1984

28 American President Lines Ltd August 27 1984

27 F M C
510 FEDERAL MARITIME COMMISSION

29 U S GulfBrazil Pooling Agreement U S Pacific Brazil Pooling

Agreement BraziVU S Pacific Pooling Agreement U S GulfArgentina

Pooling Agreement August 27 1984

30 Chemical Manufacturers Association August 27 1984

31 U S Department of Justice August 27 1984

32 U S Department ofTransportation August 27 1984

33 American Institute For Shippers Associations Inc August 28 1984

34 North Atlantic United Kingdom Freight Conference North Atlantic

French Atlantic Freight Conference North Atlantic Continental Freight Con

ference North Atlantic Baltic Freight Conference Scandinavia Baltic U S

North Atlantic Westbound Freight Conference Continental North Atlantic

Westbound Freight Conference North Atlantic Westbound Freight Associa

tion United Kingdom U S A Gulf Westbound Rate Agreement Continen

tal U S Gulf Freight Association Gulf United Kingdom Conference Gulf

European Freight Association North Europe U S South Atlantic Rate

Agreement U S South Atlantic Europe Rate Agreement August 28 1984

35 Agreement No 10305 August 29 1984

36 Sea Land Service Inc August 27 1984

37 American West African Freight Conference August 30 1984

38 Inter American Freight Conference Inter American Freight Con

ference Puerto Rico and U S Virgin Islands Inter American Freight Con

ference River Plateuerto Rico and U S Virgin IslandRiver Plate August

30 1984

39 Trans Pacific Freight Conference of JapanKorea JapanKorea Atlantic

and Gulf Freight Conference TransPacific Freight Conference Hong Kong

New York Freight Bureau PhilippinesNorth America Conference and their

member lines August 30 1984

List of Comments and Pleadings Filed in Docket No 8432

101 The 8900 Lines IberianU S North Atlantic Westbound Freight

Conference MarseillesNorth Atlantic U S A Freight Conference Italy

South France South Spain PortugalU S Gulf and the Island of Puerto

Rico Med Gult Conference U S Atlantic Gulf Australia New Zealand

Conference U S Atlantic PortsItaly France and Spain Conference The

West Coast ofItaly Sicilian and Adriatic PortsNorth Atlantic Range Con

ference WINAC October 17 1984

102 American President Lines Ltd October 17 1984

103 Council of European Japanese National Shipowners Associations

October 17 1984

104 Far East Conference Malaysia Pacific Rate Agreement Pacific

Indonesia Conference Pacific Straits Conference October 18 1984

105 The North European Conferences October 18 1984

106 Trans Pacific Freight Conference of JapanKorea JapanKorea Atlan

tic and Gulf Freight Conference Trans Pacific Freight Conference Hong

Kong New York Freight Bureau PhilippinesNorth America Conference

October 22 1984

27 F M C
RULES GOVERNING AGREEMENTS BY OCEAN COMMON 511

CARRIERS OTHERS SUBJECT TO SHIPPING ACT OF 1984

107 Sea Land Service Inc October 22 1984

108 Inter American Freight Conference October 22 1984

109 Atlantic Gulf West Coast South American Conference East Coast

Colombia Conference West Coast of South America Northbound Con

ference United States Atlantic Gulf Ecuador Freight Conference United

States FloridaEcuador Steamship Freight Association United States Atlantic

Gulf Venezuela Freight Association October 22 1984

110 United States Atlantic Gulf Southeastern Caribbean Conference

United States Atlantic Gulf Jamaica and Hispaniola Steamship Freight

Association United States South Atlantic Gulf Panama Costa Rica

Rate Agreement United States Atlantic Gulf Guatemala Honduras El

Salvador Rate Agreement October 22 1984

List of Subjects in 46 CFR Part 572

Antitrust Contracts Maritime carriers Administrative practice and proce

dure Rates and fares Reporting and recordkeeping requirements

By the Commission

S FRANCIS C HURNEY

Secretary

THEREFORE pursuant 5 U S C 553 and sections 2 3 4 5 6 7

8 10 11 13 15 16 17 and 18 of the Shipping Act of 1984 46

U S c app 1701 1702 1703 1704 1705 1706 1707 1709 1710 1712

1714 1715 1716 and 1717 Part 572 of Title 46 Code of Federal Regula

tions is revised to read as follows

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 572

AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

Sec

572 101

572 102

572 103

572 104

SUBPART AGENERAL PROVISIONS

Authority

Purpose

Policies

Definitions

SUBPART BSCOPE

572 201 Subject agreements

572 202 Non subject agreements

572 301

572 302

572 303

572 304

572 305

572 306

572 401

572 402

572 403

572 404

572 405

572 406

SUBPART C EXEMPTIONS

Exemption procedures

Non substantive agreements and non substantive modifications to

existing agreements exemption

Husbanding agreements exemption

Agency agreements exemption

Equipment interchange agreements exemption

Non exclusive transshipment agreements exemption

SUBPART D FILING AND FORM OF AGREEMENTS

Filing ofagreements

Form of agreements

Modification of agreements

Application for waiver

Information Form

Complete and definite agreements

SUBPARTECONTENT AND ORGANIZATION OF AGREEMENTS

572 501 Agreement provisions organization

572 502 Organization of conference and interconference agreements

572 601 Preliminary review rejection of agreements

SUBPART F ACTION ON AGREEMENTS

512 27 F M C
Sec

572 602

572 603

572 604

572 605

572 606

572 607

572 608

572 609

572 701

572 702

572 703

572 704

572 705

572 901

572 902

AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 513

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

Federal Register notice

Comment

Waiting period

Requests for expedited approval

Requests for additional information

Failure to comply with requests for additional information

Confidentiality of submitted material

Negotiations

SUBPART G REPORTING AND RECORD RETENTION

REQUIREMENTS

General requirements

Filing of reports related to shippers requests and complaints

and consultations

Filing of minutes

Index of documents

Waiver of reporting and record retention

SUBPART H RESERVED

SUBPART I PENALTIES

Failure to file

Falsification of reports

SUBPART J PAPERWORK REDUCTION

572 991 OMB control numbers assigned pursuant to the Paperwork Re

duction Act

Appendix A to Part 572 lnformation Form and Instructions

AUTHORITY Sections 2 3 4 5 6 7 8 10 11 13 IS 16 17

and 18 of the Shipping Act of 1984 46 US C app 1701 1702 1703

1704 1705 1706 1707 1709 1710 1712 1714 1715 1716 and 1717

SUBPART A GENERAL PROVISIONS

572 101 Authority

The rules in this part are issued pursuant to the authority of section

4 of the Administrative Procedure Act 5 D s c 553 and sections 2

3 4 5 6 7 8 10 11 13 15 16 17 and 18 of the Shipping Act

of 1984 the Act

572 102 Purpose

This part implements those provisions of the Act which govern agree

ments by or among ocean common carriers and agreements to the extent

27 F M C
I

i

514 FEDERAL MARITIME COMMISSION

the agreements involve ocean transportation in the foreign commerce of

the United States among marine terminal operators and among one or

more marine terminal operators and one or more ocean common carriers

This part also sets forth more specifically certain procedures provided for

in the Act

572 103 Policies

a The Act requires that agreements be processed and reviewed according

to strict statutory deadlines This part is intended to establish procedures

for the orderly and expeditious review of filed agreements in accordance

with the statutory requirements

b The Act requires that agreements be reviewed in accordance with

a general standard as set forth in section 6g

of the Act and empowers

the Commission to obtain certain information to conduct that review This

part sets forth the kind of information forpartieular types of agreements

which the Commission believes relevant to that review Only that informa

tion which is relevant to such a review is requested It is the policy

of the Commission to keep the costs of regulation to a minimum and

at the same time obtain information needed to fulfill its statutory responsibil

ity

c In order to further the goal of expedited processing and review

agreements are required to meet certain minimum requirements as to form

These requirements are intended to ensure expedited review and should

assist parties in preparing agreements These requirements as to form do

not affect the substance of an agreement and are intended to allow parties

the freedom to develop innovative commercial relationships and provide

efficient and economic transportation systems

d The Act itself excludes certain agreements from filing requirements

and authorizes the Commission to exempt other classes ofagreements from

any requirement of the Act or this part In order to minimize delay in

implementation of routine agreements and to avoid the private and public

cost of unnecessary regulation the Commission is exempting certain classes

of agreements from the filing or information requirements of this part

e Under the new regulatory framework established by the Act the

role of the Commission as a monitoring and surveillance agency has been

enhanced The Act favors greater freedom in allowing parties to form

their commercial arrangements This however requires greater monitoring

of agreements after they have become effective The Act empowers the

Commission to impose certain recordkeeping and reporting requirements

This part identifies those classes ofagreements which require specific record

retention and reporting to the Commission and prescribes the applicable

period of record retention the form and content of such reporting and

the applicable time periods for filing with the Commission These require

ments assure that Commission monitoring responsibilities will be fulfilled

f

The Act requires that conference agreements must contain certain

mandatory provisions Each such agreement must 1 state its purpose

27 F M C
AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 515

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

2 provide reasonable and equal terms and conditions for admission and

readmission to membership 3 allow for withdrawal from membership

upon reasonable notice without penalty 4 require an independent neutral

body to police the conference if requested by a member 5 prohibit

conduct specified in section lO c 1 or lO c 3 of the Act 6 provide

for a consultation process 7 establish procedures for considering shippers

requests and complaints and 8 provide for independent action Parties

to conference agreements are free to develop their own mandatory provisions

in accordance with the requirements of section 5 b of the Act

g An agreement filed under the Act must be clear and definite in

its terms must embody the complete understanding of the parties and

must set forth the specific authorities and conditions under which the parties

to the agreement will conduct their present operations and regulate the

relationships among the agreement members

572 104 Definitions

When used in this part

a Agreement means an understanding arrangement or assocIatIon

written or oral including any modification cancellation or appendix entered

into by or among ocean common carriers andor marine terminal operators

but does not include a maritime labor agreement

b Antitrust Laws means the Act of July 2 1890 ch 647 26 Stat

209 15 U S c I as amended the Act of October 15 1914 ch 323

38 Stat 730 15 U S c 12 as amended the Federal Trade Commission

Act 38 Stat 717 15 U S C 41 as amended sections 73 and 74 of

the Act of August 27 1894 28 Stat 570 15 U S C 8 9 as amended

the Act of June 19 1936 ch 592 49 Stat 1526 15 U S C 13 as

amended the Antitrust Civil Process Act 76 Stat 548 15 US C 1311

note as amended and amendments and Acts supplementary thereto

c Appendix means a document containing additional material of lim

ited application and appended to an agreement distinctly differentiated from

the main body of the basic agreement

d Assessment agreement means an agreement whether part of a

collective bargaining agreement or negotiated separately to the extent that

it provides for the collectively bargained fringe benefit obligations on other

than a uniform man hour basis regardless of the cargo handled or type

ofvessel or equipment utilized

e Common carrier means a person holding itself out to the general

public to provide transportation by water of passengers or cargo between

the United States and a foreign country for compensation that 1 assumes

responsibility for the transportation from the port or point of receipt to

the port or point of destination and 2 utilizes for all or part of that

transportation a vessel operating on the high seas or the Great Lakes

between a port in the United States and a port in a foreign country

t Conference agreement means an agreement between or among

two or more ocean common carriers or between or among two or more

27 F M C
516 FEDERAL MARITIME COMMISSION

marine terminal operators for the conduct or facilitation of ocean common

carriage and which provides for 1 the fixing of and adherence to uniform

rates charges practices and conditions of service relating to the receipt

carriage handling andlor delivery of passengers or cargo for all members

2 the conduct of the collective administrative affairs of the group and

3 may include the filing of a common tariff in the name of the group

and in which all the members participate or in the event of multiple

tariffs each member must participate in at least one such tariff The term

does not include consortium joint service pooling sailing or transshipment

agreements

g

Consultation means a process whereby a conference and a shipper

confer for the purpose of promoting the commercial resolution of disputes

andlor the prevention and elimination of the occurrence of malpractices

h Cooperative working agreement means an agreement which estab

lishes exclusive preferential or cooperative working relationships which

are subject to the Shipping Act of 1984 but which do not fall precisely

within the arrangements of any specifically defined agreement

i Effective agreement means an agreement approved pursuant to

section 15 of the Shipping Act 1916 or effective pursuant to an exemption

under that act or filed andlor effective under the Act

j Equal access agreement means an agreement between ocean com

mon carriers of different nationalities as determined by the incorporation

or domicile of the carriers operating companies whereby such common

carriers associate for the purpose of gaining reciprocal access to cargo

which is otherwise reserved by national decree legislation statute or regula

tion to carriage by the merchant marine of the carriers respective nations

k Independent neutral body means a disinterested third party author

ized by a conference and its members to review examine and investigate

alleged breaches or violations by any member of the conference agreement

andlor the agreement s properly promulgated tariffs rules or regulations

1 Information Form means the form containing economic information

which must accompany the filing of certain kinds of agreements

m Interconference agreement means an agreement between con

ferences

n Joint service consortium agreement means an agreement between

ocean common carriers operating as a joint venture whereby a separate

service is established which 1 holds itself out in its own distinct operating

name 2 independently fixes its own rates charges practices and conditions

of service or chooses to participate in its operating name in another agree

ment which is duly authorized to determine and implement such activities

3 independently publishes its own tariff or chooses to participate in its

operating name in an otherwise established tariff 4 issues its own bills

of lading and 5 acts generally as a single carrier The common use

of facilities may occur and there is no competition between members for

27 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

traffic in the agreement trade but they otherwise maintain their separate

identities

0 Marine terminal facilites means one or more structures and serv

ices connected therewith comprising a terminal unit including but not

limited to docks berths piers aprons wharves warehouses covered and

or open storage space cold storage plants grain elevators andor bulk

cargo loading andor unloading structures landings and receiving stations

used for the transmission care and convenience of cargo andor passengers

or the interchange of same between land and ocean common carriers or

between two ocean common carriers This term is not limited to waterfront

or port facilities and includes so called off dock container freight stations

at inland locations and any other facility from which inbound waterborne

cargo may be tendered to the consignee or outbound cargo may be received

from shippers for vessel or container loading

p

Marine terminal operator means a person engaged in the United

States in the business of furnishing wharfage dock warehouse or other

terminal facilities in connection with a common carrier This term does

not include shippers or consignees who exclusively furnish marine terminal

facilities or services in connection with tendering or receiving proprietary

cargo from a common carrier by water

q

Maritime labor agreement means a collective bargaining agreement

between an employer subject to the Act or group of such employers

and a labor organization representing employees in the maritime or stevedor

ing industry or an agreement preparatory to such a collective bargaining

agreement among members of a multiemployer bargaining group or an

agreement specifically implementing provisions of such a collective bargain

ing agreement or providing for the formation financing or administration

of a multipemployer bargaining group but the term does not include an

assessment agreement

r Modification means any change alteration correction addition

deletion or revision of an existing effective agreement or to any appendix

to such an agreement

s Non vesseL operating common carrier means a common carrier

that does not operate the vessels by which the ocean transportation portion

is provided and is a shipper in its relationship with an ocean common

carrier

t Ocean common carrier means a vessel operating common carrier

but the term does not include one engaged in ocean transportation by

ferry boat or an ocean tramp

u Ocean freight forwarder means a person in the United States

that 1 dispatches shipments from the United States via common carriers

and books or otherwise arranges space for those shipments on behalf of

shippers and 2 processes the documentation or performs related activities

incident to those shipments

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518 FEDERAL MARITIME COMMISSION

v Person means individuals corporations partnerships and associa

tions existing under or authorized by the laws of the United States or

of a foreign country

w Pooling agreement means an agreement between ocean common

carriers which provides for the division of cargo carryings earnings or

revenue andor losses between the members in accordance with an estab

lished formula or scheme

x Port means the place at which an ocean common carrier originates

or terminates andor transships its actual ocean carriage of cargo or pas

sengers as to any particular transportation movemenL

y Sailing agreement means an agreement between ocean common

carriers which provides for the rationalization of service by establishing

a schedule of ports which each carrier will serve andor the frequency

of each carrier s calls at those ports

z Service contract means a contract between a shipper or shippers

association and an ocean common carrier or conference in which the shipper

or shippers association makes a commitment to provide a certain minimum

quantity of cargo over a fixed time period and the ocean common carrier

or conference commits to a certain rate or rate schedule as well as a

defined service level such as assured space transit time port rotation

or similar service features The contract may also specify provisions in

the event ofnonperformance on the part of either party

aa Shipper means an owner or other person for whose account

the ocean transportation of cargo is provided or the person to whom delivery

is to be made

bb Shippers association means a group of shippers that consolidates

or distributes freight on a nonprofit basis for the members of the group

in order to secure carload truckload or other volume rates or service

contracts

cc Shippers requests and complaints means a communication from

a shipper to a conference requesting a change in tariff rates rules regula

tions or service protesting or objecting to existing rates rules regulations

or service objecting to rate increases or other tariff changes protesting

allegedly erroneous service contract or tariff implementation or application

andor requesting to enter into a service contract Routine information re

quests are not included in the term

dd Space charter agreement means an agreement between ocean

common carriers whereby a carrier or carriers agrees to provide vessel

capacity for the use of another carrier or carriers in exchange for com

pensation or services The arrangement may include arrangements for equip

ment interchange and receiptdelivery of cargo

ee Through transportation means continuous transportation between

origin and destination for which a through rate is assessed and which

is offered or performed by one or more carriers at least one of which

27 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

is an ocean common carrier between a United States point or port and

a foreign point or port

ft Transshipment agreement means an agreement between an ocean

common carrier serving a port or point of origin and another such carrier

serving a port or point of destination whereby cargo is transferred from

one carrier to another carrier at an intermediate port served by direct

vessel call of both such carriers in the conduct of through transportation

Such an agreement does not provide for the concerted discussion publication

or otherwise fixing ofrates for the account of the cargo interests conditions

of service or other tariff matters other than the tariff description of the

transshipment service offered the port of transshipment and the participation

of the nonpublishing carrier

SUBPART B SCOPE

572 201 Subject agreements

a Ocean common carrier agreements This part applies to agreements

by or among ocean common carriers to

1 Discuss fix or regulate transportation rates including through rates

cargo space accommodations and other conditions of service

2 Pool or apportion traffic revenues earnings or losses

3 Allot ports or restrict or otherwise regulate the number and character

of sailings between ports

4 Limit or regulate the volume or character of cargo or passenger

traffic to be carried

5 Engage in exclusive preferential or cooperative working arrangements

among themselves or with one or more marine terminal operators or non

vessel operating common carriers

6 Control regulate or prevent competition in international ocean trans

portation and

7 Regulate or prohibit their use of service contracts

b Marine terminal operator agreements involving foreign commerce

This part applies to agreements to the extent the agreements involve ocean

transportation in the foreign commerce of the United States among marine

terminal operators and among one or more marine terminal operators and

one or more ocean common carriers to

1 Discuss fix or regulate rates or other conditions of service and

2 Engage in exclusive preferential or cooperative working arrange

ments

572 202 Non subject agreements

This part does not apply to the following agreements

a Any acquisition by any person directly or indirectly of any voting

security or assets of any other person

b Any maritime labor agreement

27 F M C
520 FEDERAL MARITIME COMMISSION

c Any agreement related to transportation to be performed within or

between foreign countries

d Any agreement among common carriers to establish operate or main

tain a marine terminal in the United States

e Any agreement among marine terminal operators which exclusively

and solely involves transportation in the interstate commerce of the United

States

0 Any agreement exclusively and solely among non vessel operating

common carriers

g Any agreement exclusively and solely among ocean freight forwarders

SUBPART C EXEMPTIONS

572301 Exemption procedures

a Authority The Commission upon application or on its own motion

may by order or rule exempt for the future any class of agreements between

persons subject to the Act from any requirement of the Act if it finds

that the exemption will not substantially impair effective regulation by

the Commission be unjustly discriminatory result in substantial reduction

in competition or be detrimental to commerce

b Optional filing Notwithstanding any exemption from filing Informa

tion Form or other requirements of the Act and this part any party to

an exempt agreement may file such an agreement with the Commission

c Application for exemption Any person may apply for an exemption

or revocation of an exemption of any class of agreements or an individual

agreement pursuant to section 16 ofthe Act and this subpart An application

for exemption shall state the particular requirement of the Act for which

exemption is sought The application shall also include a statement of

the reasons why an exemption should be granted or revoked and shall

provide information relevant to any finding required by the Act Where

an application for exemption of an individual agreement is made the appli

cation shall include a

copy of the agreement

d Participation by interested persons No order or rule of exemption

or revocation of exemption may be issued unless opportunity for hearing

has been afforded interested persons and departments and agencies of the

United States

e Federal Register notice Notice ofany proposed exemption or revoca

tion of exemption whether upon application or upon the Commission s

own motion shall be published in the Federal Register The notice shall

include

1 A short title for the proposed exemption or the title of the existing

exemption

2 The identity of the party proposing the exemption or seeking revoca

tion

3 A concise summary of the agreement or class of agreements for

which exemption is sought or the exemption which is to be revoked

27 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

4 A statement that the application and any accompanying information

are available for inspection in the Commission s offices in Washington

D C and

5 The final date for filing comments regarding the application

t Retention of agreement by parties Any agreement which has been

exempted by the Commission pursuant to section 16 of the Act shall

be retained by the parties and shall be available upon request by the

Bureau of Agreements and Trade Monitoring for inspection during the

term of the agreement and for a period of three years after its termination

572 302 Non substantive agreements and non substantive modifications

to existing agreements exemption

a A non substantive agreement or a non substantive modification to

an existing agreement is an agreement between ocean common carriers

andor marine terminal operators acting individually or through approved

agreements which

1 Concerns the procurement maintenance or sharing of office facilities

furnishings equipment and supplies the allocation and assessment of the

costs thereof or the provisions for the administration and management

of such agreements by duly appointed individuals

2 Reflects changes in the name of any geographic locality stated therein

the name of the agreement or the name of a party to the agreement

the names andor numbers of any other section 4

agreement or designated

provisions thereof referred to in an agreement the table of contents of

an agreement the date or amendment number through which agreements

state they have been reprinted to incorporate prior revisions thereto or

which corrects typographical and grammatical errors in the text of the

agreement or renumbers or reletters articles or subarticles of agreements

and references thereto in the text

3 Reflects changes in the titles or persons or committees designated

therein or transfers the functions of such persons or committees to other

designated persons or committees or which merely establishes a committee

b A copy of the non substantive modification shall be submitted for

information purposes in the proper format but is otherwise exempt from

the Information Form notice and waiting period requirements of this part

c Parties to agreements may seek a determination from the Director

Bureau of Agreements and Trade Monitoring as to whether a particular

modification is non substantive

572303 Husbanding agreements exemption

a A husbanding agreement is an agreement between a principal and

an agent both of which are subject to the Act and which provides for

the agent s handling of routine vessel operating activities in port such

as notifying port officials of vessel arrivals and departures ordering pilots

tugs and linehandlers delivering mail transmitting reports and requests

from the Master to the owner operator dealing with passenger and crew

matters and providing similar services related to the above activities The

27 F M C
522 FEDERAL MARITIME COMMISSION

term does not include an agreement which provides for the solicitation

or booking of cargoes signing contracts or bills of lading and other related

matters nor does it include an agreement that prohibits the agent from

entering into similar agreements with other carriers

b A

husbanding agreement is exempt from the filing and Information

Form requirements of the Act and of this part

572304 Agency agreements exemption

a An agency agreement is an agreement between a principal and an

agent both of which are subject to the Act which provides for the agent s

solicitation and booking of cargoes and signing contracts of affreightment

and bills of lading on behalf of an ocean common carrier Such an agree

ment mayor may not also include husbanding service functions and other

functions incidental to the performance of duties by agents including proc

essing of claims maintenance of a container equipment inventory control

system collection and remittance of freight and reporting functions

b An agency agreement between persons subject to the Act is exempt

from the filing and Information Form requirements of the Act and of

this part except those 1 where a common carrier is to be the agent

for a competing carrier in the same trade or 2 which permit an agent

to enter into similar agreements with more than one carrier in a trade

572 305 Equipment interchange agreements exemption

a An equipment interchange agreement is an agreement between two

or more ocean common carriers for 1 the exchange of empty containers

chassis empty LASHSEABEE barges and related equipment and 2 the

transportation of the equipment as required payment therefor management

of the logistics of transferring handling and positioning equipment its

use by the receiving carrier its repair and maintenance damages thereto

and liability incidental to the interchange of equipment

b An equipment interchange agreement is exempt from the filing and

Information Form requirements of the Act and of this part

572 306 Nonexclusive transshipment agreements exemption

a A nonexclusive transshipment agreement is an agreement by which

one ocean common carrier serving a port of origin by direct vessel call

and another such carrier serving a port of destination by direct vessel

call provide transportation between such ports via an intermediate port

served by direct vessel call of both such carriers and at which cargo

will be transferred from one to the other and which agreement does not

1 prohibit either carrier from entering into similar agreements with other

carriers 2 guarantee any particular volume of traffic or available capacity

or 3 provide for the discussion or fixing of rates for the account of

the cargo interests conditions of service or other tariff matters other than

the tariff description of the service offered as being by means of trans

shipment the port of transshipment and the participation of the nonpublish

ing carrier

27 F M C
AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 523

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

b A nonexclusive transshipment agreement is exempt from the filing

and Information Form requirements of the Act and of this part provided

that the tariff provisions set forth in paragraph c of this section and

the content requirements of paragraph d of this section are met

c The applicable tariff or tariffs shall provide

I The through rate

2 The routings origin transshipment and destination ports additional

charges if any i eport arbitrary andor additional transshipment charges

and participating carriers and

3 A tariff provisions substantially as follows

The rules regulations and rates in this tariff apply to all trans

shipment arrangements between the publishing carrier or carriers

and the participating connecting or feeder carrier Every participat

ing connecting or feeder carrier which is a party to transshipment

arrangements has agreed to observe the rules regulations rates

and routings established herein as evidenced by a connecting car

rier agreement between the parties

d Nonexclusive transshipment agreements must contain the entire ar

rangement between the parties must contain a declaration of the nonexclu

sive character of the arrangement and may provide for

1 The identification of the parties and the specification of their respec

tive roles in the arrangement

2 A specification of the governed cargo

3 The specification of responsibility for the issuance of bills of lading

and the assumption of common carriage associated liabilities to the cargo

interests

4 The specification of the origin transshipment and destination ports

5 The specification of the governing tariff s and provision for their

succession

6 The specification of the particulars of the nonpublishing carrier s

concurrence participation in the tariff of the publishing carrier

7 The division of revenues earned as a

consequence of the described

carriage

8 The division of expenses incurred as a

consequence of the described

carriage

9 Termination andor duration of the agreement

10 Intercarrier indemnification or provision for intercarrier liabilities

consequential to the contemplated carriage and such documentation as may

be necessary to evidence the involved obligations

II The care handling and liabilities for the interchange of such carrier

equipment as may be consequential to the involved carriage

12 Such rationalization of services as may be necessary to ensure

the cost effective performance of the contemplated carriage and

13 Such agency relationships as may be necessary to provide for the

pickup andor delivery of the cargo

27 F M C
524 FEDERAL MARITIME COMMISSION

e No subject other than as listed in paragraph d of this section

may be included in exempted nonexclusive transshipment agreements

SUBPART D FILING AND FORM OF AGREEMENTS

572 401 Filing of Agreements

a All agreements including oral agreements reduced to writing in ac

cordance with the Act subject to this part and filed with the Commission

for review and disposition pursuant to section 6 of the Act shall be submit

ted during regular business hours to the Secretary Federal Maritime Com

mission Washington D C 20573 Such filing shall consist of

1 A true copy and 15 additional copies of the filed agreement

2 Where required by these regulations an original and two copies

of the completed Information Form referenced at 572 403 a and 572 405

and Appendix A of this part and

3 A letter of transmittal as described in paragraph b

of this section

b 1 A filed agreement to include such supporting documents as are

submitted shall be forwarded to the Commission via a letter of transmittal

2 The letter of transmittal shall i identify all of the documents being

transmitted including in the instance of a modification to an effective

agreement the full name of the effective agreement the Commission as

signed agreement number of the effective agreement and the revision page

andor appendix number of the modification being filed ii provide a

concise succinct summary of the filed agreement or modification separate

and apart from any narrative intended to provide support for the acceptability

of the agreement or modification Hi clearly provide the typewritten or

otherwise imprinted name position business address and telephone number

of the forwarding party and iv be signed in the original by the forwarding

party or on the forwarding party s behalf by an authorized employee of

agent of the forwarding party

3 To facilitate the timely and accurate publication of the Federal Reg

ister Notice the letter of transmittal shall also provide a current list of

the agreement s participants where such information is not provided else

where in the transmitted documents

c Any agreement and accompanying Information Form which does not

meet the filing requirements of this section shall be rejected in accordance

with 572 601

d Assessment agreements shall be filed and shall become effective

upon filing Assessment agreements need not be accompanied by an Infor

mation Form

e I Expiration dates to existing agreements or specific provisions there

of shall remain in effect on and after June 18 1984

2 Parties to agreements with expiration dates shall file any modification

seeking renewal for a specific term or elimination of a termination date

in sufficient time to accommodate the waiting period required under the

Act

27 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

572 402 Form of Agreements

The requirements of this section apply to all agreements except for

cancellations marine terminal agreements and assessment agreements

a Agreements shall be clearly and legibly typewritten on one side

only of 8 2 inch by 11 inch durable white loose leaf paper providing

a margin of not less than three quarters of an inch on all edges

b The first page of every agreement or appendix shall be the Title

Page and shall include

1 The name in which the agreement holds out service or in the

absence of such a holding out the full name of the agreement

2 Once assigned the Commission assigned agreement number

3 The generic classification of the agreement in conformity with the

definitions in 572 104

4 The date on which the entire agreement was last republished in

accordance with 572 403 gand

5 If applicable the currently effective expiration date of the agreement

andor any specific provision thereof

c Each agreement page including modifications and appendices shall

be identified by printing the agreement name as shown on the agreement

Title Page and once assigned the applicable Commission assigned agree

ment number at the top of each page

d Each agreement appendix andor modification filed will be accom

panied by a separate signature page appended as the last page of the

item which is signed in the original by each of the parties personally

or by an authorized representative indicating immediately below each such

signature the typewritten full name of the signing party and his or her

position including organizational affiliation

e The body of the agreement shall contain

1

Immediately following the Title Page a Table of Contents providing

for the location of all agreement provisions

2 Following the Table of Contents the body of the agreement setting

forth the operative provisions of the agreement in the order prescribed

by 572 501 and 572 502 Any additional materialprovisions shall be

set forth as consecutively numbered articles

f Any nonsubstantive provisions as defined in 57230 may be sepa

rated from the main body of the agreement text by the inclusion of an

Appendix to the agreement Additional provisions which are permitted to

be included in an Appendix are referred to in 572 501 b 3

572 501 b 6 and 5720 a l Such appendices must comply with the

format requirements of paragraphs a and c of this section Such appen

dices are to be serialized alphabetically with the first such Appendix being

designated on its first page as Appendix A

g All pages subsequent to the Title Page shall be numbered in the

upper right hand comer At the option of the parties the numbering of

the pages may start with the first page following the Title Page as Page

27 F M C
1

i

i

i

1

i

j

i

I

526 FEDERAL MARITIME COMMISSION

No 1 and continue consecutively thereafter or in the alternative the

pages containing the Table of Contents may be discretely numbered using

consecutive Roman numerals with all pages subsequent to the Table of

Contents being consecutively numbered beginning with Page No 1 In

either event the first edition of anyone page shall be designated in the

upper right hand corner as Original Page No

h

All agreements shall conform to the format requirements of this

section and 572 403 and the organization and content requirements of

57201 and 572 502 according to the following schedule

1 Any new agreement shall conform when initially filed

2 Any restatement of a previously effective agreement filed subsequent

to December 15 1984 shall conform to the requirements

3 Any effective agreement which is modified subsequent to December

15 1984 shall be restated in its entirety including the modification and

shall conform to the requirements

4 Any other agreement not otherwise brought into conformity with

these requirements shall be conformed and filed no later than October

1 1985

572 403 Modification of agreements

The requirements of this section apply to all agreements except for

marine terminal agreements and assessment agreements

a 1 Agreement modifications shall be filed in accordance with the

provisions of 572 401 in the format specified in 572 402 and this section

and accompanied by an Information Form

2 The Information Form shall be completed as it pertains to significant

modifications of the agreement

3 Significant modifications for the purposes of this section are those

that may result in a significant reduction in competition Such modifications

include but are not limited to significant changes in the geographic scope

of conference or pooling agreements which expand the scope to cover

additional foreign countries or U S port ranges including initial conference

intermodal authority or the extension of the scope of a joint service agree

ment to ports outside the scope of the existing joint service agreement

currently served by two or more of the parties additions to the number

of parties in pooling or joint service agreements significant reductions

in service levels significant changes in pool penalty provisions or carrying

charges and changes in cargo categories or descriptions that result in

a significant increase in the amount of cargo subject to the pool or changes

in the allocation of cargo or revenue that significantly change the cargo

or revenue shares of national or non national flag lines

b Agreement modifications shall be made by reprinting the entire page

on which the matter being changed is published Such modified pages

shall be designated as revised pages and shall publish in the upper

right hand corner of the new page the consecutive denomination of the

revision e g

1st Revised Page 5

27 F M C
AGREEMENTS BY OCEAN COMMON CARRffiRS AND OTHER 527

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

c If a modification exceeds the page being modified and the parties

do not wish to modify the entire agreement the additional material may

be published on an original page designated with the same number as

the page being modified and with an alphabetical suffix ie Original

Page 5a

d The language being modified shall be indicated on the page filed

as follows

I

Language being deleted or superseded shall be struck through and

2 New and initial or replacement language shall immediately follow

the language being superseded and be underlined

3 As an alternative to publishing such indications of change on the

filed page the filed page may be submitted devoid of such indications

if the filing is accompanied by a page submitted for informationillustration

only setting forth the proposed modifications in accordance with the format

prescribed in paragraphs d I and 2 of this section

e When a revised or new page is revised or the entire agreement

is reissued the change indications in paragraphs d I and d 2 of this

section are to be deleted from the republished pages

f If a modification requires the relocation of the provisions of the

agreement such modification shall be accompanied by a revised Table

of Contents page which shall report the new location of the agreement s

provisions

g l

In the instance of an agreement which publishes the indications

of modifications specified in paragraph d of this section on the filed

agreement page itself then not later than two years after the last modifica

tion to the agreement the entire agreement shall be republished incorporat

ing such modifications as have been made and shall supersede the previous

edition ofthe agreement

2 Such republished agreement will be filed with the Commission in

accordance with the filing except as provided in paragraph g 3 of this

section format and content requirements of this part and shall contain

nothing other than the previously effective language and such nonsubstantive

modifications as are necessary to accomplish the republication

3 It is not required that the filing of a

republished agreement as de

scribed in paragraph g2 of this section be accompanied by the Informa

tion Form or that it be filed in more than an executed original true copy

572 404 Application for waiver

a Upon a showing of good cause the Commission may waive the

form organization and content requirements of 572 401 572 402

572 403 572 501 and 572 502

b Requests for permission to depart from the form requirements of

this subpart shall be submitted in advance of the filing or submission

of the materials to which the requested waiver would apply and shall

state 1 the specific regulations from which relief is sought 2 the

27 F M C
528 FEDERAL MARITIME COMMISSION

special circumstances requiring the requested relief and 3 the beneficial

results anticipated to be obtained from the requested waiver

572 405 Information Form

a 1 Except for marine terminal agreements and assessment agreements

the information required by the Commission for review of an agreement

shall be provided in the Information Form set forth in Appendix A to

this part

2 The filing party to an agreement subject to the Act shall complete

and submit an original and two copies of the Information Form at the

time that an agreement is filed The Information Form shall be completed

in accordance with this subpart including the Instructions set forth in

Appendix A Copies of the form may be obtained in person at the Office

of the Secretary or by writing to the Secretary of the Commission

b A complete response in accordance with the instructions to the Infor

mation Form shall be supplied to each item on the Information Form

that is required to be answered Whenever the party answering a

required

part of the Information Form other than Parts III and IV is unable to

supply a complete response that party shall provide for each item for

which less than a complete response has been supplied either estimated

data with an explanation of why precise data are not available or a

detailed statement of reasons for noncompliance and the efforts made to

obtain the required information Use of estimated data with Parts III and

IVrequires no explanation ofwhy precise data are not available

c Any party filing the Information Form may supplement that Form

with any other information or documentary material

d The Information Form and any additional information submitted by

a filing party under this section shall not be disclosed except as provided

in 572 608

572 406 Complete and definite agreements

a Any agreement required to be filed by the Act and this part shall

be the complete agreement among the parties and shall specify in detail

the substance of the understanding of the parties

b Except as provided in paragraph c of this section agreement clauses

which contemplate a further agreement or give the parties authority to

discuss andor negotiate a further agreement the terms of which are not

fully set forth in the enabling agreement will be permitted only if the

enabling agreement indicates that any such further agreement cannot go

into effect unless filed and effective under the Act

c Further specific agreements or understandings which are established

pursuant to express enabling authority in an agreement are considered inter

stitial implementation and are permitted without further filing under section

5 of the Act only if the further agreement concerns routine operational

or administrative matters including the establishment of tariff rates rules

and regulations

27 F M C
AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 529

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

SUBPART ECONTENT AND ORGANIZATION OF AGREEMENTS

572 501 Agreement provisions organization

a All agreements except for cancellations marine terminal agreements

and assessment agreements shall be organized and shall include the content

as provided by this section The article numbers hereinafter enumerated

are reserved for their particular respective provision or authority as indicated

in this section and 572 502 and may not be used for any other subject

or purpose nor may the specified subject matter appear elsewhere in the

agreement except as herein provided In the instance of a legitimately

inapplicable provision the article number and title are to be included in

the text followed by the word None

b All agreements shall organize and number the following articles in

the following order and shall observe the guidelines as to content as pro

vided in this section Additional articles required to definitively express

the complete understanding between the parties to the agreement and not

otherwise incorporated in appendices to the agreement shall immediately

follow the articles enumerated in this subpart and where applicable in

5720 and shall be numbered consecutively commencing with Article

14

1 Article lFull name of the agreement

2 Article 2Purpose ofthe agreement

3 Article 3Parties to the agreement List the current parties to the

agreement to include for each participant i

the full legal name of the

party to include any FMC assigned agreement number associated with that

name and ii the address of its principal office to the exclusion of

the address of any agent or representative not an employee of the participat

ing carrier or association In the alternative to publishing the membership

of the agreement in Article 3 the membership may be published in a

designated appendix to the agreement and the designated appendix indicated

by cross reference in Article 3

4 Article 4Geographic scope of the agreement State the ports or

port ranges to which the agreement applies and any inland points or areas

to which it also applies with respect to the exercise of the collective

activities contemplated and authorized in the agreement

5 Article verview of Agreement Authority State the authorities

as set forth in 572 201 of this part intended to be collectively exercised

under the auspices of the agreement To the extent that the summary

provided does not represent the full arrangement between the parties addi

tional articles or appendices of the parties own designation and subsequent

to these enumerated articles will be required to provide the specification

ofthe authority to be exercised and the mechanics of that exercise

Article 5 is not necessarily definitive of the authority that the parties

may collectively exercise pursuant to the agreement and parties may rely

on the contents of the entire agreement as authority for their activities

27 F M C
530 FEDERAL MARITIME COMMISSION

6 Article 6Officials of the agreement and delegations of authority

Specify by organizational title the administrative and executive officials

determined by the parties to the agreement to be responsible for designated

affairs of the agreement and the respective duties and authorities delegated

to those officials At a minimum specify i the officials with authority

to file agreements and agreement modifications and to submit associated

supporting materials or with authority to delegate such authority and ii

a statement as to any designated U S representative of the agreement

required by this chapter Where convenient the contents of this article

may be published in a designated appendix to the agreement and the

designated appendix indicated by cross reference in Article 6

7 Article 7 Membership withdrawal readmission and expulsion Speci

fy the terms and conditions for admission withdrawal readmission and

expulsion to or from membership in the agreement including membership

fees refundable deposits and other fees or charges associated with member

ship Two party agreements which do not involve any form of rate charge

or tariff determination or publication authority and which do not otherwise

have any conditions of agreement participation other than the commitment

of the physical resources of the respective parties are relieved of the require

ments of this subparagraph In such a case the article number and name

shall be designated as provided in paragraphs a and b l of this section

8 Article 8Voting Specify the procedures including quorum require

ments by which the agreement membership exercises its collective authority

to choose endorse decide the disposition of defeat or authorize any par

ticular matter issue or activity

9 Article 9Duration and termination of the agreement Specify where

applicable the date on which the agreement terminates and describe the

procedures to be followed to terminate the agreement

572 502 Organization of conference and interconference agreements

a Each conference agreement in addition to Articles 1 through 9 con

tained in 572 501 and such other matters as may be necessary to express

the full understanding of the parties shall include the following articles

organized and including the content as provided in this section

1 Article lONeutral body policing State that at the request of any

member the conference shall engage the services of an independent neutral

body to fully police the obligations of the conference and its members

Include a description of any such neutral body authority and procedures

related thereto In the alternative to publishing the neutral body and proce

dures description in Article 10 the description may be published in a

designated appendix to the agreement and the designated appendix indicated

by cross reference in Article 10

2 Article IlProhibited acts State affirmatively that the conference

shall not engage in conduct prohibited by section 10 c 1 or 10 c 3

of the Act

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3 Article 12Consultation Shippers requests and complaints Specify

the procedures for consultation with shippers and for handling shippers

requests and complaints

4 Article 13 ndependent action Specify the independent action proce

dures of the conference Such procedures shall provide that any conference

member may take independent action on any rate or service item required

to be filed in a tariff under section 8 a of the Act upon not more than

10 calendar days notice to the conference and shall otherwise be in con

formance with section 5 b 8 of the Act

b I Each interconference agreement in addition to Articles 1

through

9 contained in 572 50I and Articles 10 11 and 12 contained in paragraph

a of this section shall include the following article Article 13 nde

pendent Action which specifies the independent action procedures of the

agreement

2 Each agreement between carriers not members of the same conference

must provide the right of independent action for each carrier

3 Each agreement between conferences must provide the right of inde

pendent action for each conference

Subpart F Action on Agreements

572 601 Preliminary review rejection of agreements

a The Commission shall make a preliminary review of each filed agree

ment to determine whether the agreement is in compliance with the filing

requirements of the Act and this part and whether the Information Form

is complete or where not complete the deficiency is adequately explained

b 1 The Commission shall reject any agreement that fails to comply

with the filing and information requirements under the Act and of this

part The Commission shall notify in writing the person filing the agreement

of the reason for rejection of the agreement The entire filing including

the agreement the Information Form and any other information or docu

ments submitted shall be returned to the filing party

2 Should the agreement be refiled the full waiting period must be

observed

572 602 Federal Register notice

a A notice of any filed agreement which is not rejected pursuant

to 572 601 will be transmitted to the Federal Register within seven days

of the date of filing

b The notice will include

1 A short title for the agreement

2 The identity of the parties to the agreement and the filing party

3 The Federal Maritime Commission agreement number

4 A concise summary of the agreement s contents

5 A statement that the Agreement is available for inspection at the

Commission s offices and

27 F M C
532 FEDERAL MARITIME COMMISSION

6 The final date for filing comments regarding the agreement

572 603 Comment

a Persons may file with the Secretary written comments regarding a

filed agreement Such comments will be submitted in an original and fifteen

15 copies and are not subject to any limitations except the time limits

provided in the Federal Register notice Late filed comments will be re

ceived only by leave of the Commission and only upon a showing of

good cause If requested comments and any accompanying material shall

be accorded confidential treatment to the fullest extent permitted by law

Such requests must include a statement of legal basis for confidential treat

ment including the citation of appropriate statutory authority Where a deter

mination is made to disclose all or a portion of a comment notwithstanding

a request for confidentiality the party requesting confidentiality will be

notified prior to disclosures

b The filing of a comment does not entitle a person to 1reply

to the comment by the Commission 2 the institution of any Commission

or court proceeding 3 discussion of the comment in any Commission

or court proceeding concerning the filed agreement or 4 participation

in any proceeding which may be instituted

572 604 Waiting period

a The waiting period before an agreement becomes effective shall com

mence on the date that an agreement is filed with the Commission

b Unless suspended by a request for additional information or extended

by court order the waiting period terminates and an agreement becomes

effective on the latter of the 45th day after the filing of the agreement

with the Commission or on the 30th day after publication of notice of

the filing in the Federal Register

c The waiting period is suspended on the date when the Commission

either orally or in writing requests additional information or documentary

materials pursuant to section6 d of the Act The waiting period resumes

on the date of receipt of the additional material or of a statement of

the reasons for noncompliance and the agreement becomes effective in

45 days unless the waiting period is further extended by court order

572 605 Requests for expedited approval

a Upon written request of the filing party the Commission may shorten

the review period Accompanying the request the filing party should provide

a full explanation with reference to specific facts and circumstances of

the necessity for a shortened waiting period If the Commission decides

to approve an abbreviated waiting period the term will be decided after

consideration ofthe parties needs and the Commission s ability to perform

its review functions under a reduced time schedule In no event however

may the period be shortened to less than fourteen days after the publication

of the notice of the filing of the agreement in the Federal Register When

a request for expedited approval is denied by the Commission the normal

27 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

waiting period specified in 572 604 will apply Such expedition will not

be granted routinely and wilI be granted only in exceptional circumstances

which include but are not limited to The impending expiration of the

agreement operational urgency Federal or State imposed time limitations

or other reasons which in the Commission s discretion constitute grounds

for granting the request

b A request for expedited approval will be considered for an agreement

whose waiting period has resumed after having been suspended by a request

for additional information

c Upon request of the filing party cancellations of agreements and

modifications to the following prescribed agreement provisions wilI be grant

ed expedited approval fourteen days after publication of notice of filing

in the Federal Register

1 Article 3 Parties to the agreement limited to conference agreements

2 Article 60fficials of the agreement and delegations of authority

3 Article 100Neutral body policing limited to the description ofneutral

body authority and procedures related thereto

572 606 Requests for additional information

a The Commission may request from the filing party any additional

information and documentary material necessary to complete the statutory

review required by section 6 of the Act The request shall be made prior

to the expiration of the waiting period All additional information and

documentary material shall be submitted to the Director Bureau of Agree

ments and Trade Monitoring Federal Maritime Commission Washington

DC 20573 Ifthe request is not fully complied with a statement ofreasons

for noncompliance shall be provided for each item or portion of such

request which is not fully answered

b Where the Commission has made a request for additional information

material the agreement s effective date is 45 days after receipt of the

additional material In the event all material is not submitted the agree

ment s effective date will be 45 days after receipt of both the documents

and information which are submitted if any and the statement indicating

the reasons for noncompliance The Commission may upon notice to the

Attorney General and pursuant to sections 6 i and 6 k of the Act request

the United States District Court for the District of Columbia to further

extend the agreement s effective date until there has been substantial compli

ance

c A request for additional information may be made orally or in writing

In the case of an oral request a written confirmation of the request shall

be mailed to the filing party within seven days of the communication

d The party upon whom a request for additional information is made

wilI have a reasonable time to respond as specified by the Commission

The test of reasonableness shall be based on the particular circumstances

of the request and shall be determined on a case by case basis

27 F M C
534 FEDERAL MARITIME COMMISSION

e Notice that a request for additional information has been made will

be published by the Commission and served on commenting parties Such

notice will indicate only that a request has been made and will not specify

what information is being sought Within fifteen 15 days following service

of the notice further comments on the agreement may be filed

572 607 Failure to comply with requests for additional information

a A failure to comply with a request for additional information results

when a person filing an agreement or an officer director partner agent

or employee thereof fails to substantially respond to the request or does

not file a satisfactory statement of reasons for noncompliance An adequate

response is one which directly addresses the Commission srequest When

a response is not received by the Commission within a specified time

failure to comply will have occurred

b The Commission may pursuant to section 6 i of the Act request

relief from the United States District Court for the District of Columbia

when it considers that there has been a failure to substantially comply

with a

request for additional information The Commission may request

that the court

1 Order compliance with the request and

2 At its discretion grant other equitable relief which under the cir

cumstances seems necessary or appropriate

c Where there has been a failure to substantially comply section 6 i 2

of the Act provides that the court shall extend the review period until

there has been substantial compliance

572 608 Confidentiality ofsubmitted material

a Except for an agreement filed under section 5 of the Act all informa

tion submitted to the Commission by the filing party will be exempt from

disclosure under 5 U S C 552 Included in this disclosure exemption is

information provided in the Information Form voluntary submission of

additional information reasons for noncompliance and replies to requests

for additional information

b Information which is confidential pursuant to paragraph a of this

section may be disclosed however to the extent

1 It is relevant to an administrative or judicial action or proceeding

or

2 It is in response to a request from either body of Congress or

to a duly authorized committee or subcommittee of Congress

c Parties may voluntarily disclose or make information publicly avail

able If parties elect to disclose information they shall promptly inform

the Commission

572 609 Negotiations

At any time after the filing of an agreement and prior to the conclusion

of judicial injunctive proceedings the filing party or an authorized represent

ative may submit additional factual or legal support for an agreement or

27 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

may propose modifications of an agreement Such negotiations between

Commission personnel and filing parties may continue during the pendency

of injunctive proceedings Shippers other government departments or agen

cies and other third parties may not participate in negotiations

SUBPART G REPORTING AND RECORD RETENTION

REQUIREMENTS

572 701 General requirements

a Address All reports required by this subpart should be addressed

to the Commission as follows

Director

Bureau of Agreements and Trade Monitoring

Federal Maritime Commission

Washington D C 20573

The lower left hand corner of the envelope in which each report is for

warded should indicate the subject of the report and the related agreement

number For example Minutes Agreement 5000

b Serial numbers of reports

1 Each report filed with the commission should be assigned a number

for each subject For example a conference filing minutes of its first

meeting upon the effective date of this rule should assign Meeting No

I to its Minutes the next meeting will be assigned Meeting No 2

and so on The first Shippers Request and Complaint report should be

designated Shippers Request and Complaint Report No 1 the next

report would be Shippers Request and Complaint Report No 2 and

so on

2 Any conference or rate agreement which for its own internal purposes

has a system for assigning sequential numbers to its reports in a manner

which differs from that set forth in paragraph b 1 of this section may

continue to utilize its own system in lieu thereof

c Retention of records Each agreement required to file an index of

documents pursuant to this subpart shall retain a

copy of each document

listed for a minimum period of 3 years after the date the document is

distributed to the members and shall make it available to the Commission

upon written request

d Request for documents Documents may be requested by the Director

Bureau of Agreements and Trade Monitoring in writing by reference to

a specific minute or index and shall indicate that the documents will

be received in confidence Requested documents shall be furnished by the

parties within the time specified

e Time for filing Documents filed on an annual calendar year basis

shall be filed by February 15 of the following year Other documents

shall be filed within 30 days of the end of a quarter year a meeting

or the receipt of a

request for documents

27 EMC
536 FEDERAL MARITIME COMMISSION

1

j

t Confidentiality All information submitted to the Commission under

this subpart shall be accorded confidential treatment to the fullest extent

permitted by law

572 702 Filing of reports related to shippers requests and complaints

and consultations

a Shippers requests and complaints

1 Each conference shall file with the Commission an annual report

setting forth under established shippers request and complaint procedures

and for each calendar year a statistical summary separately showing i

the total number of shippers and shippers associations requests and com

plaints received ii the total number which were fully granted Hi the

total number which were partially granted and iv the total number which

were denied

2 Each report shall also show the total number of requests or complaints

which were pending disposition at the start and at the end of the report

period

3 Each of the totals which are reported to the Commission shall be

divided into three categories i

those involving rates or charges ii those

involving transportation services and Hi those involving other matters

b Consultations Each conference shall file with the Commission an

annual report setting forth a statistical summary showing separately the

total number of shipper and shippers associations requests for consultations

and the total number of consultations during each calendar year under

the established consultation procedures Each of the totals which are reported

to the Commission shall be divided into two categories 1 consultations

involving commercial disputes and 2 consultations involving cooperation

with shippers in preventing and eliminating malpractices

572 703 Filing of minutes

a Meetings For purposes of this subpart the term meeting shall

include any meeting of the parties to the agreement including meetings

of their agents principals owners committees or subcommittees of the

parties authorized to take final action on behalf of the parties Where

the agreement so authorizes this includes final action by telephonic or

personal polls of the membership

b Content of minutes Except as provided in paragraph c of this

section conferences interconference agreements agreements between a con

ference and one or more ocean common carriers pooling agreements equal

access agreements discussion agreements marine terminal conferences and

marine terminal rate fixing agreements shall through a designated official

file with the Commission a report of each meeting defined in paragraph

a of this section describing all matters within the scope of the agreement

which are discussed or considered at any such meeting and shall indicate

the action taken These reports need not disclose the identity of parties

that participated in discussions or the votes taken

27 F M C
17D A r

AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 537

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

c Exemption No minutes need be filed under paragraph b of this

section with respect to any discussion of or action taken with regard to

1 Rates that if adopted would be required to be published in the

Commodity Rate Section Class Rate Section or Open Rate Section of

the pertinent tariff on file with the Commission except that this exemption

does not apply to discussions limited to general rate policy general rate

changes the opening or closing of rates or service or time volume contracts

or

2 Purely administrative matters

572 704 Index ofdocuments

a Each agreement required to file minutes pursuant to 572 703 shall

maintain an index of all reports circulars notices statistics analytical

studies or other documents not otherwise filed with the Commission pursu

ant to this subpart which are distributed to the member lines and are

used to reach a final decision on any of the following matters

1 Revenue projections and plans This would exclude individual rate

adjustments but would include general rate adjustments surcharges and

other items affecting shipper costs

2 Studies regarding proposed changes to the conference agreement or

its membership

3 Non conference competition

4 Changes in the nature and type of transportation service generally

and specifically at individual ports or points

5 Trade tonnaging requirements vessel utilization and vessel replace

ment plans

6 Conference participation in trade market share

7 The exercise of the right of independent action

8 Development of transportation technology and intermodal services

9 Malpractices

10 Use of service contracts time volume rate schemes and loyalty

contracts

11 Conference relationship with shippers and shipper groups

12 Governmental and other foreign requirements affecting the con

ference

b 1

Each index required to be maintained by paragraph a of this

section shall be filed with the Commission on a calendar year quarterly

basis

2 Each index must be certified by an official of the agreement as

true and correct

572 705 Waiver ofreporting and record retention

Upon a showing of good cause the Commission may waive any of

the provisions ofthis subpart
538 FEDERAL MARITIME COMMISSION

SUBPART H RESERVED

SUBPART I PENALTIES

572 901 Failure to file

Any person operating under an agreement involving activities subject

to the Act pursuant to sections 4 and 5 a of the Act and this part and

not exempted pursuant to section 16 of the Act or excluded from filing

by the Act which has not been filed and has not become effective pursuant

to the Act and this part is in violation of the Act and of this part and

is subject to the civil penalties set forth in section 13 a of the Act

572 902 Falsification ofreports

Knowing falsification of any report required by the Act or this part

including knowing falsification of any item on the Infonnation Fonn is

a violation of the rules of this part and is subject to the civil penalties

set forth in section 13 a of the Act and may be subject to the criminal

penalties provided for in 18 U S C 1001

SUBPART I PAPERWORK REDUCTION

572 991 OMB control numbers assigned pursuant to the Paperwork Re

duction Act

This section displays the control number assigned to infonnation collec

tion requirements of the Commission in this part by the Office of Manage

ment and Budget pursuant to the Paperwork Reduction Act of 1980 Pub

L 96511 The Commission intends that this section comply with the re

quirements of section 3507 f

of the Paperwork Reduction Act which re

quires that agencies display a current control number assigned by the Direc

tor of the Office of Management and Budget OMB for each agency

infonnation collection requirement

Section

Current

OMB Con

trol No

572 101 through 572 902 3072045

7F M r
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

APPENDIX A TO PART 572

INFORMATION FORM AND INSTRUCTIONS

Explanation and Instructions for Information Form

The following explanation and instructions accompany the Information

Form Form and are intended to facilitate the completion of the Form

The explanations and instructions should be read in conjunction with the

Shipping Act of 1984 Act and with 46 CFR Part 572

All agreements by or among ocean common carriers referenced in 46

CFR 572 201 a excluding assessment agreements marine terminal agree

ments and those agreements exempted from the filing of the Information

Form pursuant to Subpart C of Part 572 and significant modifications

to agreements referenced in 572403 filed with the Commission must

be accompanied by a completed Information Form which in all cases

necessitates the completion of Parts I II VI and IX

Part V which requests information on proposed service and any proposed

reduction or elimination of service is required to be completed only by

parties filing agreements with service authority

Completion of Part VII is optional

Because of their potential substantial anticompetitive implications parties

filing certain types of agreements namely rate fixing including for exam

ple agreements authorizing conferences interconference agreements and

agreements between a conference and one or more ocean common carriers

pooling and joint service and consortium agreements are required to com

plete Parts III IV and VIII of the Form in addition to the above specified

parts required to be completed by all filing parties

Certain parts of the Form request information that may not be readily

available to the filing party Where precise information is not available

best estimates may be suppled Where estimates are made they should

be identified by the use of the notation est Except for Parts III and

IV furnishing an estimate requires a clear explanation of why the precise

information is not available Where such an explanation is provided the

use of estimates will not ordinarily be regarded as a failure to supply

a complete response as specified in 46 CFR 572 601 and does not require

a

separate statement of reasons for noncompliance

In all parts of the Form where data are requested the filing party is

required to indicate all sources used to obtain such data Sources should

also be specified where estimates have been made by the filing party

PART BY PART EXPLANATION

Part I

Part I

requires the filing party to state the full name of the agreement

as also provided under 46 CFR 572 501

27 EM C
540 FEDERAL MARITIME COMMISSION

Part IIA

Part IIA requires the filing party to indicate whether or not the agree

ment authorizes the parties to collectively fix rates or significantly modifies

an agreement with such authority Rate fixing may be authorized by a

conference agreement an interconference agreement or an agreement be

tween a conference and one or more ocean common carriers

Part II B

Part IIB requires the filing party to indicate whether or not the agree

ment authorizes the parties to pool cargoes or revenues or significantly

modifies an agreement with such authority

Part II C

Part IIC requires the filing party to indicate whether or not the agree

ment authorizes the parties to establish a new joint service or consortium

or significantly modifies an agreement with such authority

Background Information to Parts III and IV

Ifany question in Part II is answered YES the filing party is required

to complete Parts III IV and VIII in addition to completing Parts I

II VI and IX which are required to be completed by all filing parties

The amount of cargo is to be measured in uappropriate units as determined

by the parties such as revenue tons weight tons measurement tons or

TEUs Specify the unit of measurement used

The relevant trade s for the purpose of Parts III and IV is to be deter

mined by the parties The relevant trade s may encompass the entire geo

graphic scope of the agreement or any combination of U S and foreign

ports or port ranges or sub trades within the scope of the agreement as

deemed appropriate by the parties The filing party should clearly identify

the relevant trade s used for the purposes of completing the Information

Form

Sub trade is defined as the scope of all liner movements between each

foreign country and each U S port range within the scope ofthe agreement

Each foreign country U S port range pair should be shown separately

Where the agreement covers both U S inbound and outbound liner move

ments inbound and outbound liner movements should be shown separately

U S port ranges are defined by using the Bureau of Census classification

of U S Coastal Districts Thus the U S port ranges are defined as follows

North AtlanticIncludes ports along the eastern seaboard from the north

ern boundary ofMaine to the southern boundary ofVirginia

South Atlantic Includes ports along the eastern seaboard from the north

ern boundary of North Carolina to but not including Key West Florida

Also included are all ports in Puerto Rico and the U S Virgin Islands

Z7 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

Gulf Includes all ports along the Gulf of Mexico from Key West

Florida to Brownsville Texas inclusive

South Pacific Includes all ports in the States of California and Hawaii

North Pacific Includes all ports in the States of Oregon Washington

and Alaska

Great Lakes Includes all ports bordering upon the Great Lakes and

their connecting waterways as well as all ports in the State of New York

on the St Lawrence River

Liner service refers to a definite advertised schedule giving relatively

frequent sailings at regular intervals between specific U S ports or port

ranges and designated foreign ports or port ranges Liner vessels are defined

as those vessels used in a liner service Liner cargoes are cargoes carried

on liner vessels in a liner service A liner operator is a vessel operating

ocean common carrier engaged in liner service Liner movement is the

carriage of liner cargo by liner operators The above liner terms definitions

and descriptions are only to be used for the purpose of the Information

Form

Market share information should be provided using data for the most

recent twelve 12 month period for which data are available State the

period used Identify all units of measurement and all sources of the data

Data may be estimated Indicate where estimates are made and describe

the basis of their derivation

Alternative liner routing is defined as liner service between the foreign

country specified in the sub trade and any North American port s other

than those located within the port range covered by the sub trade The

alternative liner routing may serve the sub trade s port s and interior

point s by way of feeder service transshipment surface carriage such

as mini landbridge or some other form of substituted transport Alternative

liner routing includes only those liner services which compete for cargoes

carried in the sub trade

Part III A

Part III A requires the filing party to provide the total amount of cargo

carried on all parties liner vessels in each relevant trade within the scope

of the agreement over the most recent twelve 12 month period for which

data are available

Part III B

Part III B requires the filing party to provide the total amount of cargo

carried on all liner vessels ie both party and non party carriers operating

in each trade identified in A within the scope of the agreement for

the most recent twelve 12 month period for which data are available

27 F M C
542 FEDERAL MARITIME COMMISSION

Part III C

Part III C requires the filing party to provide the combined market

share of all parties operating in each relevant trade within the scope of

the agreement The market share provided in Part III C is the quotient

multiplied by 10 of the total derived in Part III A divided by the

total derived in Part III B The formula for calculating market share is

as follows

The total amount of cargo carried on all parties liner vessels

in each relevant trade within the scope of the agreement over

the most recent twelve month period for which data are available

divided by the total amount of cargo carried on all liner vessels

in each relevant trade within the scope of the agreement over

the same twelve month period which quotient is multiplied by

100

The relevant trade s identified in III A should be clearly identified

Each market share calculation should be based on cargo data for identical

relevant trades The most recent twelve month period for which data are

available is to be the same period of time used both in the calculation

of the parties total liner cargo movements Part III A and in the calcula

tion of the total sub trade liner cargo movements for all liner operators

Part III B

Part IV A

Part IV A I

requires the filing party to provide for each relevant trade

within the scope of the agreement the names of all liner operators who

are not parties to the agreement and who were offering liner service

in that trade at the time the agreement was filed with the Commission

Part IV A 2 requires the filing party to provide for each relevant trade

the names of all liner operators serving alternative liner routings who com

pete for the cargoes carried by the parties

Part IV A 3 requires the filing party to describe the extent of the

competition offered by all non party liner operators including liner operators

directly serving the relevant trade s and liner operators serving alternative

liner routings A description of the extent of competition should include

estimates or precise information where available of non party liner operator

market share shown either for each individual operator or for all operators

collectively Any evidence of underutilized capacity in the alternative liner

routings may also be provided Explain how the non party market share

was derived Specify the units of measurement used in the calculations

Indicate the source s used to provide data or estimates

27 F M C
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PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

Part IV B

Part IV B 1

requires the filing party to identify to the extent known

all significant non liner competitive substitutes that are available to shippers

of commodities historically transported by liner service within the scope

of the agreement Non liner competitive substitutes may include carriage

on a charter or contract basis or on an infrequent irregular basis by bulk

mix container bulk breakbulk or other vessel type operators Such substitutes

may also include carriage by air freight operators or air passenger operators

with available belly space for air freight Such substitutes may provide

service to a trade through some form of substituted service e

g mini

landbridge transshipment or feeder service by way of ports within an

alternative North American port range s

Part IV B 2

requires the filing party to estimate the percentage of

the total amount of the total amount of cargo historically carried in the

trade on liner vessels that has been carried by non liner competitive sub

stitutes over the most recent twelve 12 month period for which data

are available The intent of Part IV B 2 is to determine the amount

of liner cargo historically carried in the trade that has been lost to

non liner operators Identify all units of measurement and describe how

the percentage was derived Identify the sources used

Part V

Part V is required to be completed only by filing parties whose agree

ments contain service authority which is defined as including either or

both of the following authorities allowing parties to agree between or

among themselves to allocate or otherwise provide tonnage or capacity

between or among carriers in the relevant trade s to establish a schedule

of ports which each carrier will serve andlor the frequency of each carrier s

calls at those ports For the singular purpose of the Information Form

port means the place with a harbor that an ocean carrier serves either

directly by oceangoing vessel or indirectly by feeder service Port calls

are direct or indirect calls at a port by vessels under the direct operational

control of one or more parties to the agreement

Part V A

Part V A requires the filing party to identify all U S ports expected

to be served under this agreement Include all U S ports expected to

receive direct liner service port calls by a party and indirect liner service

port calls by way of some form of substituted service such as feeder

service where those vessels are under the direct operational control of

one or more of the parties to the agreement The identification of other

forms of indirect service under the agreement such as intermodal service

e ginterior point or minilandbridge or transshipment may be provided

27 F M C
544 FEDERAL MARITIME COMMISSION

if the parties believe that such information will assist and expedite the

Commission s analysis ofthe agreement s impact on service

Part V B

Part V B 1 requires the filing party to specify any party s reduction

in frequency of service to any U S port within the scope of the agreement

where the reduction of service to that port occurs as a result of the imple

mentation of the agreement Reductions in frequency are determined as

follows 1 for each party and for each U S port within the scope of

the agreement served by that party determine total number of port calls

over the most recent twelve 12 month period for which data are available

historical port call calculation 2 for each party and for each U S

port within the scope of the agreement served by that party estimate

the total number of port calls for the twelve 12 month period immediately

following implementation of the agreement expected port call calculation

3 calculate the difference between the historical port call calculation

and the expected port call calculation Provide for each party and for

each U S port the following calculations the historical port call calcula

tion the expected port call calculation and the difference between

those calculations

Part V B 2 requires the filing party to specify any elimination of service

to any U S port within the scope of the agreement that is currently at

the time the agreement is filed receiving liner service from any party

to the agreement where the elimination of that port occurs as a result

of the implementation of the agreement The term service to any U S

port includes direct service by the parties and indirect service by way

of feeder service

Part VI A

Part VI A requires the filing party to indicate whether or not the agree

ment was entered into as a direct or indirect response to any law decree

rule regulation or any other governmental action promulgated or otherwise

implemented by a foreign government The agreement may for example

operate in a context where a foreign government has promulgated or imple

mented certain cargo reservation cargo preference or other cargo sharing

schemes that favor national flag lines and that require these national lines

to be members of a conference A direct response to such governmental

action would be the creation of a conference agreement An indirect re

sponse to such governmental action would be the creation of a

pool that

facilitates cargo sharing within a conference even though the pool was

not per se required by such governmental action Moreover a commercial

agreement that is in response to a governmental action that was itself

in response to the concerted actions of other governments for example

the UNCTAD Code of Liner Conduct would be in direct response to

27 F M C
AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 545

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

a governmental action and so require the completion of Part VI In addition

an equal access agreement necessarily entails the involvement of a foreign

government in liner shipping thus requiring the completion of Part VI

Part VI B

Part VI B requires the filing party to identify all such laws decrees

rules regulations or any other foreign governmental actions that have led

to the agreement All such governmental actions should be identified by

the type of governmental action e g

a law decree memorandum order

etc the full legal title of the governmental action the date that the

governmental action became or will become effective and the date if

specified the governmental action will terminate Part VI B also requires

a detailed description of the purpose and the nature of the governmental

action including all requirements imposed on the parties by the govern

mental action and the specification of each provision in the agreement

that is a direct or indirect response to each such governmental action

Part VI C

Part VI C requires the filing party to indicate whether or not any law

decree rule regulation or any other foreign governmental action identified

in Part II B limits access to the carriage of liner cargoes within the

scope of the agreement Limited access to the carriage of liner cargoes

may be effected by excluding certain liner operators or classes of liner

operators e g by national flag or carrier nationality from the trade entirely

or by reserving certain cargoes for carriage by certain liner operators or

classes of liner operators e

g by national flag or carrier nationality

or by limiting the ports at which liner operators may call or by restricting

the frequency of scheduled port calls or by other such measures that

restrict the open competition for liner cargoes within the scope of the

agreement by liner operators

Part VI D

Part VI D requires the filing party to explain how access to cargoes

carried by liner operators is limited by the actions of a foreign government

as identified in Part VI B See Part VI C for examples of how access

to cargoes can be limited by the actions of a government

Part VI E

Part VI E requires the filing party to provide the percentage of the

total amount of cargo carried on all liner vessels in the trade to which

access is limited by a foreign government The percentage is derived by

dividing the amount of cargo in the trade to which access is limited

by a foreign government by the total amount of cargo carried on all

27 F M C
546 FEDERAL MARITIME COMMISSION

liner vessels in the trade and multiplying the quotient by 100 The trade

is defined as the scope of the agreement that is all foreign and domestic

ports or port ranges served under the agreement The amount of cargo

can be measured in revenue tons weight tons measurement tons or TEU s

Specify which unit of measurement is used The amount of cargo should

be provided on the basis of the most recent twelve 12 month period

for which data are available Where precise information is not available

best estimates may be supplied Identify estimates by the use ofthe notation

est Indicate the sources of such estimates

Part VII

The completion ofPart VII A and B is optional

Part VII A

Part Vll A permits the filing party to indicate all benefits resulting

from the agreement that will accrue principally to the parties as a result

of the operation of the agreement Such benefits may include increased

operational efficiencies or other reductions in costs that result from the

implementation of the agreement Data that are necessary to substantiate

the specified benefits should be submitted

Part VII B

Part VII B permits the filing party to indicate all benefits resulting

from the agreement that will accrue to shippers and to U S commerce

generally Such benefits may include reduced rate levels or improved quality

or frequency of service that result from the operation of the agreement

Data that are necessary to substantiate the specified benefits should be

submitted

Part VIII

Part VIII requires a filing party that has answered yes to Part II

A B or C to identify any reports studies or other research that

were prepared by or for any or all of the parties for the purpose of

analyzing formulating or assessing the competitive conditions in the relevant

trade s affected by the agreement or the competitive impact of the agree

ment on the relevant trade s affected by the agreement

Part IX A

Part IX A requires the filing party to provide the name title address

telephone number and cable address of a person the Commission may

contact regarding the Information Form and any information provided there

in

27 F M C
AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 547

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

Part IX B

Part IX B requires the filing party to provide the name title address

telephone number and cable address of a person the Commission may

contact regarding a

request for additional information or documents

Part IX C

Part IX C requires generally that the filing party sign and certify that

the information in the Form and all attachments and appendices are to

the best of the filing party s knowledge true correct and complete The

filing party is also required to indicate his or her relationship with the

parties to the agreement

FEDERAL MARITIME COMMISSION

INFORMAnON FORM

For Certain Agreements By or Among Ocean Common Carriers

Agreement Number

Assigned by FMC

PART I Agreement Name

PART II Agreement Type

YES NO

A Rate Fixing Agreements

Does the agreement authorize the parties to collectively

fix rates or significantly modify an agreement with

such authority

B Pooling Agreements

Does the agreement authorize the parties to pool cargoes

or revenues or significantly modify an agreement with

such authority

C Joint Service orConsortium Agreements

Does the agreement authorize a joint serviceconsortium

arrangement or significantly modify an agreement with

such authority

If any question in PART II is answered YES complete PARTS III

IV and VIII in addition to PARTS I II VI and IX that are required

to be completed by all filing parties

27 F M C
548 FEDERAL MARITIME COMMISSION

PART III Market Share Information

A Provide the total amount of cargo carried on all parties liner vessels

in each relevant trade within the scope of the agreement over the most

recent twelve 12 month period for which data are available

B Provide the total amount of cargo carried on all liner vessels in

each relevant trade within the scope of the agreement over the most recent

twelve 12 month period for which data are available

C Provide the market share of all parties in each relevant trade within

the scope of the agreement over the most recent twelve 12 month period

for which data are available

PART IV Market Competition

A Liner Competition

1 For each relevant trade within the scope of the agreement provide

the names of all liner operators not parties to the agreement currently

offering service in that trade

2 Provide the names of all liner operators serving alternative liner

routings where those operators compete for cargoes carried by the parties

in the relevant trade

3 Describe the nature and extent of the competition from the liner

operators listed in A 1 and A 2 above

B Non Liner Competition

1 Identify all competitive substitute forms of transport other than liner

service that are available to shippers of commodities historically transported

by liner service in each relevant trade including for example bulk carriers

charter operators or air freight carriers

2 Estimate the percentage of the total amount of liner cargoes in

each relevant trade traditionally carried on liner vessels that has been

carried by non liner substitute forms of transport over the most recent

twelve 12 month period for which data are available

PART V Service to the Shipping Public Under the Agreement

To be completed only for those agreements which have service authority

A Proposed Service

Identity all U S ports expected to be served by the parties under this

agreement

b

Reduced Sailings

1 Estimate the parties reductions in frequency of calls at each U S

port within the scope of the agreement

2 Specify the parties elimination of service to any U S port within

the scope of the agreement currently served by any party

27 F M C
AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER 549

PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

PART VIForeign Government Involvement in the Liner Market

YES NO

A Was this agreement entered into as a direct or indirect re

sponse to any law decree rule regulation or other govern

mental action promulgated or implemented by a foreign govern

ment

8 Ifthe answerto A is YES identify all such laws decrees

rules regulations or other governmental actions and specify all

provisions in the agreement that stem from these factors

C Ifthe answer to A is YES do any of the above identified

governmental actions limit access to the carriage of liner car

goes within the scope of the agreement

D If the answer to C is YES explain how access to liner

cargoes is limited by the foreign government

E Ifthe answer to C is YES provide the percentage of the

total liner cargo in the trade to which access is limited by a for

eign government Explain the method by which the percentage

was derived

PART VII Benefits ofthe Agreement Optional

A Indicate any benefits such as improved efficiencies or other reduc

ions in transportation costs that will accrue principally to the parties

as a result of the operation of the agreement Provide the data necessary

to substantiate the above specified benefits

B Indicate any benefits such as lower rate levels or improved service

levels that will accrue to shippers and to U S commerce generally as

a result of the operation of the agreement Provide the data necessary

to substantiate the above specified benefits

PART VIII Reports Studies or Other Research

Identify any reports studies or other research that were prepared by

or for any or all of the parties for the purpose of analyzing formulating

or assessing the competitive conditions in the relevant trade s affected

by the agreement or the competitive impact of the agreement on the

relevant trade s affected by the agreement

PART IX Identification of Person s to Contact Regarding the Information

Form and Certification ofAuthenticity

A Identification of Contact Person

1 Name of Contact Person

2 Title of Contact Person

3 Firm Name and Business

4 Business Telephone Number

5 Cable Address

27 F M C
550 FEDERAL MARITIME COMMISSION

B Identification of an Individual Located in the United States Designated

for the Limited Purpose of Receiving Notice of an Issuance of a Request

for Additional Information or Documents see 46 CFR 572 606

1 Name

2 Title

3 Address

4 Telephone

5 Cable Address

C Certification

This Information Form together with any and all appendices and attach

ments thereto was prepared and assembled in accordance with instructions

issued by the Federal Maritime Commission Subject to the recognition

that where so indicated reasonable estimates have been made the informa

tion is to the best of my knowledge true correct and complete

Name please print or type

Title

Relationship with parties to agreement

Signature

Date

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 510

DOCKET NO 8429

LICENSING OF OCEAN FREIGHT FORWARDERS

November 16 1984

Discontinuance ofProceeding

The Federal Maritime Commission has determined to

discontinue this proceeding in light of the recent enact

ment of certain amendments to the Shipping Act 1916

which renders the proceeding unnecessary Freight for

warder agreements relating to the foreign commerce of

the United States are no longer subject to the require

ments of that Act

DATES Effective November 23 1984

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on August 29 1984 49

FR 34253 the Commission proposed to reinstate the requirement provided

for in 46 CFR 510 36 1983 to require ocean freight forwarders operating

in the foreign commerce of the United States to file their agreements

with the Commission pursuant to section 15 Shipping Act 1916 46 U S c

814 The comment period on this proposal is scheduled to expire on Decem

ber 29 1984

H R 5833 Pub L No 98 595 98 Stat 3130 1984 which was recently

enacted into law amends the Shipping Act 1916 to remove such freight

forwarder agreements from the filing and approval requirements of that

Act That action renders this proceeding unnecessary Accordingly the pro

ceeding is discontinued

ACTION

SUMMARY

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C 551
FEDERAL MARITIME COMMISSION

DOCKET NO 8411

INGERSOLL RAND COMPANY

v

U S LINES S A FORMERLY MOORE McCORMACK LINES INC

NOTICE

November 27 1984

Notice is given that no exceptions were filed to the October 17 1984

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

could determine to review that decision has expired No such detennination

has been made and accordingly that decision has become administratively

final

S FRANCIS C HURNEY

Secretary

44 7pur
FEDERAL MARITIME COMMISSION

DOCKET NO 8411

INGERSOLL RAND COMPANY

v

U S LINES S A FORMERLY MOORE McCORMACK LINES INC

Shipment of air compressor kits found properly classified Case dismissed

FrankJ Hathaway forIngersoll Rand Company

A C Hidalgo for U S Lines S A

INITIAL DECISION I OF JOHN E COGRAVE ADMINISTRATIVE LAW

JUDGE

Finalized November 27 1984

This case involves a shipment of portable air compressor kits which

complainant say were improperly classified by respondent under Southbound

Freight Tariff No 6 of the United States South and East Africa Conference

On the bill of lading the shipment is described as

ROADBUlLDING MACHINERY

3 House to House Containers Said To Contain

Below this heading the contents of the three containers were listed as

46 Boxes air compressor kits 3 boxes of batteries 2 bundles of wool

and I box of parts for air compressor kits

The arguments of the parties revolve around two tariff items and a

rule of general application Item 4310 reads

ROADMAKING EARTHMOVING OR CONSTRUCTION

EQUIPMENT AND PARTS VIZ

Listed under this heading are various pieces of equipment rang

ing from Angle Dozers to Wagon Tank Motorized

ROADMAKING EARTHMOVING OR CONSTRUCTION

EQUIPMENT AND PARTS VIZ

Completely boxed

Unboxed other than completely boxed must be assessed the

unboxed rate

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

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

27 F M C 553
i

I

4

i

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554 FEDERAL MARITIME COMMISSION

Item 1190 reads

COMPRESSORS Air

Completely boxed or completely boxed except for Traction

Treads or Wheels with or without controls exposed

Unboxed other than boxed or completely boxed except for

Traction Treads or Wheels must be assessed the unboxed rate

The rule ofgeneral applicability Rule 2 0 reads

0 RATE APPLICATION FOR PARTS

Whenever rates are provided for an article named herein the

same rate will also be applicable on named parts of such arti

cles when so described on ocean bills of lading except where

specific rates are provided herein for such parts

It is complainant s contention that the shipment should have been rated

under Item 4310 instead of Item 1190 Complainant says that its portable

air compressor kits are parts for Roadbuilding Machinery because a

roadbuilding air compressor is not a self propelled unit and therefore must

be pulled by other motorized equipment i e Equipment Highway Pavement

Marking 2 Moreover says complainant the air compressor kits are less

engines and are not complete air compressors ready for use They are

kits or parts for roadmaking roadbuilding equipment ofwhich air compres

sors are considered a part

Finally complainant contends that respondent s classification of the kits

was improper because Item 1190 has no provision for parts In other

words Item 1190 does not read COMPRESSOR AIR and PARTS nor

does it list beneath the heading specific p

which would take the item

rate Since the words and Parts do not appear in the description of

the articles covered by Item 1190 and there are no parts listed in the

item it can cover only complete air compressors according to complainant

The air compressor kits in issue are less engines Therefore they are not

complete compressors and cannot be propeJ ly classified under Item 1190

This argument follows from complainant s reading of Rule 2 0

Complainant reads that part of Rule 2 0 which says the rate applies

to name parts of such articles as requiring either that the tariff item

itself contain specific references to the named parts of the articles cov

ered by the item or that the words and Parts appear in the item as

they do in Item 4310

On the other hand the respondent reads Rule 2 0 as requiring the

shipper to specifically name the articles shipped as parts of a specific

machine on the bill of lading In the case here respondent s position

is that the complainant should have described the compressor kits as parts

for a specific viz i e air compressor kit parts for Equipment Highway

2

Item 4310 lists after the viz Equipment Highway Pavement Marklng

27 F M C
INGERSOLL RAND COMPANY V U S LINES S A FORMERLY 555

MOORE MCCORMACK LINES INC

Pavement Marking in order to comply with the first part of Rule 2 G

However respondent argues that rule 2 G is clear that where specific

rates are provided in the tariff for such parts those rates shall apply

Here says the respondent there was a specific rate for air compressors

so it was the proper rate to apply to the portable air compressor kits

even if it is admitted that the compressor kits were parts for the Highway

Pavement Marking Equipment

Where a question of tariff interpretation is in issue any indefiniteness

and ambiguity in the tariff provisions which in reasonableness permit of

misunderstanding and doubt by shippers require interpretation of such provi

sions against the carrier The Gelfand Manufacturing Co v Bull S S

Line Inc 1 D S S B 169 170171 1929 However shippers may not

avail themselves of a strained or unnatural construction to create an ambigu

ity Buckley Dunton Overseas S A v Blue Star Shipping Corp 8 F M C

137 1964 And where two classifications are applicable to a commodity

the one which more specifically describes the article is the proper one

Corn Products Co v Hamburg American Lines 10 F M C 388 1967

The first question to be answered is whether there is an ambiguity

in the tariff which must be construed against the respondent Although

the complainant does not specifically urge such an ambiguity his argument

seems to create one or at least to create the appearance of one When

Rule 2 G says that named parts of an article shall take the same

rate as the article itself just where are the names of the named parts

to appear Complainant reads the rule so as to require that the parts

be named in the tariff or at least that the tariff item under which

the parts are to be classified carry the and Parts designation Respondent

on the other hand reads Rule 2 G as requiring that the parts be named

in the bill of lading

A moment s

thought is all that is needed to see that complainants

interpretation would result in truly humongous tariffs There are just

too many parts to even relatively simple machines to read Rule 2 G

as requiring the individual parts to be named in the tariff if the part

is to take the same rate as the machine Moreover the language of the

rule itself seems to me reasonably clear The rule simply requires that

where a shipper is seeking to apply the rate of an article to parts for

that article then he must so designate the parts on the bill of lading

Then if the shipment consists of axles for tractors they would be described

as such on the bill of lading and would take the tractor rate If the

complainant sreading of the rule were accepted there would be no need

for the general rule since all of the parts on which the article rate would

apply would already be listed in the same item as the article

The question now becomes whether the compressor kits are parts for

Equipment Highway Pavement Marking or Compressors or parts for Com

pressors Complainant s sole ground for the conclusion that the compressor

kits are parts for roadbuilding machinery is that even when the kit is

27 F M C
556 FEDERAL MARITIME COMMISSION

assembled this particular compressor has no motive power of its own

and must be pulled behind or by other motorized equipment namely the

Highway Pavement Marker This clearly stretches the commonly understood

meaning of the word part as a constituent member of a machine

or other apparatus Webster s Third New International Dictionary or

and extra piece for replacing worn out parts The American College

Dictionary Complainant s air compressor if towed by a Mercedes Benz

would by complainant s

reasoning be apart of that Mercedes Benz The

presence or absence of motive power does not determine whether a thing

is a part

Finally even if complainant s argument that its compressor kits could

be considered as parts of roadbuilding machinery Rule 2 0 would still

require their classification under Item 1190 under the rule s proviso

except where specific rates are provided for such parts

For the foregoing reasons I conclude that the shipment in question

was properly classified under Item 1190 The complaint is dismissed

S JOHN E COORAVB

Administrative Law Judge

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 847

TARIFF COMPLIANCE INTERNATIONAL ACTING ON BEHALF OF

A A INTERNATIONAL A DIVISION OF TANDY CORPORATION

v

KAWASAKI KISEN KAISHA LTD STEAMSHIP COMPANY

ORDER OF REMAND

November 28 1984

This proceeding arose from a complaint filed on February 22 1984

by TariffCompliance International Complainant acting as agent for A A

International A Division of Tandy Corporation against Kawasaki Kisen

Kaisha Ltd Steamship Company K Line Respondent Respondent is

a common carrier engaged in transportation by water from Japan and Korea

to the West Coast of the United States and is a member of the Trans

Pacific Freight Conference of JapanKorea

Complainant alleges that it was assessed rates and charges on 39 ship

ments bills of lading during the period January 12 1982 to March 28

1983 which were greater than those specified in Respondent s tariff in

violation of section 18b 3 of the Shipping Act 1916 1916 Act 46

U S C 817 and has been subjected to unfair unjust and discriminatory

treatment in the adjustment and settlement of claims in violation of section

14 Fourth of the 1916 Act 46 U S C 813

Reparations in the amount of 73 863 27 are sought for the alleged

tariff violations In addition Complainant seeks an unspecified amount as

reparations for the alleged violation of section 14 Fourth

Complainant sought to have the case heard pursuant to the shortened

procedure of Subpart K Rule 181 of the Commission s Rules of Practice

and Procedure 46 CF R 502 181 Respondent in its answering memoran

dum to the complaint consented to the shortened procedure

On May 9 1984 the Presiding Administrative Law Judge served a

notice in which he rejected the shortened procedure request on the

ground that Complainant had failed to comply with the requirements of

Rule 182 of the Rules of Practice and Procedure 46 U S C 502 182

That notice further directed the parties to submit on or before May 21

1984 a prehearing statement pursuant to Rule 95 of the Commission s

Rules ofPractice and Procedure 46 C FR 502 95

On May 21 1984 the parties filed a Joint Prehearing Statement which

identified the issues which remained in dispute As to the following items

71Ur 7
558 FEDERAL MARITIME COMMISSION

the only issue in dispute is whether Complainant has met its burden of

proof of showing that the alleged commodity was actually shipped

Commodity Amount

Printing Mechanism partsAccessories

Thermal Paper

Disk Drives

Speaker Parts

Printing Mechanisms FOB

Copy Machine Parts

P A Systems Megaphones

MaximumPer Container Rates

4443 18

334 46

I 86 94

5887

346 90

9 60

6 70

356 69

8 078 34

As to the following items in addition to the issue of sufficiency of

proof of commodity shipped there existed disputes of tariff interpretation

and application

Commodity Amount

Keyboards

Joystick Control Assemblies

Programmable Calculators

Hand Held Electronic GameslParts

Audio Cassette Tape Cases

Electronic Telephone Directories

Audio Goods

54 520 35

1 764 11

708 63

255 87

1 574 40

222 49

6 739 08

65 784 93

The parties advised that they intended to call one or more expert witnesses

to testify as to the nature and use of the commodities in dispute In

addition they advised that they would introduce copies of all documents

attached to the complaint all relevant tariffs and tariff pages all correspond

ence relevant to the handling of Complainant s overcharge claims and

descriptive literature relating to commodities shipped The parties also indi

cated that in some cases actual physical production and demonstration of

the commodity itself was contemplated

On May 23 1984 the Presiding Officer served a notice which stated

that the proceeding would be conducted under the shortened procedure

provided for in Subpart K of the Commission s Rules of Practice and

Procedure The parties were given until June 4 1984 to submit any supple

mental evidence

In response to the notice of May 23 1984 Complainant provided an

affidavit relating to the nature and use of keyboards and submitted

copies of payment vouchers relating to the subject shipments The other

evidence and testimony which Complainant indicated in the Joint Prehearing

Statement that it would adduce at hearing was not included in Complainant s

submission In its response Respondent noted that the change in the

27 F M C
TARIFF COMPLIANCE INTERNATIONAL V KAWASAKI KISEN 559

KAISHA LTD STEAMSHIP COMPANY

procedural schedule has not permitted Respondent the opportunity to fully

explore the evidence which might have been offered Respondent thus

relied largely on its previously filed pleadings

On July 25 1984 the Presiding Officer issued an Initial Decision in

which he concluded that Complainant had failed to prove what was actually

shipped and that there was not sufficient information upon which to establish

the validity of the claim Complainant filed Exceptions to the Initial Deci

sion which argue the merits of its case in regard to the commodities

shipped and except to the procedure followed by the Presiding Officer

Respondent filed a Reply to Exceptions supporting the Initial Decision

DISCUSSION

We believe that many of the Presiding Officer s difficulties with the

material submitted could have been resolved by the testimony of an appro

priate sponsoring witness Accordingly rather than proceeding under Subpart

K it would have been more appropriate to conduct an oral evidentiary

hearing on the issues identified in the Joint Prehearing Statement The

Presiding Officer s abrupt reversal on the hearing procedure and the particu

larly short period allowed the parties to adjust to the change would appear

to have denied the parties the opportunity to fully present their cases

The Commission is therefore remanding this proceeding to afford the parties

that opportunity

THEREFORE IT IS ORDERED THAT this proceeding is hereby re

manded to the Office of Administrative Law Judges for an oral evidentiary

hearing on the issues identified in the Joint Prehearing Statement filed

May 21 1984

By the Commission

8 FRANCIS C HURNEY

Secretary

pur
I

I

I

j

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 1441 1

UNION CARBIDE CORP BAlTERY DIVISION

v

WATERMAN STEAMSHIP CORP

ORDER

November 30 1984

This proceeding was initiated upon the complaint ofUnion Carbide Cor

poration Battery Division against Waterman Steamship Corporation pursu

ant to section 11 of the Shipping Act of 1984 the Act 46 U S C

app 1710 Carbide alleges that it was overcharged 5 205 03 on a ship

ment of dry cell battery bottom covers from New York N Y to the

Port of Sudan Egypt Settlement Officer Donald F Norris dismissed the

complaint without prejudice on the ground that Waterman is presently

undergoing areorganization under Chapter XI of the Bankruptcy Act 11

U S C A 1101 et seq The Commission is reviewing the dismissal upon

the request of Commissioner Thomas F Moakley pursuant to Rule 304

of the Commission s Rules ofPractice and PrOCedure 46 C F R 502 304

1983

Carbide s complaint was served on Waterman on August 17 1984 In

response Waterman s Senior Vice President George H Hearn advised

the Settlement Officer that

Waterman filed a Petition for a Reorganization under Chapter

XI in the United States Bankruptcy Court on December

I 1983 We are advised by Counsel that Carbide s claim

is automatically stayed pursuant to the Bankruptcy Act Accord

ingly Waterman can neither proceed nor consent to adjudication

under the Commission s informal procedure

The Settlement Officer therefore dismissed Carbide s complaint without

prejudice to refiling by March 19 1985 He found that after that date

1 The Settlement OffIcer explained that his dismissal was consistent withthe result in two other proceed

ings involving a carrier involved in a banknaptcy reorganization submitted to the Informal Docket Activity

in the past See Informal Docket Nos 10941 and 1132 1 Keyes Fibre An Neata Co v Seatraill IlIler

1Iat o11al and Dow Com llg Corp v Seatra lIll1lematlollQ

The Commission believes that this proceeding is distinguishable from the authorities relied upon

by the settlement Officer In Docket No 1132 1 the complainant requested dismissal when it was

advised that the respondent was In banknaptcy Docket No 10941 did not concern aclaim for

reparations aga lISt a bankrupt Rather the complainant shipper was attempting to avoid the carrier s

civil claim forunderpaying the applicable freight charges

fiO 7 JIM
UNION CARBIDE CORP BATTERY DIVISION V WATERMAN 561

STEAMSHIP CORP

all claims against common carriers predicated upon alleged violations

of the Shipping Act 1916 46 U S c app 801 et seq will be barred

statutorily by section 20 e 2 B of the Shipping Act of 1984 46 U S C

app 1719 2

DISCUSSION

For reasons stated below we find that the Settlement Officer improperly

dismissed Carbide s complaint

Section 362 a I of the Bankruptcy Code II U S C 362 a I provides

in pertinent part that

A petition filed under section 301 302 or 303 of this title

operates as a stay applicable to all entities of

1 the commencement or continuation including the issuance

or employment of process of a judicial administrative or other

proceeding against the debtor that was or could have been com

menced before the commencement of the case under this title

or to recover a claim against the debtor that arose before the

commencement of the case under this title Emphasis added

The language of section 362 a I is clear and unequivocal It requires

an automatic stay in the nature of an injunction 3of all proceedings

judicial or administrative against the bankrupt debtor in order to avoid

a chaotic and uncontrolled scramble for the debtor s assets in a variety

of uncoordinated proceedings 4

Although the stay provisions are designed

to protect the debtor S these provisions were not intended to work a hardship

on claimants by requiring tribunals to dismiss their claims 6

Accordingly

the Commission will vacate the Settlement Officer s Order of Dismissal

The proceedings will be stayed however in accordance with section 362

of the Bankruptcy Code until the bankruptcy proceeding is completed

or until Carbide has obtained awaiver from the Bankruptcy Court 7

THEREFORE IT IS ORDERED That the Settlement Officer s October

9 1984 Order of Dismissal in this proceeding is vacated

2The Settlement Officer misinterpreted the limitation provided for in section 20 e 2 b That section pro

vides

This Act and the amendmentsmade by it shall not affect any suit

B with respect to claims arising out of conduct engaged in before the date of enactment of this

Act filed within I year after the date of enactment of thisAct

In its Notice of May IS 1984Application of Shipping Act of 1984 to Formal Proceedings Pending before

the Federal Maritime Commission on June 18 1984 the Commission advised that the term suits in section

20eX2 was intended only to preserve antitrust actions and had no application to cases pending before the

Commission

3

See In Re Decker 465 F 2d 294 3rd Cir 1972 Thacker v Eller 24 B R 835 U S Bkrtcy Court S D

Ohio WO

4Maller ofHoltkamp 669 F 2d 505 7th Cir 1982

Ibid

6Perkins Dry Goods Co v Dennis 54 S W 2d 1078 22 Am Bankr Rep N S 291

7Carbide may petition the Bankruptcy Court for relief from the stay provisions See 11 US CA 362 d

27 F M C
562 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That this proceeding be stayed pursuant

to 11 U S C A 362 until the Waterman bankruptcy proceeding is com

pleted or until Carbide has obtained relief of the stay provisions from

the Bankruptcy Court

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 8415

DR ETHEL M HEPNER

v

THE PENINSULAR AND ORIENTAL STEAM NAVIGATION

COMPANY

ORDER OF ADOPTION

December 20 1984

This proceeding arose from a complaint filed by Dr Ethel M Hepner

against the Peninsular and Oriental Steam Navigation Company P O

alleging violations of sections 14 15 16 and 20 of the Shipping Act

1916 1916 Act 46 U S c app 813 814 815 819

In December 1976 Dr Hepner was a passenger aboard the P O liner

MV SUN PRINCESS As a result of an incident occurring on that voyage

Dr Hepner brought suit in the Superior Court of the State of California

County of Los Angeles alleging that she had suffered injuries due to

the negligent and willful misconduct of an employee of P O In settlement

of that suit P O and Dr Hepner entered into an agreement dated February

27 1982 P O agreed to pay Dr Hepner 40 000 in settlement of the

claim and Dr Hepner agreed that at no time in the future would she

board or attempt to board any vessel owned by P O nor would she

attempt to book passage on any vessel owned by P O She further agreed

that if she attempted to board any P O vessel in contravention of the

settlement agreement P O would have the right to eject her forcibly from

the ship without incurring liability for any injuries which she might sustain

The agreement went on to state that it was the entire agreement among

the parties thereto In a second agreement P O stated that it would

not publicly disclose the terms of the settlement agreement

In the instant proceeding Dr Hepner claims that the provisions of the

settlement agreement which bar her from boarding or booking passage

on any vessel owned by P O are contrary to sections 14 15 and 16

of the 1916 Act In addition she claims that P O violated the provisions

of the second agreement and section 20 of the 1916 Act by disclosing

the contents of the settlement agreement to third parties In this connection

it is also alleged that representatives of P O orally represented that Dr

Hepner would only be barred from P O ships for a period of six months

P O filed a Motion for Summary Disposition of the complaint on the

grounds that Complainant failed to state a cause of action for which relief

27 F M C 563
564 FEDERAL MARITIME COMMISSION

can be granted by the Commission The Commission s Bureau of Hearing

Counsel the only intervenor in the proceeding supported dismissal Dr

Hepner filed areply in opposition Chief Administrative Law Judge John

E Cograve granted the Motion and dismissed the proceeding in an order

dated September 27 1994

The Presiding Officer s dismissal order concluded that the complaint

fails to state a cause of action for which relief may be granted by the

Commission The section 14 Third allegation was rejected on the grounds

that the essential element of any violation of that section is the retaliation

by a carrier against a shipper and that Dr Hepner s only relationship

with P O prior to entering into the agreement was that of a passenger

The Presiding Officer noted that Dr Hepner has never claimed that she

is or ever was a shipper He also found that the term retaliation as

used in sections 14 Third contemplates a unilateral act on the part

of a carrier and not a contractual arrangement between carrier and shipper

He therefore concluded that section 14 Third was not intended to cover

the sort of situation presented in this proceeding

The Presiding Officer further found no agreement between two persons

subject to the 1916 Act and therefore no jurisdiction under section 15

of the Act The Presiding Officer also rejected the allegation of a violation

of section 16 on the basis that it suffers from the same infirmity as

does the section 14 allegation i e section 16 First contemplates a unilat

eral act which subjects someone to undue or unreasonable prejudice Fi

nally he determined that there is nothing in section 20 of the 1916 Act

that would prevent P O from disclosing the terms of the settlement agree

ment

The Complainant Dr Hepner has filed an appeal from the order of

dismissal to which P O and Hearing Counsel have replied Complainant

argues that sections 14 Third and 16 First of the 1916 Act are intended

to protect passengers as well as shippers In addition Dr Hepner claims

that she was coerced into signing the settlement agreement Appeal at

17 and was denied an opportunity to conduct the necessary discovery

to establish that fact Appeal at 17 18 The replies of P O and Hearing

Counsel rely on the arguments originally made in support ofP O s Motion

for Summary Disposition 1

I

Subsequently Complainant filed a Motion for Leave to File Closing Brief and for Delay of Decision

by Commission The grounds for lhe MOIion are thai Complainant s attorney did not receive a transcript of

a prehearing conference to which P O refers in its reply to the appeal A transcript of the prehearing con

ference inquestion which the Commission received on August 29 1984 could have been obtained by Com

plainant upon payment to the reponing firm Complainant s failure to obtain a transcript appears to be due

10 a lack of diligence In any event the failure to obtain the transcript of the prehearing conference does

nOl prejudice the Complainant The statements of counsel made in a prehearing conference are not pan of

the evidentiary record in this proceeding The Presiding Officer did not base his order of dismissal on such

statements and Ihe Commission does nOI in any way rely on them in adopting the order of dismissal

27 F M C
DR ETHEL M HEPNER V THE PENINSULAR AND ORIENTAL 565

STEAM NAVIGATION COMPANY

DISCUSSION

Upon consideration of the full record in this proceeding we find that

the Presiding Officer s dismissal of the complaint is supportable both in

law and in fact The Commission is therefore adopting the Order of Dismis

sal

While Complainant s Exceptions constitute rearguments of contentions

already advanced before the Presiding Officer and correctly disposed of

by him certain points raised warrant further discussion First Complainant

contends that the Presiding Officer erred in failing to find section 14

Third can be applied for the protection of passengers as well as shippers

The preamble to section 14 states that the section applies to the transpor

tation by water of passengers however the term passenger does not

appear anywhere else in the section 2

Section 14 Third only refers to

any shipper Although an argument can be made that the preamble

to section 14 indicates that section 14 Third was intended to protect pas

sengers as well as shippers the Presiding Officer s conclusion to the con

trary is consistent with the language of section 14 Third itself However

even assuming arguendo that section 14 Third is intended to cover pas

sengers as well as shippers the Presiding Officer s dismissal ofthe proceed

ing can be supported on the grounds that neither section 14 Third nor

section 16 First is intended to reach a voluntary arrangement of the type

presented here

Second Dr Hepner s contention that the settlement agreement was not

voluntary has no merit Complainant s appeal from the order of dismissal

states that there were two settlement conferences between the attorneys

and the Superior Court judges and as a result of a recommendation made

by those judges the parties entered into the settlement agreement Appeal

at 13 14 At the time Dr Hepner entered into the settlement agreement

with P O she was represented by the same attorney that now represents

her in this proceeding before the Commission He signed the following

statement at the bottom of the settlement agreement

I Bruce A Friedman attorney for Ethel Hepner have read and

approved this release and compromise settlement effective thereby

and further represent that I have advised her to enter into said

compromise settlement and to sign this release

2

Section 14 states in pertinent part

That no common carrier by water shall directly or indirectly in respect to the transportation by

water of passengers

or property between a

port of a State Territory District or possession of the

United States and any other such port or aport of a foreign country

Third Retaliate against any shipper by refusing or threatening to refuse space accommodations

when such are available or resort to other discriminating or unfair methods because such shipper

has patronized any other carrier or has filed acomplaint charging unfair treatment orfor any other

reason

27 F M C
566 FEDERAL MARITIME COMMISSION

The Commission believes that the Presiding Officer had a sound basis

upon which he could conclude that Dr Hepner was not coerced into signing

the agreement

THEREFORE IT IS ORDERED That the Dismissal of Proceeding order

served September 27 1984 in this proceeding is adopted and made a

part hereof

IT IS FURTHER ORDERED That Complainant s Motion for Leave

to File Closing Brief and for Delay ofDecision by Commission is denied

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 8415

DR ETHEL M HEPNER

v

THE PENINSULAR AND ORIENTAL STEAM NAVIGATION

COMPANY

DISMISSAL OF PROCEEDING

Adopted December 20 1984

The respondent has filed a Motion for Summary Disposition of this

proceeding on the grounds that the complaint fails to state a cause of

action for which relief may be granted by the Commission

In February of 1982 complainant Dr Ethel M Hepner entered into

an agreement with the respondent Peninsular and Oriental Steam Navigation

Company P O P O paid Dr Hepner 40 000 and in return she dis

missed a lawsuit then pending in the Superior Court of California County

of Los Angeles Iand agreed

2 that at no time in the future will she a board or

attempt to board any vessel owned or operated by the Peninsular

and Oriental Steam Navigation Company under its own name

or any fictitious name including but not limited to Princess

Cruises or b book or attempt to book either directly or indi

rectly whether in her own or another name passage on any vessel

owned or operated by the Peninsular and Oriental Steam Naviga

tion Company under its own name or any fictitious name includ

ing but not limited to Princess Cruises

3 Expressly consent and agree that if in violation of her

agreement herein she boards or attempts to board any vessel

hereinabove described or referred to the Peninsular and oriental

Steam Navigation Company its officers agents employees officers

and crew members of any such vessel may exercise any and

all means to prevent her boarding or if already aboard to cause

her to leave such vessel including but not limited to the use

of reasonable force if necessary but specifically excluding the

right to use deadly force or kill her and that in such event

she hereby releases acquits and forever discharges and agrees

to hold harmless said vessel and its officers and crew and Penin

sular and Oriental Steam Navigation Company and all its officers

agents employees of and from all claims etc

1

In the lawsuit complainant alleged that she had received or suffered injuries while aboard avessel oper

ated by respondent

27 F M C 567
568 FEDERAL MARITIME COMMISSION

In a separate agreement respondent agreed to keep confidential the provi

sions of the settlement agreement and all matters pertaining to the court

case mentioned above

Although it is less than clear from the complaint itself the position

of the complainant seems to be simply that the banishment provisions

of the Settlement Agreement are void in that they are illegal under the

Shipping Act 1916 This banishment is said to violate sections 14

15 16 and 20 ofthe Act

Of the four provisions of section 14 only the Third can be argued

to apply here It provides

That no common carrier by water shall directly or indirectly

in respect to the transportation of passenger or property

Third Retaliate against any shipper by refusing or threatening

to refuse space accommodations when such are available or resort

to other discriminating or unfair methods because such shipper

has patronized any other carrier or has filed a complaint charging

unfair treatment or for any other reason

2

The essential element of any violation of section 14 Third is the retalia

tion by a carrier against a shipper Since the proscribed action by a carrier

must be against a shipper the question then becomes can the complainant

by any reasonable interpretation be brought within the meaning of the

term shipper Generally a shipper is The person for whom the

owners of the ship agree to carry goods called freight to a specified

destination and at a specified price 3 Complainant s only relationship with

P O prior to entering into the agreement was that of a passenger aboard

respondent s cruise vessels There is no claim by the complainant that

she is or ever was a shipper Complainant however seems to be saying

that the preamble to section 14 renders the prohibitions of section 14

Third applicable to passengers even if they lack status as shippers Thus

complainant would have the statute read that no common carrier by water

shall in respect to the transportation by water refuse or threaten

to refuse space accommodations Unfortunately for complainant section

14 Third cannot be read that way

The specific act prohibited is the retaliation by a common carrier against

a shipper because that shipper has patronized another carrier or has

filed a complaint charging unfair treatment or for any other reason

Among the acts of retaliation specifically prohibited to a carrier is the

refusal or threat of refusal of space accommodations when such are avail

able An example would be where a shipper is contemplating giving

his business to another carrier and the carrier with whom he has been

2

Section 14 First applies to deferred rebates section 14 Second applies to fighting ships and section 14

Fourth speaks only to contracts made with shippers

3

De Kerchove nter1lQtlonal Maritime Dictionary 2d Ed 1961 p 724 Similarly Black s Law Dictionary

4th Ed 19S 1 at pIS46 defines a shipper as One who ships goods one who puts goods on board avessel

forcarriage to another place during her voyage and fordelivery there by charter party or otherwise

27 F M C
DR ETHEL M HEPNER V THE PENINSULAR AND ORIENTAL 569

STEAM NAVIGATION COMPANY

dealing says he will not give the shipper any space in the future no

matter how desperate the need if he ships with anyone else The section

is clearly restricted to retaliation by a carrier against a shipper and is

not applicable here where there is no shipper involved

Here the respondent s refusal of passage aboard its ships is in the

form of an agreement with the complainant In return for 40 000 complain

ant dropped a lawsuit against the respondent and agreed that she would

not at any time in the future attempt to sail aboard any of respondent s

vessels This is not it seems to me the kind of situation contemplated

by the statute

The language and context of section 14 Third contemplates a unilateral

act on the part of the carrier The terms retaliate refusing and

threatening are not compatible with the concept of an agreement in

which the allegedly harmed party agrees to the very conduct which is

said to cause the harm and who in return for that agreement receives

a sum of money

4

Thus even if the language of the section was less

specific in its restrictions to shippers I would have great difficulty in

concluding that it applied to the kind of agreement at issue here

Respondent argues that there is yet another reason why section 14 Third

does not apply here Itmaintains that the space accommodations referred

to in the section are limited to cargo space and accommodations and

do not apply to passenger accommodations As evidence of this respondent

cites the recently enacted Shipping Act 1984 PL 98 237 in which the

prohibitions of section 14 Third were carried over with the clarifying addi

tion of the word cargo so that the prohibited act is the refusal of

cargo space accommodations P L 98 237 Sec 1O b 5 While Imight

agree that no substantive change was intended no specific reference to

the legislative history of the 1984 Act has been provided However even

if we accept for the moment the idea that section 14 Third did include

passenger space accommodations the section does not apply to the

agreement presented here because the complainant is not a shipper against

whom the carrier has retaliated in any way and is thus not covered by

the specific prohibitions ofthe section

Without any explanation complainant alleges that section 15 of the 1916

Act has been violated by the conduct of respondent Section 15 only

covers agreements between common carriers by water andor other

persons subject to the Shipping Act 1916 5 The Settlement Agreement

the only possible connection here with section 15 is between P O a

common carrier and complainant who is not and does not claim to be

4Counsel for the complainant at the Preheating Conference conceded that respondent would not have exe

cuted the agreement and paid the 40 000 ifthe complainant had not agreed that she would stay away from

respondent s vessels inthe future

S The Act defines other personas any person carrying on the business of forwarding or furnishing

wharfage dock warehouse orother tenninal facilities in connection with a common carrier by water

17 l M
570 FEDERAL MARITIME COMMISSION

another person subject to the Act or a common carrier by water Therefore

section 15 does not apply

The complaint also alleges a violation of section 16 of the Shipping

Act 1916 The only portion of section 16 which could arguably apply

to the complaint is section 16 First which provides

That it shall be unlawful for any common carrier by water

either alone or in conjunction with any other person directly

or indirectly

First To make or give any undue or unreasonable preference

or advantage to any particular person locality or description of

traffic in any respect whatsoever or to subject any particular

person locality or description oftraffic to any undue or unreason

able prejudice or disadvantage in any respect whatsoever

Here again as in section 14 Third the language and context of section

16 First contemplates a unilateral act which subjects someone to undue

or unreasonable prejudice It does not in my view extend to an agreement

where as here the party seeking relief agreed to the very conduct which

is supposed to constitute the prejudice In return for 40 000 she dropped

the lawsuit and agreed to refrain from taking cruises on respondent s vessels

So just what is the act of respondent that has prejudiced complainant

All that respondent has done was sign the agreement and pay complainant

40 000 Viewed in its proper light the relief which complainant seeks

is not the removal of prejudice but a declaration that she is relieved

of an obligation which she freely undertook and for which she received

consideration Looked at this way it is difficult to find prejudice in

its commonly understood sense i e a disadvantage resulting from some

judgment or action of another 6 Certainly at the time the agreement was

executed no one thought that respondent had prejudiced the complainant

It was not until two years later that the complaint was filed with the

Commission 7 The complainant may now feel prejudiced but the restriction

was self imposed Complainant is not the victim of prejudice so much

as she is the dissatisfied party to a

bargain she no longer wishes to honor

As such she cannot now claim unlawful prejudice under section 16 8

Finally complainant alleges that respondent has violated section 20 of

the Shipping Act 1916 by disclosing the terms ofthe Settlement Agreement

to third parties Section 20 forbids common carriers by water to disclose

without the consent of the shipper or consignee concerned any information

6See The AmericQn Coiiegiale Dictionary Random House 1970

7

The complainant alleges that when the agreement was signed respondent said it would only remain in

effect for six months i e that Dr Hepner would only be barred from respondent s vessels for that period

The respondent denies this Of course all evidence on this point is barred by the parole evidence rule But

even if complainant waited to see if respondent would abrogate the agreement after six months it still was

another I 8 months before the complaint was filed here

S

I do not mean to imply that an agreement can never give rise to prejudice against one of the parties

to an agreement See e g filler American Freight Conference 14 F MC S8 1970 Indeed if duress or some

form of coercion is present any agreement could later be found prejudicial

27 F M C
DR ETHEL M HEPNER V THE PENINSULAR AND ORIENTAL 571

STEAM NAVIGATION COMPANY

concerning the nature kind quantity destination consignee or routing

of any property tendered or delivered by such common carrier when

the information could be used to the detriment of the shipper or consignee

This section does not apply to the situation here so that even if respondent

has made the disclosures alleged the remedy of complainant lies elsewhere 9

The proceeding is dismissed

S JOHN E COGRAVE

Administrative Law Judge

9

Ifthere is something wrong with the agreement then complainant s remedy would appear to lie in the

local forum under the jurisdiction of which the agreement was executed

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 27

PASCOE BUILDING SYSTEMS

v

PACIFIC WESTBOUND CONFERENCE AND AMERICAN PRESIDENT

LINES LTD

NOTICE

DECEMBER 31 1984

Notice is given that no exceptions were filed to the November 6 1984

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

Pursuant to 46 CPR 502 253 respondent American President Lines Ltd

shall pay complainant interest in the amount of 15 769 19 resulting in

total reparation of 58 320 60 to be paid to complainant by January 15

1985 Respondent shall also furnish the Secretary with evidence of payment

within five days thereof

S FRANcIs C HURNEY

Secretary

572 27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 27

PASCOE BUILDING SYSTEMS

v

PACIFIC WESTBOUND CONFERENCE AND AMERICAN PRESIDENT

LINES LTD

1 Where a tariff provides in pertinent part that

Cargo freighted on a measurement basis shall be assessed rates

on the gross or overall measurement of individual pieces or pack

ages in cubic meters

and further that

The three dimensions in centimeters are to be multiplied

together to produce the cube of one package or piece in cubic

meters

and does notprovide that the outside measurement of the dimensions should

be used the tariff is clear and definite that the actual cubic measurement

of each individual steel shape is the basis on which rates shall be assessed

2 Where three dimensions ie length x height x width are used to

measure the number of cubic feet the use of two measurements along

an irregular generally triangular width so as to arrive at an average

width does not represent the use of a fourth dimension within the

meaning of the tariff

3 The averaging of the width measurement by the complainant by

generally using the widest and narrowest measurement along the width

dimension and dividing by two is a

reasonably accurate measurement of

the width of the steel shapes involved in this proceeding and comports

with the tariff requirement that the rate shall be assessed on the gross

or overall measurement of individual pieces in cubic meters Further the

measurement of the steel shapes involved by using the outside or widest

measurement and then multiplying that figure by the length x height does

not result in the gross or overall measurement of individual pieces as

the tariff requires Rather it results in a measurement of the smallest

rectangular container into which the piece or package would fit

4 The record in this proceeding does not support a finding that the

practice in the industry under the pertinent tariff for measuring the steel

shapes involved here is to use the measurement of width at its widest

point so as to ultimately arrive at the number of cubic meters involved

5 This holding is limited to the measurement of the steel shapes involved

here However if the respondents wish to use the outside measurement

27 F M C 573
574 FEDERAL MARITIME COMMISSION

of the three dimensions to arrive at the number of cubic feet involved

in the future the tariff should so specifically provide

Edward D Greenberg for Pascoe Building Systems complainant

R Frederic Fisher and Charles L Coleman III for Pacific Westbound

Conference and American President Lines Ltd respondents

INITIAL DECISION I OF JOSEPH N INGOLIA ADMINISTRATIVE

LAW JUDGE

Finalized December 31 1984

This case involves the question of whether or not a portion of section

18 b 3 of the Shipping Act 1916 was violated because fabricated steel

structures were mismeasured The complainant alleges that four shipments

are involved and that it is entitled to reparations totalling 42 55141 with

interest under the authority of section 22 of the Shipping Act 1916 2

It argues that the mismeasurement contravenes the provisions of the pertinent

tariff

FINDINGS OF FACT

The parties have stipulated certain facts in this proceeding Reference

to that stipulation is S F

1 The complainant Pascoe Building Systems pascoe is a division of

Amcord Inc a Delaware corporation and is generally engaged in the

manufacture and sale of prefabricated steel structures used for building

and construction purposes S F par 1

2 The respondent American President Lines Ltd APL is a common

carrier by water in the foreign commerce of the United States and has

been a member of the respondent Pacific Westbound Conference PWC

at all times relevant to this proceeding The respondent PWC is a con

ference of carriers with various members one of whom is American Presi

dent Lines Ltd S F par 2 Entire Record

3 During the period of time involved in this proceeding PWC established

special project rates to Hong Kong for the carriage of machinery equip

ment materials supplies and parts thereof in connection with the China

Cement Company Hong Kong Ltd cement plant project The applicable

project rate from December 17 1980 through October 31 1981 was

105 00 W M and the applicable rate from November 1 1981 to February

1 1982 was 116 00 W M The pertinent tariff pages publishing this

rate appeared in PWC Local and Overland Tariff No 11 FMC 19 Item

I This decision wiII become the decision of the Commission inthe absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2Section 1O b of the Shipping Act 1984 generally corresponds to section 18 bX3 of the 1916 Act

Section II of the new act corresponds to section 22 of the old act The pertinent law regarding the alleged

violation is the same under either act

27 F M C
PASCOE BUILDING SYSTEMS V PACIFIC WESTBOUND 575

CONFERENCE AND AMERICAN PRESIDENT LINES LTD

982 300100 on page 774 The pertinent rates set forth in the tariff are

contract rates and are available only to shippers signing the PWC dual

rate contract Pascoe became a signatory to such contact so that the rates

applied to Pascoe s cargo movements which are here in issue S F

par

3

4 In addition to specific rates the tariff contained other pertinent provi

sions as follows

At page 81

RULE NUMBER 39OMETHOD OF COMPUTING FREIGHT Except

as otherwise provided the following will apply

39 2 Measurement Cargo

Cargo freighted on a measurement basis shall be assessed

rates on the gross or overall measurement of individual

pieces or packages in cubic meters

and further

39 2 6 The Three dimensions in centimeters rounded off according to

the above are to be multiplied together to produce the cube

of one package or piece in cubic meters to six 6 decimal

places

and further

394 Freight Charges are Subject to Revision

Adjustments shall be made by the Carrier if shipment are

found to be improperly described or if billed weight or

measurement is found to be incorrect For the purpose

of this Rule except as otherwise provided the Pacific

Cargo Inspection Bureau is designated as authorized rep

resentative of the Carriers

Entire Record

5 During the relevant time period involved in this proceeding Pascoe

was a subcontractor for the China Cement Company Hong Kong Ltd

cement plant project Pascoe contracted with Del Mar Shipping Corporation

Del Mar an ocean freight forwarder to arrange for the actual transpor

tation from Pascoe s

facility in Pamona California to the pier book cargo

aboard the PWC vessels and pay the ocean carrier S F

par 4

6 There are four cargo movements of fabricated steel structures involved

in this proceeding They took place on June 14 1981 the President Adams

August 11 1981 the President Grant November 19 1981 the President

Cleveland and January 22 1982 the President Tyler The cargo involved

in each of the shipments was freighted on a measurement basis in accord

ance with the pertinent tariff S F par 5

7 When Pascoe tendered each of its shipments to APL it furnished

a packing list prepared by its engineering department setting forth the

27 F M C
576 FEDERAL MARITIME COMMISSION

dimensions which it believed were applicable to its cargo In measuring

the width of its steel shapes Pascoe arrived at a width measurement by

generally taking the widest and the narrowest measurement allowing for

flanges along the width and dividing by two S F par 5 Entire Record

8 The Pacific Cargo Inspection Bureau PCIB rejected the width dimen

sions submitted by Pascoe and substituted its own measurement The PCIB

measured the width of Pascoe s steel shapes at their widest points and

used that measurement to arrive at the number of cubic meters involved

by multiplying the length x height x width S F par 9

9 Using the width measurement submitted by Pascoe the freight charges

due by Pascoe were as follows

Shipment Charges

Total

94721 37

76 4022

283 514 38

83 715 69

538 353 86

June 14 1981

August II 1981

November 19 1981

January 22 1982

S F par 13

10 Using the width measurement submitted by the PCIB the freight

charges due by Pascoe were as follows

Shipment Charges

Total

103 576 95

78 1629

305477 71

93 033 42

580 250 27

June 14 1981

August 11 1981

November 19 1981

January 22 1982

S F par 13

11 The PCIB did not remeasure the steel shapes for the August 11

1981 shipment Instead the steel shapes were measured in Hong Kong

after devanning by an independent marine surveyor Sworn Measurers and

Weighers Hong Kong Ltd at a cost of 655 00 S F par 10

12 Pascoe has paid all the freight charges relating to the four shipments

in issue on the basis of the measurements made by PCIB In addition

it has paid the 655 00 referred to in paragraph 11 above It now seeks

to recover with interest the difference in the freight charges due under

its measurements and those charges it has paid including the 655 00

The total amount is 42 55141 S F par 6

13 During the period from 1976 through 1982 Pascoe entered into numer

ous contracts to manufacture and ship cargoes of steel shapes many of

which were handled by the Del Mar Shipping Corporation which acted

as freight forwarder The shipments were as follows

27 F M C
PASCOE BUILDING SYSTEMS V PACIFIC WESTBOUND 577

CONFERENCE AND AMERICAN PRESIDENT LINES LTD

Year Number of

Contracts

1976 34

1977 47

1978 64

1979 35

1980 22

1981 30

1982 47

Rebuttal Statements Banuelos and Little pars 7 and 5 respectively

14 The contracts referred to in paragraph 13 above in each instance

included triangular steel shapes which formed a sizeable part of the cargo

that was shipped The cubed measurements of those shapes were arrived

at by Pascoe in the same manner as were the cubed measurements for

the shipments herein involved The accuracy of those measurements was

never questioned until this proceeding Rebuttal Statements Banuelos and

Little pars 7 and 5 respectively

ULTIMATE FINDINGS OF FACT

15 The tariff involved in this proceeding clearly provides that cargo

freighted on a measurement basis shall be assessed rates on the gross

or overall measurement of individual pieces or packages in cubic meters

and the measurement used by Pascoe satisfies that requirement while the

measurement used by PCIB does not Entire Record

16 The averaging of the width measurement employed by Pascoe

by using the widest and narrowest measurement along the width and divid

ing by two is areasonably accurate measurement of the width of the

steel shapes involved and comports with the tariff requirement that the

rate shall be assessed on the gross or overall measurement of individual

pieces in cubic meters The averaging of the width does not add a fourth

dimension since the cubic meters are still arrived at by using three

dimensions i

e

length x height x width Entire Record

17 The measurement of the width of the steel shapes involved by using

the outside or widest measurement and then multiplying that figure

by the length xheight does not result in the gross or overall measurement

of individual pieces or packages in cubic meters as the tariff requires

Rather it results in a measurement of the smallest rectangular container

into which the piece or package would fit Entire Record

18 The record in this proceeding does not support a finding that the

practice in the industry under the pertinent tariff for measuring the steel

shapes involved here is to use the measurement of width at the widest

point to arrive at the number of cubic meters involved Entire Record

19 Pascoe was overcharged 42 55141 by APL for the four shipments

involved here and is entitled to recover that amount plus the appropriate

interest Entire Record

27 F M C
i

I

578 FEDERAL MARITIME COMMISSION

ARGUMENT AND CONCLUSIONS

This case is one involving the proper measurement of steel shapes There

is no dispute as to the surrounding facts concerning the applicable monetary

rate the shipments involved or the description of the pertinent cargo Indeed

there is no real dispute either as to how the complainants and respondents

measured the steel shapes or as to the accuracy of the numerical figures

that were used What is in controversy is which measurement in cubic

meters satisfies the terms of the pertinent tariff

With respect to the shipments involved here Pascoe arrived at the dimen

sions of the tapered columns which appear to be triangular in shape but

are actually four sided 3 from engineering specifications determined by its

engineering department From those specifications Pascoe prepared and gave

packing lists to the respondents in advance of sailing Pascoe arrived at

the cargo measurement by in effect averaging the width measurement

of each tapered column It argues that its measurement process results

in the most accurate measurement of the overall or gross cubic dimensions

of the tapered columns since the measurements are based on precise

engineering calculations which are correct to the thousandth of a foot

It argues further that Pascoe has been using this method to derive the

cubic dimensions of its tapered columns for at least twenty years and

that in the last seven years made a large number of ocean shipments

based on such measurements which were never questioned by any carrier

Pascoe asserts that the respondents method of measurement is to deter

mine the smallest rectangular container into which the piece or package

would fit Pascoe argues that in so doing the respondents violated the

terms of the tariff because the tariff does not speak in terms of calculating

the dimensions of such a hypothetical rectangular container

On the other hand the respondents argue that Pascoe s method of meas

urement was wrong because Pascoe used four dimensions instead of the

three called for by the PWC tariff because Pascoe s method was not

in accordance with standard industry practice because Pascoe s argument

that the PWC s tariff is ambiguous is an error and because Pascoe s

measurement system is arbitrary and unworkable

Section 18b 3 of the Shipping Act 1916 provides in part that

No common carrier by water in foreign commerce shall charge

or demand or collect or receive a greater or less or different

compensation for the transportation of property or for any service

in connection therewith than the rates or charges which are speci

fied in its tariffs on file with the Commission

Given this statutory mandate it is clear that we must begin any examination

of the issue involved here by determining just what the tariff says In

3 See complainant s Opening Statement of Facts Exhibits 7 and 15 which contain drawings of the tapered

columns

27 F M C
PASCOE BUILDING SYSTEMS V PACIFIC WESTBOUND 579

CONFERENCE AND AMERICAN PRESIDENT LINES LTD

so doing we find that its language is unequivocal The basic tariff language

says that

Cargo freighted on a measurement basis shall be assessed rates

on the gross or overall measurement of individual pieces or pack

ages in cubic meters

That language when applied to the steel shapes tapered columns which

moved here clearly requires that the measurement involved be of the indi

vidual pieces themselves and there is no provision that any outside

measurement shall govern Further there is nothing in the tariff either

specifically or by implication which would measure the individual pieces

by computing the smallest rectangular container into which the individual

pieces would fit

The tariff also states that

The three dimensions in centimeters are to be multiplied

together to produce the cube of one package or pieces in cubic

meters

This language standing alone does not change the basic tariff language

by requiring an outside measurement of the three basic dimensions

ie length height and width 4

Further we have also found as a fact

that the use of two measurements along one dimension so as to average

the dimensions is a reasonably accurate measurement of the width dimension

involved here and comports with the basic tariff requirement We have

also found as a fact that the use of two measurements of width so as

to arrive at the overall dimension does not add a fourth dimension

Rather the measurement of cubic meters under the tariff is still arrived

at by the use ofthe three dimensions of length height and width

As we have noted we think the tariff is clear so there is no need

to go beyond its terms at least not insofar as the steel shapes involved

here are concerned But even if we look beyond the terms of the tariff

as the respondents would have us do in order to determine whether or

not the complainant s method of measurement of steel shapes is contrary

to the practice in the industry we hold that the facts of record do not

support any such finding s While the respondents witnesses talk generally

of such a practice there is no real delineation between a tariff which

requires an outside measurement to be used respecting irregular shapes

and a tariff like the one in issue here that does not contain such a

requirement Further there is no attempt by the respondents to deal specifi

cally with the particular commodity involved here and instead it is discussed

generally along with automobiles and other similar commodities not in

4This statement also applies to the use of Tweed s Accurate Metric Cubic Tables for which the tariff

provides

This holding makes unnecessary any determination as to the extent to which an industry wide practice

affects the clear and unequivocal language of atariff

27 F M C
580 FEDERAL MARITIME COMMISSION

issue This despite the fact that the complainant established and we have

found as uncontroverted fact that from 1976 through 1982 it shipped

tapered steel shapes which were measured in the same manner as were

the steel shapes involved here The characterization advanced by the re

spondents that in making such shipments Pascoe simply got away with

it in the past meaning at least the past seven years is a subjective

self serving argument having no factual basis in this record

When we turn from the facts to the case law we find that generally

the cases hold that strict adherence to filed tariffs is mandatory Mueller

v Peralta Shipping Corp 8 F M C 361 364 1965 and that demanding

and collecting greater compensation than specified in the tariff on file

with the Commission violates section 18b 3 of the Shipping Act 1916

Bratti v Prudential et al 8 F M C 375 380 1965 The case law further

provides that tariffs should be specific and plain Gelfand Mfg Co v

Bull SS Lines 1 U S S B 169 170 1929 and that if no specific commer

cial meaning has been engrafted on to a term that term must be construed

according to its ordinary meaning European Trade Specialists Inc and

Kunzle Tasin v Prudential Grace Lines Inc and the Hipage Co Inc

21 F M C 888 890 1979 citing Nix v Hedden 149 U S 304 1983

In their brief the respondents make several arguments one of which

can be disposed ofin summary fashion The brief refers to Pascoe s shift

ing contentions and its abandoned nesting argument Pascoe denies

that its case rested on the nesting argument and asserts that it is relying

solely on the provisions and language of the tariff This being so we

have disregarded those portions of the record which relate to nesting 6

and have limited our consideration of the issue to which the tariff provisions

require

As we have noted the respondents primary argument which is really

three arguments states

Pascoe seeks to impose a system of measurement which is contrary

to the tariff contrary to uniform industry practice and completely

unworkable

As to being contrary to the tariff the language of the tariff standing

alone does not allow the use of an outside measurement of width

even if all were to accept the idea that the use of three dimensions precludes

the use of two measurements along one irregular dimension The only

way the respondents can reach such a result is to establish that uniform

industry practice as to the tapered steel shapes involved here requires

that the three dimensions set forth in the tariff means the three outside

The nesting argument rests on the assertion that since the irregular steel shapes could be nested

or bundled together so as to conserve cargo space the carrier ought not to use the outside measurement of

width as to each tapered column in computing the numberof cubic feet involved

7

As has been nOled previously we have held as a fact that the tariff does not preclude the use of two

measurements along the width dimension

27 F M C
PASCOE BUILDING SYSTEMS V PACIFIC WESTBOUND 581

CONFERENCE AND AMERICAN PRESIDENT LINES LTD

dimensions We have already held that the facts of record do not support

the view that the tapered steel shapes involved here were historically meas

ured as the respondents measure them In their brief the respondents cite

language from Orleans Materials and Equipment Co v Matson Navigation

Co 8 F MC 160 1964 Orleans They state and we agree that the

Commission rejected the argument that the measurement of cargo may

be reduced to take into account the possibility of nesting the cargo

so as to conserve stowage space Further the Commission s reasons for

its decision that is that the cargo must be measured as it is received

at the dock and that the possibility of nesting must be disregarded

are equally valid However that language does not support the respondents

case here

In Orleans supra the complainant sought to have the Commission hold

that because the cargo could be nested the measurement of the cube

should not be based on the outside measurement of the dimensions even

though unlike the instant case the applicable tariff provided that the

outside measurement would govern The Commission correctly followed

the terms of the tariff which specifically provided for the outside measure

ment Likewise here we would follow the terms of the tariff and the

fact that the tariff in Orleans specifically provides for the use of the

outside measurement in arriving at the cube and the tariff here does not

calls into question the respondent s assertion that since the tariff here pro

vides for the measurement of cube by using three dimensions it also requires

use of the outside measurement The problem is brought into focus by

consideration of Ocean Shipment of Associated Factories Inc 26 FMC

144 FMC Docket No 83 33 1983 Associated which is cited by the

respondents That case came to the Commission on referral from the United

States District Court for the Southern District of Georgia The issue pre

sented was whether or not shipments of carpet were properly measured

in calculating the cubic measurement by using the greatest dimensions

of the role rectangularization where the tariff provided that

All cargo shall be measured on the overall measurements of the

individual packages unless otherwise specified

The Commission decided that the measurement was improper and that

the shipper was right in using a geometric measurement to find the volume

of the cylinder rug The Commission stated

Rule 21 A states that all cargo shall be measured on the overall

measurements of the individual packages What is meant by

the overall measurements of a package is not defined or ex

plained Nor does Rule 21 specify what method is to be used

to calculate the overall measurements of a package In this

regard it is unlike those tariffs which state that the cubic measure

ment shall be the product of the three greatest dimensions Specify

ing that the cubic measurement of the cargo shall be based on

27 F M C
582 FEDERAL MARITIME COMMISSION

the depth width and length of the cargo precludes the use of

the geometric formula for calculating the cubic volume of a cyl

inder In contrast nothing in Rule 21 precludes the use of the

geometric formula in determining the overall measurements of

the carpet rolls By this decision we are in no way overruling

the general rule stated in Orleans Material and Equipment Co

Inc v Matson Navigation Co 8 FMC 160 3 SRR 105S 1964

Where rectangularization is clearly indicated it continues to be

a valid and essential means of rating cargo Our holding here

is based on our judgment that Rule 21 A is sufficiently ambiguous

to lead us to rule in favor of Associated

In the absence of a tariff rule which clearly specifies the method

to be used in order to determine the overall measurements

of cargo we conclude that in this instance Associated may have

the benefit of the geometric formula Ambiguous tariff provisions

are construed against the maker ie the carrier and in a manner

most favorable to the shipper in terms of yielding the lowest

rate Bratti v Prudential et al 8 FMC 375 379 5 SRR 611

1964 Sacramento Yolo Port Dist v FredF Noonan Co Inc

9 FMC 551 558 7 SRR 387 1966 United Nations Children s

Fund v Blue Sea Line 15 FMC 206 209 12 SRR 1067 1972

The Commission may look to matters outside the express

language of the tariff to aid in its construction if there exists

a custom or usage of a trade or course of dealing of the parties

which although not in the tariff is such that it should be applied

Great Northern Ry v Merchants Elev Co 259 US 285 291

292 1922 Sacramento Yolo Port Dist v Fred F Noonan Co

Inc 9 FMC 551 560 7 SRR 387 1966 Although many tariffs

specifically require rectangularization of cargo in calculating

the cubic measurement for rating purposes this does not establish

that rectaniularization is such a universal custom or usage

in this trade and with this commodity so that it must be applied

even though it is not specifically required by the tariff

In the case before us the tariff contains precise language as to how

cargo should be measured There is no ambiguity within its terms It

does not specifically provide for the use of the outside measurement

or rectangularization as do other tariffs which the Commission refers to

in Associated supra Given the clear language of the tariff and the failure

of the record to establish that the use of the outside measurement is

such a universal custom or usage in this trade with this commodity and

under the language of this tariff we hold that it cannot be applied here

and the complainant s method of measurement is proper

In so holding we note that this case is not one where the definition

of a commodity is in question In those cases one can understand the

inability of a tariff to cover every commodity within every description

27 F M C
PASCOE BUILDING SYSTEMS V PACIFIC WESTBOUND 583

CONFERENCE AND AMERICAN PRESIDENT LINES LTD

so that it often becomes necessary to look outside the terms of the tariff

itself Here all that is involved is how cargo is measured and the tariff

contains language as to how this is to be accomplished in rather precise

terms Yet unaccountably the tariff simply fails to specify that the out

side or greatest dimension should be used It seems obvious that if

the tariff is to be clear and unequivocal as it is required to be the intent

that the outside dimension be used ought to be expressly stated and

not left to a reliance on standard industry custom or practice Otherwise

we are sometimes left with what we have here a record that does not

support a holding that in measuring this specific cargo outside measurements

are always used

Further it is difficult to understand the respondents assertion through

its witnesses that a

ruling in Pascoe s favor here would have catastrophic

industry wide consequences In advancing this premise the arguments made

that there needs to be a uniform method for measuring cargo and a series

of questions is propounded as the How would we determine how many

measurements to use and if a package is hour glassed shaped how

do we determine the mean width Then these and similar questions

are applied to different types of irregular shapes to show that the measure

ment is not feasible as to those shapes and that therefore it should not

be allowed as to the steel shapes involved here

Of course the answer to the above is that uniformity in a tariff is

desirable and it could have and can be achieved here by simply inserting

a sentence in the tariff that makes clear that all irregular shaped objects

will be measured by multiplying the three dimensions and that the measure

ment used for each dimension will be the outside measurement of that

dimension If the tariff were so clarified there would be no need to rely

on extrinsic evidence as to what is meant no agonizing over how to

measure different irregular shapes and no possible lack of uniformity which

might lead to catastrophic industry wide consequences

So here we hold that the specific language of the tariff is clear and

that the measurement used by the complainant reasonably complies with

the requirements of that language We hold further that the record in

this proceeding does not support a finding that under the language of

this tariff and with respect to this commodity the industry wide practice

is to use the outside measurement of width so as to arrive at a hypo

thetical rectangle Such rectangularization is not clearly indicated in this

tariff as the Commission s decision in Orleans supra requires

Finally PWC in its brief states that Pascoe s complaint against the

PWC must be dismissed for failure to state a claim under the Shipping

Act See Nepera Chemical Inc v Sea Land Service Inc 527 FSupp

136 D D C 1981 Given the facts of this case where the tariff involved

is a conference tariff and the measurements made by PCIB were made

under the specific terms of the tariff as well as other facts it is clear

27 F M C
584 FEDERAL MARITIME COMMISSION

that the PWC is a proper party to this proceeding even though it may

not be liable insofar as reparations are concerned

In view of the above the respondent American President Lines Ltd

is hereby ordered to pay Pascoe the sum of 42 55141 with appropriate

interest8It is further ordered that if the respondents want to measure

all irregularly shaped cargo by using the outside measurement of each

dimension so that the measurement achieves rectangularization it be so

specifically provided for in the appropriate tariff

This proceeding is hereby discontinued

S JOSEPH N INGOLIA

Administrative Law Judge

8

See 46 CFR 502 253 forthe proper interest computation

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 845

SOUTH CAROLINA STATE PORTS AUTHORITY

v

GEORGIA PORTS AUTHORITY

NOTICE

January 9 1985

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

1984 dismissal of the complaint in this proceeding and the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

S FRANCIS C HURNEY

Secretary

27 F M C 585
FEDERAL MARITIME COMMISSION

DOCKET NO 845

SOUTH CAROLINA STATE PORTS AUTHORITY

v

GEORGIA PORTS AUTHORITY

ORDER DISMISSING COMPLAINT

Finalized January 9 1985

This order summarizes some events whieh transpired at the hearing on

Friday November 30 1984 and the speaking order issued at that time

Counsel for complainant and counsel for respondent requested that the

following statement be read into the record

The respondent Georgia Ports Authority acknowledges that it

now recognizes that there are certain errors in Booz Allen

Hamilton Inc report described in the complaint and that it agrees

that the report will not be further distributed or circulated by

the Georgia Ports Authority

In consideration of the above rapproachment the South Carolina

State Ports Authority having achieved the primary purpose of

this action now agrees to withdraw the complaint pending before

the Federal Maritime Commission

After the statement was read the complaint was ordered dismissed with

prejudice and the proceeding was closed

S SEYMOUR GLANZER

Administrative Law Judge

j

586 27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 38

NOTICE OF INQUIRY AND INTENT TO REVIEW

REGULATION OF PORTS AND MARINE TERMINAL OPERATORS

January 18 1985

Discontinuance of Proceeding

The Federal Maritime Commission has determined to

discontinue this proceeding having reviewed and adopted

the Final Report of the Inquiry Officer

DATE Effective January 24 1985

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on September 14 1983

48 FR 41199 the Commission initiated this proceeding to accomplish

a general review of its regulation of the marine terminal industry The

Commission proposed to review the continued need to require terminal

tariffs to be filed and marine terminal agreements to be filed and approved

and the general area of antitrust immunity for marine terminal operators

Comments were solicited from the public and Commissioner Robert

Setrakian was appointed Inquiry Officer authorized to review written com

ments and solicit any other comments necessary to further the objectives

of the Inquiry

Numerous comments were submitted from various components of the

ocean shipping industry and other interested parties and hearings were

held in certain U S port cities The Inquiry Officer issued an initial report

dealing with terminal tariffs and agreements and has now issued a Final

Report covering the area of antitrust immunity Both reports which have

been reviewed and adopted by the Commission are available from the

Commission s Secretary The Commission has now determined that the

purposes of the proceeding have been accomplished and that it should

be discontinued

Accordingly this proceeding is discontinued

ACTION

SUMMARY

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

27 F M C 587
FEDERAL MARITIME COMMISSION

DOCKET NO 8410

THE COCA COLA EXPORT CORPORATION

v

PERUVIAN AMAZON LINE

ORDER OF REMAND

JANUARY 24 1985

This proceeding was initiated by complaint filed by Coca Cola Export

Corporation Coke against Peruvian Amazon Line pAL for alleged over

charges of 9 824 52 on the shipment of 14 366 cases of canned sodas

from Miami Florida to Iquitos Peru l Chief Administrative Law Judge

John E Cograve issued an Initial Decision denying reparations to which

Coke has filed Exception

BACKGROUND

The essential facts are not in dispute Coke s contract of sale called

for shipment of 14 336 cases of Coca Cola and Sprite and the Peruvian

letter of credit precluded partial shipment Coke booked space for the

shipment with PAL and requested that eight containers be furnished The

cases of Coca Cola and Sprite are automatically palletized as they come

off the plant s production lines However the number of cases ordered

could not be neatly divided into standard pallet loads Coke therefore made

up the requisite number of cases by providing the maximum number on

pallets and the remainder in loose cases Coke shipped the entire amount

in containers because the letter of credit prohibited partial shipment 2

and to avoid damage from excessive handling exposure to the elements

and pilferage PAL was not informed either at time of booking or shipment

that the greater portion of the cargo was palletized The containers provided

by PAL were loaded by Coke at its Miami plant

At the time of shipment the PAL s tariff contained the following rates

Canned Goods Beverages Palletized W M 120

Canned Goods Beverages in Boxes W M 160

I The maller was tried under the shortened procedure of Subpart K of the Commission s Rules of Prac

tice and Procedure 46 C F R 502 l81

2No explanation is given for Coke s belief that shipment on the same vessel for cargo that is partly on

pallets and partly containerized or in loose cartons would constitute partial shipment under the terms of

the leller of credit

588 27 F M C
THE COCA COLA EXPORT CORPORATION V PERUVIAN 589

AMAZON LINE

The bill of lading prepared by Coke did not reflect that some of

the cargo was Palletized and PAL rated the shipment at the higher rate

for cargo in boxes The complaint alleged that the lower rate for

palletized cargo should have been charged and claimed reparations in

the amount of 9 824 52

In denying reparations the Presiding Officer found that quite literally

both rates for Beverages Palletized and Beverages Boxed would apply

The shipment was palletized and it was loaded into containers He charac

terized the problem presented as not being the usual problem of tariff

ambiguity but rather a case of ambiguity created by the actions of the

shipper who first palletized at least part of the cargo and then placed

those pallets inside a container box The Presiding Officer concluded

that Coke had elected to use containers in order to obtain certain benefits

and that the higher container or box rate was appropriately charged

as compensation for the higher costs incurred by PAL to supply the contain

ers

Coke argues on exception that the Initial Decision erroneously interprets

the tariff description in boxes to mean in containers thus imputing

container rates to a tariff which then contained none Coke points out

that the word container did not appear anywhere in PAL s tariff at

the time of shipment and that the first reference to containers or container

ized cargo was not made in the tariff until a number of months after

the claim for overcharge was made 3 Coke therefore concludes that a

reading

of PAL s tariff leads to the inescapable conclusion that it is a typical

traditional breakbulk tariff one which offers a lower rate for palletizing

cargo as opposed to shipping boxes 4 While arguing that a fair and

reasonable construction must be given to the term in boxesCoke does

not allege that the tariff is ambiguous To the contrary Coke states that

There is no ambiguity in the tariff

In its Reply to Exception PAL takes the position that the Presiding

Officer s conclusions are correct and that Coke seeks to avoid compensating

it for the additional costs of containerization while reaping its benefits

by concealing the packaging of the cargo from the carrier

DISCUSSION

The Presiding Officer erred in equating boxes and containers

The Commission does not read the tariff term in boxes as describing

3

In reply Respondent explains that the later amendment was intended to make perfectly clear what was

already clear enough Both parties are referring to Peruvian Amazon s Tariff FMC No 3 original page

SA effective March 18 1983 which provides per container rates for shipper owned 20 and 40 foot con

tainers including separately stated charges forreturn of the empty containers Because the shipment in ques

tion was not made in shipper owned containers it appears that these rates would have been inapplicable

to the shipments in question and provide no guidance forthe question raised herein

4Coke concedes on exception that the higher box rate should be applied to that portion of the cargo

which was not palletized but moved in loose cartons within the containers and that PAL s computation

of the maximum overcharge of 8 128 92 based on amix of palletized and in Boxes rate is more accu

rate than the 9824 52 amount sought inthe complaint

27 F M C
590 FEDERAL MARITIME COMMISSION

containers Nor do we consider box synonymous with container in

the context of a tariff setting forth the terms and conditions of as well

as the rates and charges for transportation by water in foreign commerce

PAL s tariff reflected two rates for canned beverages in boxes or

palletized As the Presiding Officer found both rates were literally appli

cable Neither referred to containerized shipment and no other reference

to containers was made in PAL s tariff effective at the time of shipment

We cannot determine on this record whether the rate for cargo in

boxes was the appropriate rate to apply in this case without examining

factQrs which are not apparent from the existing limited record Although

there is some evidence of PAL s general past practice in handling cargo

tendered to it in boxes the record is devoid of any showing as to past

dealings between Coke and PAL which might have led Coke to expect

container service s Nor is there any evidence in the record regarding the

manner in which Coke s overseas shipments are usually made whether

by this carrier or other Such evidence of past practice by a shipper might

clarify the basis for its expectations of the rate to be charged Evidence

of a shipper s past practices and dealings may thus indicate its prior knowl

edge of the meaning and interpretation of tariff terms While such knowl

edge by one shipper would not of itself generally make an ambiguous

tariff unambiguous it does serve to put the matter into proper perspective

Cummin s Engine Co v United States Line 21 EM C 944 1979

THEREFORE IT IS ORDERED That the Initial Decision served in

this proceeding is set aside and that the proceeding is remanded for further

hearing consistent with this Order

By the Commission

5 BRUCE A DOMBROWSKI

Assistant Secretary

Commissioner Moakley dissenting in part

I would not remand this proceeding to the Administrative Law Judge

because Ibelieve there are no relevant facts in dispute

The majority have concluded that the term in boxes as used in the

tariff in question does not mean in containers I

agree Having disposed

of that issue the resolution of the case is clear There is one tariff rate

which applies to the cargo that was shipped in pallets and another higher

rate applicable to the remainder of the cargo that was shipped in loose

cartons or boxes No other tariff rates are at issue The parties agree

that application of these two rates to the cargo in question results in

an overcharge of 8 128 92 to the shipper in this case

PAL stated in its pleadings that the higher rate for cargo in boxes is based upon its regular practice

of providing containers at additional cost to itself for cargo which is shipped loose in cartons or boxes

The higher rate also allegedly compensates for the loss of vessel cubic capacity resulting from use of the

containers PAL further advised that it offers alower rate for palletized cargo because it requires no further

handling orpackaging for protective purposes

27 F M C
THE COCA COLA EXPORT CORPORATION V PERUVIAN 591

AMAZON LINE

The majority would remand the proceeding to examine factors unrelated

to whether the cargo moved in pallets or boxes The issue they want

the AU to pursue relates to past dealings between the shipper and carrier

which might have led the shipper to expect container service The theory

seems to be although it is not clearly stated that if the shipper received

the benefit of container service it should have to pay for that benefit

even though there is no such charge in the tariff

Unlike the facts in the informal docket case cited by the majority

there is no tariff ambiguity to resolve here The only possibility of such

an ambiguity whether in boxes meant in containers was resolved

in favor of the shipper Thus past dealings between the shipper and carrier

are totally irrelevant The terms of a tariff cannot be amended or ignored

on the basis of equitable principles

I would discontinue this proceeding and award reparation of 8 128 92

plus appropriate interest to the complainant

I Cummins Engine Co v United States Lines et ai 2 F M C 944 1979

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 572

DOCKET NO 8426

RULES GOVERNING AGREEMENTS BY OCEAN COMMON

CARRIERS AND

OTHER PERSONS SUBJECT TO THE SHIPPING ACT OF 1984

NON SUBSTANTIVE AGREEMENTS EXEMPTION

February 13 1985

Correction of Final Rule

This amends the Commission s rule regarding the exemp

tion of non substantive agreements to clearly and consist

ently provide that the exemption applies both to new

agreements and modifications to existing agreements The

amendment corrects an inadvertent incongruity in the

earlier rule and conforms the rule in all respects to

the earlier expressed intention of the Commission

DATE February 13 1985

SUPPLEMENTARY INFORMATION

The Commission s final rule in this proceeding 27 F M C 430 in

section 57230 Non substantive agreements and non substantive modifica

tions to existing agreements exemption defines non substantive agreements

and modifications and provides an exemption for them The supplementary

information to that rule indicates that in response to comments on the

Interim Rule the Commission had determined to clarify and enlarge the

reach of the exemption so that it would coincide with the exemption pre

viously in effect at 46 CFR 524 3 and 524 4 To accomplish this it was

necessary inter alia to provide for application of the exemption to new

non substantive agreements as well as modifications to non substantive

agreements The Interim Rule s application had been limited to modifica

tions This intention to clarify and enlarge the reach of the exemption

was carried out only partially In the Final Rule appropriate references

were added in the section heading and in paragraph a of section 57230

which defines a non substantive agreement or modification However a

similar reference was inadvertently omitted from paragraph b of the section

which states the parameters of the exemption The Commission hereby

is correcting the incongruity in the rule created by this inadvertence

Additionally paragraph b also inadvertently failed to include a reference

to the Act when describing the parameters of the exemption This omis

sion also is corrected by this document This conforms the language of

ACTION

SUMMARY

592 27 F M C
NON SUBSTANTIVE AGREEMENTS EXEMPTION 593

this exemption to the language of sections 572304 572 305 and 572 306

of this part regarding other exemptions

The Federal Maritime Commission has determined that this rule is not

a major rule as defined in Executive Order 12291 dated February 17

1981 because it will not result in

1 an annual effect on the economy of 100 million or more

2 a major increase in costs or prices for consumers individual industries

Federal State or local government agencies or geographic regions or

3 significant adverse effect on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies that this

rule will not have a significant economic impact on a substantial number

of small entities including small businesses small organizational units or

small governmental jurisdictions

The Commission finds that good cause exists for dispensing with the

prior notice opportunity for comment and deferred effective date require

ments of 5 U S C 553 in that this amendment imposes no new substantive

requirements but merely corrects an incongruity in the Final Rule and

conforms the rule in full to the extent expressed by the Commission in

its Final Rule

List of Subjects in 46 CFR Part 572

Antitrust Contracts Maritime carriers Administrative practice and proce

dure Rates and fares Reporting and recordkeeping requirements

Therefore pursuant to 5 U S C 553 and Sections 16 and 17 of the

Shipping Act of 1984 46 U S c app 1715 and 1716 paragraph b

of section 57230 of Title 46 CFR is revised to read as follows

57230 Non substantive agreements and non substantive modifications

to existing agreements exemption

b A copy of the non substantive agreement or modification shall be

submitted for information purposes in the proper format but is otherwise

exempt from the Information Form notice and waiting period requirements

of the Act and of this part

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
ACTION

SUMMARY

FEDERAL MARITIME COMMISSION

46 CPR PART 572

DOCKET NO 8437

APPLICATION OF THE SHIPPING ACT OF 1984

TO CERTAIN TRANSSHIPMENT AGREEMENTS

February 13 1985

Final rule

This rule sets forth the approach the Commission will

take under the Shipping Act of 1984 with regard to

transshipment agreements where one party to the agree

ment provides a service in the domestic offshore com

merce of the United States and the other party provides

a service in the foreign commerce of the United States

The Shipping Act of 1984 does not provide for the

regulation of common carriers by water operating exclu

sively in the domestic offshore trades However when

the movement of cargo in a domestic trade is part of

a through movement of cargo via transshipment involv

ing the foreign commerce of the United States the entire

arrangement will be considered to be in the foreign com

merce of the United States and therefore subject only

to the Shipping Act of 1984

EFFECTIVE

DATE March 21 1985

SUPPLEMENTARY INFORMATION

The proposed rule in this proceeding was published in the Federal Reg

ister on December 14 1984 49 FR 48764 with comments due on January

28 1985 The availability of the finding of no significant impact on the

quality of the human environment was published in the Federal Register

on January 24 1985 50 FR 3369

In order to clarify the question of jurisdiction the proposed rule indicated

that the Commission would interpret the Shipping Act of 1984 46 U S C

app 1701 1720 to apply to all agreements involving domestic offshore

movements when such movement is part of a continuous through movement

of cargo via transshipment involving the foreign commerce of the United

States

The Atlantic and Gulf West Coast of South America Conference the

West Coast of South America Northbound Conference and the United

States Atlantic and Gulf Colombia Conference collectively filed the only

594 27 F M C
APPLICATION OF THE SHIPPING ACT OF 1984 TO CERTAIN 595

TRANSSHIPMENT AGREEMENTS

comment which indicated that the conferences fully support the rule and

urge the Commission to adopt the rule as proposed

Accordingly the proposed rule is adopted as final without change

The Commission has determined that this rule is not a major rule

as defined in Executive Order 12291 dated February 17 1981 because

it will not result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with Foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies pursuant

to section 605 b of the Regulatory Flexibility Act 5 U S c 601 et seq

that this rule will not have a significant economic impact on a substantial

number of small entities including small businesses small organizational

units and small governmental jurisdictions

List of Subjects in 46 CPR Part 572

Antitrust Contracts Maritime carriers Administrative practice and proce

dure Rates and fares Reporting and recordkeeping requirements

Therefore pursuant to 5 U S C 553 and sections 16 and 17 of the

Shipping Act of 1984 46 U S c app 1715 and 1716 the Commission

hereby amends Part 572 of Title 46 of the Code of Federal Regulations

as follows

I The Authority Citation for Part 572 is revised to read as follows

AUTHORITY 5 U S C 553 46 U S C 1701 1707 1709 1710 1712

and 17141717

2 572 104 is amended by adding the following language at the end

ofparagraph ff to read

572 104 Definitions

ff Transshipment Agreement

An agreement which involves the movement of cargo in a domestic

offshore trade as part of a through movement of cargo via transshipment

involving the foreign commerce of the United States shall be considered

to be in the foreign commerce of the United States and therefore subject

to the Shipping Act of 1984 and the rules of this part

By the Commission

S FRANCIS C HURNEY

Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 36

JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE

VIOLATION OF SECTION 44A SHIPPING ACT 1916

NOTICE

FEBRUARY 21 1985

Notice is given that no exceptions were filed to the January 14 1985

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

In the appearances for respondent on the first page of the initial decision

Anthony G Luongo should read Arthur G Luongo

8 FRANCIS C HURNEY

Secretary

596 27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 36

JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE

VIOLATION OF SECTION 44A SHIPPING ACT 1916

Respondent found to have been carrying on the business of forwarding without a license

Cease and desist order issued Assessment of penalty found unwarranted

Meyer M Brilliant and Anthony G Luongo for respondent Jorge Reynoso Import

Export Co

JohnRobert Ewers and Janet F Katz as Hearing Counsel

INITIAL DECISION t OF SEYMOUR GLANZER ADMINISTRATIVE

LAW JUDGE

Finalized February 21 1985

This proceeding was instituted by Order of Investigation and Hearing

Order served August 24 1983 The Order was issued pursuant to sections

22 32 and 44 of the Shipping Act 1916 46 U S C 821 831 and 841 b

to detennine whether Jorge Reynoso Import and Export Co a Florida

corporation had violated section 44 a of the Shipping Act 1916 46 U S C

841b a

by carrying on the business of freight forwarding without a license

The Order required that the following specific issues be detennined

1 Whether Jorge Reynoso Import and Export Co violated section

44 a of the Shipping Act 1916 46 U S C 841b by carrying

on the business of forwarding without a license issued by the

Commission and

2 Whether a civil penalty should be assessed against Jorge

Reynoso Import and Export Co pursuant to section 32 of the

Shipping Act 1916 46 U S C 831 for violation of section 44 a

of the Shipping Act 1916 and if so the amount of penalty

which should be imposed and

3 Whether the Commission should order Jorge Reynoso Import

and Export Co to cease and desist from carrying on the business

of forwarding without a license obtained pursuant to section 44

of the Shipping Act 1916

The Order named Jorge Reynoso Import and Export Co as the respondent

and named Hearing Counsel as a party in the proceeding

Pursuant to order issued August 31 1983 on September 16 1983

Hearing Counsel provided respondent with a statement setting forth the

I This decision will become the decision of the Commission inthe absence of review thereof by the Com

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

27 F M C 597
598 FEDERAL MARITIME COMMISSION

facts they intended to introduce at the hearing a list of and copies of

all exhibits they intended to introduce in evidence the names and a brief

description of the witnesses they intended to call to testify and a statement

of the relevant law in the case

Thereafter also pursuant to the August 31st order Hearing Counsel

moved for a stay to permit them to conduct and conclude settlement negotia

tions with the respondent The respondent joined in the motion which

was granted on October 11 1983 2 On January 6 1984 Hearing Counsel

submitted a proposed settlement accompanied by their memorandum and

other material in support of the settlement

By Interim Order With Respect to Proposed Settlement served February

16 1984 I indicated my concern that the dollar amount of the proposed

settlement was excessive The settlement was for S OOOthe maximum

penalty permitted to be assessed in a formal proceeding under sections

22 and 32 of the Shipping Act 1916 for a violation of section 44 of

that Act

It is sufficient to note the following matters touched on in the Interim

Order I was perturbed because Hearing Counsels memorandum advised

in effect that among the matters they considered in evaluating a settlement

were mitigating factors and while the memorandum demonstrated that some

mitigating factors were present in the case Hearing Counsel seemed to

have given no weight to those factors in the settlement Yet I did

not reject the settlement outright Instead I suggested that the two parties

reenter negotiations leading to a settlement which either reflected the matters

in mitigation or explained why the maximum penalty provided by law

should be approved

In response to the Interim Order Hearing Counsel submitted a supple

mental memorandum in support of the proposed settlement contending it

still believed the settlement to be reasonable although they acknowledged

that the settlement had become unsettled For respondent s part its coun

sel submitted a memorandum focusing on mitigation and maintaining that

the settlement was based upon a fear that the cost of litigation would

exceed the amount of penalty which could be imposed

Because negotiations had come to a standstill and the issues were still

unresolved a hearing was ordered to be held on June 19 1984 In advance

of the hearing the parties entered into a stipulation sufficient to support

a conclusion that the respondent was engaged in the business of freight

forwarding without a license 3 Thus the sole issue left for determination

at the hearing was the amount of the penalty to be assessed

2

Procedural Schedule Stayed served October 12 1983 Later on November 3 1983 the schedule was

modified and after a status report and motion for a further procedural schedule was filed it was ordered

that the proposed selllement and accompanying materials and memoranda be submilled by January 6 1984

3

Respondent s reply brief filed after thehearing admilled that it had previously stipulated it has violated

section 44a ofthe Shipping Act 1916 Reply brief p2

27 F M C
27 F M C

JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 599

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

After a one day hearing in West Palm Beach Florida Hearing Counsel

filed an opening brief and respondent filed a

reply brief

SOME PERTINENT STATUTES AND REGULATIONS

The unnumbered section preceding section 2 of the Shipping Act 1916

46 US c 802 46 U S c 801 contains the following definitions

The term carrying on the business of forwarding means the

dispatching of shipments by any person on behalf of others by

oceangoing common carriers in commerce from the United States

its Territories or possessions to foreign countries or between

the United States and its Territories or possessions or between

such Territories and possessions and handling the formalities inci

dent to such shipments

The term independent ocean freight forwarder means a

per

son that is carrying on the business of forwarding for a consider

ation who is not a shipper consignee seller or purchaser of

shipments to foreign countries

An independent ocean freight forwarder is a person carrying

on the business of forwarding for a consideration who is not

a shipper or consignee or a seller or purchaser of shipments

to foreign countries nor has any beneficial interest therein nor

directly or indirectly controls or is controlled by such shipper

or consignee or by any person having such a beneficial interest

Sec 1608 c of Public Law 97 35 approved August 13 1981

provides that the previous definition shall remain in effect until

December 31 1983 after which time this definition shall apply

In addition Sec 1608 c provides By June 1 1983 the Federal

Maritime Commission shall submit a report to Congress evaluating

the enforceability of this section and describing any reasons why

this section should not be made permanent law

Section 44 of the Shipping Act 1916 provides

a No person shall engage in carrying on the business of

forwarding as defined in this Act unless such person holds a

license issued by the Federal Maritime Commission to engage

in such business Provided however That a person whose primary

business is the sale of merchandise may dispatch shipments of

such merchandise without a license

e A common carrier by water may compensate a person carry

ing on the business of forwarding to the extent of the value

rendered such carrier in connection with any shipment dispatched

on behalf of others when and only when such person is licensed

hereunder and has performed with respect to such shipment the
600 FEDERAL MARITIME COMMISSION

solicitation and securing of the cargo for the ship or the booking

of or otherwise arranging for space for such cargo and at least

two ofthe following services

1 The coordination of the movement of the cargo to ship

side

2 The preparation and processing of the ocean bill oflading

3 The preparation and processing of dock receipts or deliv

ery orders

4 The preparation and processing of consular documents

or export declarations

5 The payment ofthe ocean freight charges on such ship

ments

The Commission regulations governing independent ocean freight for

warders 46 CFR Part 510 contain the following definitions of terms at

510 2

i

i

f Freight forwarder is anyone who performs or holds itself

out to perform the dispatching of a shipment of cargo for another

by rendering anyone or more of the services enumerated in

51O 2h ofthis part

g Freight forwarding fee means charges billed by a freight

forwarder to a shipper consignee seller purchaser or any agent

thereof for the performance of freight forwarding services as spec

ified in 51O 2h ofthis part

h Freight forwarding services refers to the dispatching of

shipments on behalf of others in order to facilitate shipment

by an oceangoing common carrier which may include but is

not limited to the following

1 Ordering cargo to port

2 Preparing andor processing export declarations

3 Booking arranging for or confuming cargo space

4 Preparing or processing delivery orders or dock receipts

5 Preparing andor processing ocean bills of lading

6 Preparing or processing consular documents or arranging

for their certification

7 Arranging for warehouse storage

8 Arranging for cargo insurance

9 Clearing shipments in accordance with United States Gov

ernment export regulations

10 Preparing andor sending advance notifications of ship

ments or other documents to banks shippers or consignees

as required

11 Handling freight or other monies advanced by shippers

or remitting or advancing freight or other monies or credit

in connection with the dispatching ofshipments

12 Coordinating the movement of shipments for origin to

vessel and

27 F M C
17 PMr

JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 601

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

13 Giving expert advice to exporters concerning letters of

credit other documents licenses or inspections or on problems

germane to the cargos dispatch

FACTS

CHAPTER I

JORGE REYNOSO IMPORT AND EXPORT CO

In which the reader may fmd a brief description of the notorious respondent and its officers

and how the respondent came to provide succor to its correspondent in a

faraway island

The respondent s name indicates that it is both an importer and exporter

In fact it is engaged in business almost exclusively as an exporter of

goods from Miami Florida to an island off the coast of Colombia The

island is San Andres and it is the only free port in Colombia

Jorge Reynoso is the president and his wife Edith is the vice president

of the corporation which has its place of business in Miami Mr Reynoso

does not speak English 4 Mrs Reynoso who testified at the hearing does

speak English

The Reynosos have three children of their own plus nine others of

Mr Reynoso s former marriage Four of the nine are emancipated The

eight dependent children attend parochial schools or universities which

charge tuition

As a small business the respondent files a Form 1120S 5

for its annual

federal income tax return According to its 1983 federal return prepared

shortly before the hearing the respondent had ordinary income of only

16 350 The income was divided amongst inventory on the shelf and

cash on hand at the end of the year Although both Reynosos devote

full time to the respondent neither drew any salary in 1983 In order

to live they borrowed 38 727 from corporate assets In addition to current

and short term liabilities of about 30 000 6 the corporation owes 50 000

pursuant to a putative commitment made by Mr Reynoso in connection

with an investment in a river terminal 7

The respondent was incorporated in June 1979 Although the facts are

not entirely clear its entry into freight forwarding seems to have occurred

accidentally in 1981 It came about this way One of the persons the

respondent did business with in San Andres became the agent for Hoover

and Company in Colombia The agent a Mr Basmagi began to encounter

some problems with Hoover shipments from Miami Presumably because

the respondent had gained a familiarity with processing shipments from

Miami to San Andres Mr Basmagi asked the Reynosos to supervise the

4

At the hearing an interpreter was provided for Mr Reynoso

U S Income Tax Return foran S Corporation

6Not including about 23 000 inaccounts payable

7

The circumstances surrounding this investment and debt were not clear to Mrs Reynoso It is clear how

ever that the terminal is neither an asset nor a revenue producing property of the respondent
602 FEDERAL MARITIME COMMISSION

shipments and the documentation for him The same thing seems to have

happened with Swift s customers in San Andres All the services provided

by the respondent whether the cargo got to Miami in good condition

whether the pallets were unbroken whether the cargo was in order whether

the documentation was prepared timely so that the consignors would be

paid timely from letters of credit were provided for the consignees and

were paid for by them 8

Since January 1984 because the Colombian government then placed

severe restrictions on importation of goods the business of respondent

has been brought to an all time low Whereas in the first six months

of 1983 respondent exported about 200 to 250 shipments to San Andres

during that same period in 1984 it exported only about ten shipments

CHAPTER II

MARCH 1981 THE VISITOR

1

In which the respondent learns that the comfort given Mr Basmagi and other correspondents

causes it to be accused of giving the appearance of an unlicensed freight forwarder

One day in March 1981 two of the Federal Maritime Commission s

investigators arrived at the premises of the respondent They went there

because one of them 9 came across the respondent s name as forwarding

agent on a bill of lading he saw at another place of business a fact

which sort of indicated that the company might be acting as a forwarding

agent 10

The investigator identified himself to Mrs Reynoso Mr Reynoso was

not in and told her that the reason he was visiting was to look

through their shipping files to determine whether or not they were or

were not engaged in unlicensed forwarding 11

I didn t have anything to hide from him Mrs Reynoso recalled

during her testimony 12 She did not think of the respondent as being engaged

in the freight forwarding business and with a clear conscience and spirit

of cooperation Ishowed him many all my papers

13

After examining twelve to fifteen files the investigator informed Mrs

Reynoso that several of the shipping files gave her company the appear

ance of having participated in unlicensed freight forwarding 14 Mrs

Reynoso disagreed It was her understanding that a freight forwarder is

an agent who is paid a commission by a steamship company and the

8On a few occasions the consignor was billed for services or for ocean freight by the respondent but

this occurred only because of peculiarities or deficiencies in the consignee s lellers of credit incident to a

particular transaction

The other investigator seems to have played no further role in theevents which followed

IOTr 14

d

12 Tr 62

13 d

I Tr 15

71 Ml
JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 603

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

respondent had never been paid any fees by a steamship company on

our shipments IS

The record of trial evidences nothing to show that the investigator at

tempted to disabuse Mrs Reynoso of her notion about payments from

steamship companies being the sine qua non for freight forwarding Never

theless pressed for an explanation why it was his opinion that the respond

ent appeared to be an unlicensed freight forwarder the investigator

replied that for some shipments the company prepared the bills of lading

and that their invoices to the customers were invoices that had charges

similar to those that were put on invoices by ocean freight forwarders

to their customers 16 Essentially all that the investigator imparted to

Mrs Reynoso was that these documents indicate to me that you are

engaged in freight forwarding 17 He did not explain what it was about

respondent s activities that section 44 of the Shipping Act and the Commis

sion s

regulations governing freight forwarding 46 CPR Part 510 frowned

upon Here is what the investigator said he did not say to Mrs Reynoso

in March 1981 after listening to a colloquy with Hearing Counsel concern

ing the elements of freight forwarding activity 18

Q You didn t explain to her what it was in specific detail

that the statutes or the regulations frowned upon

A No If I can recall exactly what I said to her I would

tell you

Q But you don t recall spelling out the details of what con

stituted freight forwarding

A Not to the extent that Idid on the second visit

Tr 123

The investigator left the premises without telling Mrs Reynoso to stop

the activities he said gave the appearance of being or appeared to

be unlicensed freight forwarding He did say the activities should not

be continued without a license 19 But he did not say unequivocally

that the respondent was in violation of law 2o

ISTr 55

16Hearing Counsel s PFF proposed finding of fact No 8 would have me fmd that in March 1981 the

investigator explained that one of the reasons it appeared that respondent was engaged in freight forward

ing was that respondent paid ocean freight I

am unable to make that finding In response to aquestion

of what explanation he made the investigator said and as I recall I

am not sure at this time on those

particular shipments whether they paid the ocean freight on any of them I believe they did pay the ocean

freight on some of them Tr 25 26 The investigator s uncertain recollection is what controls The fact

that he believes that ocean freight was paid on some of them adds nothing because among the files

he examined at that time were those relating to shipments of goods in which the respondent had afinancial

interest

I7Tr 121 123

18Tr 115 121

19Tr 2425 4950 127 128

20At first blush these may appear to be trivial semantic distinctions However they were not at least

in the mind of the investigator who seemed to be guided in his choice of words by asincere belief that

he was following clearly defmed investigative procedures as will be seen infra Moreover as a witness

Continued

27 F M C
604 FEDERAL MARITIME COMMISSION

There was a bemused ending to the visit When he left the investigator

thought that Mrs Reynoso understood what he was telling her 21 But

he knew when he left that she thought she was not a freight forwarder 22

She did not think the respondent was a freight forwarder or was in violation

of law She had not been told that respondent was in violation of law

The investigator told her apparently at the end of the visit that he would

come back Consequently in the context of all that was said and discussed

during the visit when there was no follow up contact she thought the

business had passed government inspection 23

CHAPTER III

MARCH 1981 THE VISIT

In which the reader discovers that the visitor was not conducting an investigation during

his visit Or when an investigation is not an investigation until it becomes an investiga

tion

As noted n 20 supra the explanation of why the investigator employed

vague euphemisims in lieu of straight talk in his conversation with Mrs

Reynoso may be found in his understanding of outstanding investigative

procedures

Although the picture that emerges to reveal those investigative procedures

is not exactly lucid it does provide some insight Those procedures seem

to work this way According to the investigator there is no procedure

at the beginning of an investigation whereby people are warned

in any way in writing that some of their activities might constitute violations

of law 24 The way we notify them is by telling them face to face at

the time of the investigation 25 Having heard this explanation the reader

might conclude that the investigator meant that the March 1981 visit was

the investigator parried repeated questions asking if he told Mrs Reynoso to stop by replying with vari

ations of the theme that she should not continue The investigator knew full well the distinction between

the stem admonition stop and the more permissive not continue E g on the second visit infra he

told her to stop and on the second visit he discarded the word appear in favor of an affumative state

ment that the company s activities constituted unlicensed freight forwarding There is no evidence that on

the second visit the investigator uncovered any data different that he found on the first visit to warrant the

difference in terminology In this respect were the consequences nOl so serious the investigator s

partial re

sponse to questioning asking him why he used the term appeared to be in violation rather than saying

that the respondent was in violation might be regarded as humorous He said I

am not going to make

adetermination I am not the Judge Iam just there to get the facts Tr 24 Yet as seen with no

more facts to go on than he obtained on his f11 St visit on his second visit he did make that determination

and didsay that the respondent was inviolation

21Tr 26

22Tr 33

23Tr 62 According to Mrs Reynoso he said Okay We will have to make areport so we will contact

you and wewill come back When asked on cross examination ifhe said why he would contacther again

she replied He said if they had other questions something like that that I couldn t repeat exactly

the way he told me but something like meaning If they wanted more information they would come back

to ouroffice and get more information from us orpape from us Tr 100 See also Tr 128

24Tr 30

25Tr 31

27 F M C
JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 605

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

the beginning of the investigation of the respondent That would be a

mistake on the part of the reader While it surely was the commencement

of the investigation it was not the commencement of the formal investiga

tion The formal or official investigation was not opened until the

investigator requested that it be opened 26 Applying those definitions to

the March 1981 visit the plain meaning of the investigator s testimony

is that it was the beginning of the investigation but not a formal

investigation therefore the respondent could not be warned face to face

that it was in violation That warning would have to await the official

investigation

Inasmuch as there already have been some references to a second visit

during which Mrs Reynoso was given face to face warning that the

respondent was in violation of law it will come as no surprise that the

investigator requested that his District Director open a formal investiga

tion and that the request was granted

Jumping out of sequence for a bit it must be observed that the second

visit did not take place until sometime in January 1983some twenty

two months later One then might reason that the formal investigation

was not requested or granted until sometime in the late fall of 1982 or

the winter of 1982 1983 That would be a faulty conclusion for as the

investigator testified An investigation was formally opened at the time

that I requested it be opened immediately after my first visit 27 More

precisely the formal investigation was opened almost simultaneously

with the first visit in March of 1981 28

CHAPTER IV

JANUARY 1983 THE VISITOR RETURNS

In which there is an investigation that is an investigation for real Or the respondent is

informed that it has run afoul of the law and must refrain from any further freight

forwarding

Sometime in January 1983 the investigator revisited the respondent s

premises He again spoke to Mrs Reynoso and asked for her files Again

she cooperated by giving him access to all the information he wanted

After he examined the documents he told her that the respondent was

in violation of the Shipping Act because it was engaged in unlicensed

freight forwarding 29 and it must stop Although Mrs Reynoso even then

retained the impression that freight forwarding meant receiving compensation

20ld To unravel the complexities of the investigation procedures which the text attempts to simplify see

Tr 2425 27 29 3033

27Tr 31

28Tr 29

2911 was at some point during this conversation that he frrst explained in detail why the respondent was

afreight forwarder in connection withSwift and Hoover shipments Tr 123 supra

27 F M C
606 FEDERAL MARITIME COMMISSION

from an ocean carrier she obeyed the investigator s command and thence

forth the respondent ceased handling the Hoover and Swift shipments

A stipulation entered into by respondent s counsel and Hearing Counsepo

agrees that the documents examined by the investigator disclose that the

respondent engaged in freight forwarding transactions in connection with

forty six shipments made by Swift and Hoover during the period from

February 2 1981 through December 28 1982 inclusive N b however

that in its post hearing brief Hearing Counsel reduced its claim to thirty

one instances of alleged violation Brief p

14 All of those thirty one ship

ments took place after the first visit

The stipulation 31 states that the respondent prepared the bills of lading

for all shipments 32 The stipulation states that respondent booked arranged

or confirmed space for the cargo for all shipments 33 The stipulation states

that the respondent did not have a financial interest in any of the ship

ments 34 The stipulation goes on to recite that for one or more of the

shipments the respondent prepared andor processed a Shipper s Export

Declaration prepared or sent advance notifications of shipments or other

documents to banks shippers or consignees advanced monies for ocean

freight to the carrier advanced monies for inland freight prepared consumer

documents handled letters of credit

The problem with the foregoing portions of the stipulation giving effect

to the material contained in the marginal notes to the preceding paragraph s

text is that because of the lack of specificity and the possible combinations

and permutations there is no way of telling for certain for which of

the remaining thirty one shipments the respondent was a freight forwarder

To some extent this is remedied by other parts of the stipulation which

show that for a particular shipment the respondent performed a particular

combination of services 3 Nevertheless despite the lack of clarity it is

fair to say that in connection with enough of the shipments enumerated

in the stipulation there was a sufficient showing of freight forwarding

activity to permit me to find that the respondent was carrying on the

business of a freight forwarder I find as well that the respondent did

30Ex 1

3

Par 5

32ln fact the respondent did not do so forall shipments See e g Tr 89

33 In fact the respondent did nol do so for all shipments See e

g Tr 8990

34ln fact it may have had such interest See e

g

Tr 5960 Perhaps this is agood atime as any to

quote passages which appeared in respondent s counsel s Memorandum Reflecting Matters in Mitigation in

response to the lnterim Order At p I counsel wrote

The Settlement dated January 5 1984 entered into between the Respondent and Hearing Counsel

was based upon the fact that the expense and inconvenience of an evidentiary hearing would

exceed the amount of the penalty imposed and as a practical matter and because of the economic

status of the Respondent it was more feasible to enter into the Settlement Agreement

We discussed the matters set forth in the interim Order but could not reach any decision

in mitigation of the penalty Hearing Counsel s stubbornness was matched only by the splendid co

operation advice and help she has rendered to me in all these proceedings for which I am sincerely

grateful

35 See e

g

Ex 2 par 53

27 F M C
JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 607

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

not hold a license issued by the Federal Maritime Commission and in

effect during the period from February 2 1981 through December 28

1982 inclusive authorizing it to carry on the business of freight forwarding

CHAPTER V

FINIS

In which a visit of another kind is recounted and the reader may wish to reflect on

whether the tale that is told in these five chapters is a detective story a courtroom

drama an human drama a comedy of errors or an horror story

On February 26 1984 respondent s office was burglarized Over 32 000

in cash was removed by a person or persons unknown 36 The money

did not belong to respondent It was entrusted to Mr Reynoso by four

of respondent s customers and was to be paid to others or to be deposited

in accordance with the customers instructions The loss was not covered

by respondent s insurance Respondent feIt the loss was its responsibility

and a debt of honor so it borrowed against its own line of credit to

repay the monies 37

All in all the respondent s current economic situation is so bad that

it is seeking for different business now in order to continue 38

DISCUSSION AND CONCLUSION

I

Except as explicitly or impliedly adopted in the preliminary statement

and Facts supra or in this Discussion and Conclusion Hearing Counsels

proposed findings of fact including statements tantamount to proposed find

ings in their argument in brief 39 are rejected for reasons of inaccuracy

irrelevancy or immateriality

36 SeeEx 4 A Dade County Florida Police Incident Report

37 Tr 6972

38 Tr 72

39 E g

in its Brief at p13 Hearing Counsel writes Mrs Reynoso admitted that the only difference

between the activity of respondent and afreight forwarder was that respondent did not receive compensa

tion from a carrier PFF 76 There is no PFF 76 Obviously PFF 75 was meant to be cited PFF 75

reads

Mrs Reynoso believes that because respondent did not receive compensation from asteamship

company it was not a forwarder but that was the only difference between respondent and a

freight

forwarder concerning the shipments in Hearing Exhibit 2 Tr 97

I agree with everything in that sentence which precedes the word but and I have so found However

the rest of the sentence is lacking in record support anywhere in the exhibits or transcript let alone Tr 97

Moreover to the extent that the sentence implies that Mrs Reynoso believed that this was the only difference

between respondent s handling of the Swift and Hoover shipments and what a freight forwarder does this

too is not sustained by the record Although Mrs Reynoso was obviously wrong in her belief that the re

spondent was not a forwarder because it did not receive compensation from acarrier the fact of her mis

conception is credible She was not given copies of the statutes or regulations pertaining to freight forwarding

Although section 44a prohibits carrying on the business of forwarding section 44 does not itself define

the characteristics of the business One must go to the definitions section of the Shipping Act to learn those

Continued

27 F M C
608 FEDERAL MARITIME COMMISSION

II

The Respondent was engaged in clllTying on the business of freight forwarding without

a license in violation of section 44 of the Shipping Act 1916

It is admitted that the respondent was engaged in the freight forwarding

business without a license in violation of section 44a of the Shipping

Act 1916 40 Absent that admission and even if the respondent did not

forward every one of the thirty one shipments the respondent s overall

handling of the Swift and Hoover accounts fits the statutory and regulatory

definitions of freight forwarding In order to facilitate oceangoing carrier

transportation of cargo for a sufficient number of those shipments the

respondent did perform that wide range of services involving handling

and dispatching of cargo which are components of freight forwarding serv

ices within the meaning of 46 CFR 51O 2b

Docket No 805 Dynamic

International Freight Forwarder Inc Independent Ocean Freight For

warder License Application and Possible Violation of Section 44 Shipping

Act 1916 Report and Order Partially Adopting Initial Decision 23 F M C

537

This conclusion implies no mens rea on the part of the respondent

for indeed none has been established However the statute does not require

a guilty intent for a finding concerning the legality of respondent s conduct

All that is necessary is a showing that the respondent has done what

the law proscribes This was decided long ago in Bullen v Wisconsin

240 U S 625 1916 where Mr Justice Holmes wrote at 6301 41

We do not speak of evasion because when the law draws a

line a case is on one side of it or the other and if on the

safe side is none the worse legally that a party has availed himself

to the full of what the law permits When an act is condemned

as an evasion what is meant is that it is on the wrong side

of the line indicated by the policy if not by the mere letter

of the law

III

Cease and Desist Order

Inasmuch as the respondent urges that a cease and desist order against

future violations be issued 42 one will be entered 43

charac teristics and then go to the regulations in 46 CPR S10 2 fora clearer undentanding On the other hand

a pan of section 44 subparagraph e does explain aspects of freight forwarding in terms of eotnpensation

from cwen

40 See n 2 supra

41 See also InterS ale Commerce Commission v AM Car Drivers Exchange Inc 340 F 2d 820 826

2Cir 1965

42 Respondent s Reply Brief p

4

43 A cease and desist order is a

remedy traditionally fashioned to discontinue ongoing violations or to

forestall future violations Windjameer Cruises

Inc

19 F M C 112 123 1976 Here as seen the viola

tions were voluntarily discontinued as of the second visit inJanuary 1983 and there is no evidence to indicate

27 F M C
JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 609

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

IV

No monetary penalty is warranted

Hearing Counsel relentlessly continues to pursue the imposition of the

maximum penalty permitted by law although the evidence cries out for

no penalty at all Their reasons may be paraphrased this way The respond

ent engaged in the business of freight forwarding after March 1981 and

because the respondent previously agreed to settle for 5 000 it is only

reasonable to assess that amount as the penalty

The underpinning of Hearing Counsel s argument is what they call the

warning of March 1981 Their argument concerning the warning in

its entirety 44 is shown below

More importantly some 31 shipments occurred after a visit from

a Commission investigator who told an officer of the respondent

that its activities could be considered forwarding The respondent

did not stop forwarding or even question the possibility of a

violation The Commission has held that

Once Commission warnings not to engage in ocean freight for

warding have been clearly disseminated to a

respondent so that

a reasonable man would understand them or lacking such under

standing would undertake to inquire as to matters he did sic

not understand the subsequent act of engaging in freight for

warding without a license in sic not a technical violation

and will not be excused because of alleged lack of willfulness

ignorance lack ofharm or other similar factors

Air Compak lnclndependent Ocean Freight Forwarder License

Application Docket No 79 98 Initial Decision served August

5 1980 23 F MC 22445 Mrs Reynoso knew enough to realize

that there was a problem with the respondent s activities since

she disputed the investigator s conclusions about possible unlaw

ful freight forwarding during his first visit The respondent can

a likelihood of resumption However it is appropriate to enter acease and desist order when requested by

a

respondent as part of the disposition of a

proceeding

44 Brief p

14

The Initial Decision in that case hereafter AirlCompak is published at 20 SRR 263 23 F M C 224

It was adopted by the Commission on September 10 1980 I do not understand why Hearing Counsel failed

to provide the SRR citation in their brief My curiosity is whetted by the fact that Hearing Counsel seem

to be quoting from the SRR headnote rather than the decision The equivalent language of the decision ap

pears at 20 SRR 268 as follows

The holding in this case stands for the proposition that once Commission warnings not to engage

in ocean freight forwarding have been clearly disseminated to a

respondent so that areasonable

man would either understand them or lacking such understanding would undertake to inquire as

to matters he does not understand the subsequent act of engaging in freight forwarding without

alicense is not a technical violation and will not be excused because of alleged lack of willful

ness ignorance lack of harm orother similar factors

My inquiry does not end there As will be seen later Hearing Counsel chose not to include in its selection

a significant sentence of the paragraph from which they quoted beginning after the words similar fac

tors

27 F M C
610 FEDERAL MARITIME COMMISSION

not now claim that it was not warned or did not understand

the warning

Hearing Counsel recognize that the respondent was cooperative

in providing documents for the investigator to examine This

does not offset the effect of the warning nor did the investigator s

inspection constitute approval of the respondent s activities as

Mrs Reynoso claimed References to PFF omitted

Where Hearing Counsel go astray is on the facts and the law The

facts they rely upon find no support in the record and the legal rationale

upon which they rely while otherwise valid is inapposite to the facts

In the first place with respect to the facts it must be manifest

by now that the investigator s admittedly vague and non specific remarks

in March I98I hardly qualify as a warning of any kind let alone a

clear warning 46 Second the statement that the respondent did not

even question the possibility of a violation standing alone boggles the

mind In juxtaposition with the later statement that Mrs Reynoso

disputed the investigator s conclusions about possible unlawful freight for

warding during the first visit Hearing Counsel s earlier statement leaves

one breathless Third Hearing Counsel seem to lay at respondent s door

alone the claim that it was not warned or that it did not understand

the warning Plainly and simply it was the investigator who bore witness

that he did not clearly and affirmatively inform Mrs Reynoso that the

respondent was a freight forwarder and that she never did understand that

the respondent was a freight forwarder Fourth there is no claim that

the inspection constituted approval of the respondent s activities Rather

it was the investigator s failure to respond to Mrs Reynoso within a

decent interval after the inspection to resolve the questions that had

been raised that brought about the reasonable belief on her part that the

respondent had passed muster

Hearing Counsel s reliance on the rationale of Air Compak is misplaced

The facts of Air Compak are nowhere near akin to those in the instant

proceeding The facts are patently distinguishable a matter of no small

moment especially if one were to go on to read more of the Air Compak

holding than proffered by Hearing Counsel see n 45 supra where the

following is found

Further a civil penalty of at least 5 00047 is warranted in such

cases where there are no material distinguishing facts 20 SRR

268 23 F M C 231

46N b Hearing Counsels seeming recognition that the warnings were at best feeble by theirlukewarm

characterizations of those warnings a the investigator telling the respondent that its activities could be

considered freight forwarding and b the respondent disputed the investigator s conclusions about possible

unlawful freight forwarding Emphasis supplied

41 At the time AirlCompak was decided each forwarding transaction was treated as a

separate unit of of

fense carrying amaximum penalty of 5000

27 F M C
JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 611

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

The facts in Air Compak with respect to warnings may be summarized

as follows 1

Air Compak had filed an application for a freight forwarder s

license 2 one of the principals of Air Compak had about four years

experience working at the various activities engaged in by freight for

warders 3 on June 1 1978 a representative of the Commission s Office

of Freight Forwarders discussed the application with that principal telling

him that Air Compak was not permitted to engage in freight forwarding

without a license 4 one week later on June 7 1978 the Commission s

Chief Office of Freight Forwarders notified Air Compak in writing saying

that its application for a license had been received that the applicant s

attention was directed to section 44 of the Shipping Act 1916 which

prohibits freight forwarding without a license that Carrying on the busi

ness of forwarding is defined under Section 510 2 of the enclosed48 Gen

eral Order 4 and Section 1 Shipping Act 1916 49 that if Air Compak

engaged in freight forwarding prior to the issuance of a license it would

be subject to penalties provided by law 5 thereafter and notwithstanding

the clear warnings Air Compak engaged in forwarding activities 6 that

on December 18 1978 during an inspection a Commission investigator 50

discovered freight forwarding activity which occurred after the letter of

June 7 1978 and he informed Air Compak not to conduct such activity

without a license in the future and 7 on January 30 1979 Air Compak

was found out by another investigator to have engaged in yet more freight

forwarding activity after the December 18 1978 warning

It does not take the wisdom of a Solomon to recognize the contrast

between the clear and repeated cautioning of Air Compak and the tepid

euphemisms here

Finally with respect to warning it must be said that a situation

of the kind disclosed here which may be a worst case scenario is unlikely

to recur I take official notice of the Commission s Director of Programs

memorandum to Bureau Directors dated December 19 1983 The subject

of the memorandum is Interim Procedures for Handling Investigative Re

ports The following instructions concerning the need for written warnings

before instituting penalty procedures in certain kinds of cases of which

this is one may be found at page 6

Administrative Closing

Hearing Counsel may recommend discontinuance with reasons

of a referred matter by referring the matter to the substantive

bureau or Bureau of Investigations which shall prepare and trans

mit a warning or cautionary letter or a letter informing the subject

that the matter is closed Generally a warning letter should issue

for an insignificant violation especially one which occurred prior

to an official warning written notification or other non serious

48 Emphasis supplied

4

The unnumbered section preceding section 2 of theShipping Act 1916 is also called section I

OThe same person identified inn 9 supra

27 F M C
612 FEDERAL MARITIME COMMISSION

situations A number of other possible situations arise where a

warning letter may be appropriate 51

Presumably the warning letter to unlicensed persons believed to be en

gaged in forwarding sent pursuant to those Interim Procedures includes

copies of relevant portions of the statute and regulations governing forward

ing activities This would comport with what the facts in Air Compak

indicate to be standard practice for persons who apply for forwarding

licenses 52 Obviously if this detailed information is given to persons who

have extensive and intensive experience in forwarding can any less be

given those like respondent who are not well oriented

Unfortunately for respondent those Interim Procedures did not apply

to formal proc edings already instituted It is unfortunate too that Hearing

Counsel did not understand the worth ofthe Interim Procedures in evaluating

the mitigating factors present in this case Even more unfortunate is the

fact that after hearing the evidence showing that there was no effective

communication of a warning showing fewer forwarding transactions than

claimed during the settlement process and showing the deterioration of

the respondent s financial condition Hearing Counsel did not soften its

demands 53

I have already mentioned several factors bearing on mitigation e g

respondent s financial condition and the number of persons dependent upon

profits from the business There are others all of which confirm my prehear

ing impression that the settlement was unreasonable 54 But in view of

my determination that a monetary penalty is unwarranted because the re

spondent was not adequately forewarned and there is convincing evidence

51 EmphaSis supplied

52N b To be eligible for a license an applicant must demonstrate that its qualifying individual has a

minimum of three 3 years of experience in ocean freight forwarding in the United States 46 CPR

510 11 a4

53While it is not my intent to inb Ude into the settlement process except as I am required as forexample

when called upon to rule on a

proposed selllement and substitute my judgment for that of Hearing Counsel

I

am compelled to direct some remarks to Hearing Counsel s recommendation for a specific dollar amount

to be assessed by me Just as the amount of settlement of claims is Hearing Counsel s prerogative the func

tion of the imposition of a penalty is the province of the trier of the facts It is my preference that this

task be performed without prompting This does not mean of course that Hearing Counsel should not express

its general views based upon the record concerning the severity of an offense

54 Hearing Counsel contend that the 5000 penalty to be paid out over a period of three years under the

settlement agreemem was and continues to be reasonable They say that this penalty was based on consider

ations including ability to pay Brief p14 Whatever those other consideratlbns may have been the only

one which seems to have survived the hearing as a point of their argument is ability to pay However

one may search Hearing Counsel s proposed fmdings of fact in vain to uncover even a scintilla of evidence

indicating an ability to pay When the settlement was submilled for approval Hearing Counsel tendered

an affidavit prepared by a Commission accountant who said that he had examined the respondent s 1982

income tax returns and came to the conclusion that the respondent could pay 5000 but only if spread over

three years Hearing Counsel did not offer the 1982 return in evidence nordid it produce a witness to testify

on the subject of ability to pay My eValuaticln of the 1983 tax return and the testimonial evidence is

that the assessmem of any penalty would work a

hardship on the respondent and its officers

27 F M C
JORGE REYNOSO IMPORT AND EXPORT CO POSSIBLE 613

VIOLATION OF SECTION 44 A SHIPPING ACT 1916

that if properly informed the respondent would have stopped the unlawful

forwarding at once

55 it is unnecessary to belabor the mitigation issue

ORDER

The respondent Jorge Reynoso Import and Export Company having

been found to have violated section 44 a of the Shipping Act 1916

by carrying on the business of forwarding without a license issued by

the Federal Maritime Commission during the period from January 1982

through December 1982 is ordered to cease and desist and thereafter to

refrain from carrying on the business of forwarding unless and until such

time as there is issued to respondent and in effect a license authorizing

respondent to carry on the business of forwarding

The assessment of a

civil penalty having found to be unwarranted it

is further ordered that no assessment be imposed upon the respondent

S SEYMOUR GLANZER

Administrative Law Judge

55 In their argument Hearing Counsel write We have no evidence whether the respondent is acting as

a freight forwarder Brief pIS The short and simple rejoinder to that remark is that theevidence of record

shows that the respondent stopped forwarding activity after the second visit

27 F M C
FEDERAL MARITIME COMMMISSION

DOCKET NO 8

THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

v

NEW YORK SHIPPING ASSOCIATION ET AL

DOCKET NO 8 8

PUERTO RICO MARmME SHIPPING AUTHORITY AND PUERTO

RICO MARINE MANAGEMENT INC

v

NEW YORK SHIPPING ASSOCIATION

Initial Decision adopted with factual and legal clarifications and modification to remove

all excepted treatment fortranshippedrehandled cargo

Clarification made with respect to application of Maritime Labor Agreements Act and remedies

available to PRMSNPRMMI Agreement No LM 86 modified and schedule prescribed

for effectuating necessary modifications and assessment adjustments General procedure

established for phasing out of special treatment fortransshippedrehandled cargo

Appearances as below except forthe following additional appearances

Kevin Marrinan forIntervenor ILA

Edward J Sheppard forIntervenor Massachusetts Port Authority

REPORT AND ADOPTION WITH MODIFICAnONS OF INITIAL

DECISION

February 27 1985

By the Commission Alan Green Jr Chairman James J Carey Vice

Chairman Edward J Philbin Commissioner Thomas F Moakley Commis

sioner dissenting in part Robert Setrakian Commissioner concurring and

dissenting

These consolidated proceedings 1came before the Commission on Excep

tions to an Initial Decision ID of Administrative Law Judge Norman

D Kline Presiding Officer or AU by New York Shipping Association

NYSA and its members International Longshoremen s Association AFL

CIO ILA Puerto Rico Maritime Shipping Authority PRMSA and Puerto

I The complaints in Docket No 8 and Docket No 848 filed on February 22 1984 and February 27

1984 respectively were consolidated by the Presiding Officer for hearing and decision The complaint in

Docket No 848 was subsequently amended forpurposes of clarification on May IS 1984 10 S

614 27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 615

NEW YORK SHIPPING ASSOCIATION ET AL

Rico Marine Management Inc PRMMI the Port Authority of New York

and New Jersey Port Authority Sea Land Service Inc Sea Land a

member of NYSA appearing through separate counsel and also acting as

an intervenor in Docket No 848 Maryland Port Administration MPA

Massachusetts Port Authority Massport and Hearing Counsel The Presid

ing Officer found that the assessment formula used by NYSA and the

ILA to fund certain fringe benefits for longshoremen under Agreement

No LM 86 Agreement or LM 86 was unfair and unjustly discrimina

tory to PRMSAPRMMI and the Port Authority and directed that it be

modified and that prospective credits be granted PRMSAPRMMI for pay

ments under the present formula made between the time of the filing

of its complaint and the conclusion of these proceedings The Presiding

Officer denied certain modifications to the present formula requested by

PRMSAPRMMI interest on the credits made and reparations for assess

ments made between the formation of the agreement and the filing of

PRMSAPRMMI s complaint Replies to the exceptions were filed by all

of the aforementioned parties We heard oral argument on January 10

1985 Under the Maritime Labor Agreements Act of 1980 P L 96325

94 Stat 1021 1980 our final decision must be issued by February

27 1985 i

e within one year of the filing of the complaint

Before turning to our disposition of these proceedings we feel that

a brief discussion of the nature of LM 86 and the modifications found

necessary by the AU may be helpful

BACKGROUND

These proceedings involve the lawfulness under the Maritime Labor

Agreements Act of 1980 MLAA 2

of the whole tonnage assessment for

mula used by the NYSA and ILA to fund fringe benefits under Agreement

No LM 86 for the period from October 1 1983 to September 30 1986

Under this formula assessments are levied against carriers with certain

exceptions explained below with respect to each ton of cargo carried in

and out of the Port of New YorkNew Jersey The present rate of assessment

is 8 90 ton The benefits funded through the assessments include holidays

vacations welfare clinics pensions and Guaranteed Annual Income GAl

The two challenges to the Agreement were filed by the Port Authority

and PRMSA a carrier in the Puerto Rican trade operated by the Common

wealth of Puerto Rico and PRMMI its operating agent

The Port Authority essentially claims that LM 86 is unjustly discrimina

tory and unfair to the Port of New YorkNew Jersey because it places

an improper burden on the Port s ability to compete for cargo with other

2Under the MLAA assessment agreements become effective upon filing with the Commission subject

to subsequent modification ordisapproval and assessment adjustments upon afinding of unjustness or

unfair discrimination to shippers carriers or ports the original MLAA also contained detriment to com

merce as a disapproval standard but this standard was removed by the Shipping Act of 1984 Pub L No

98237 98 Stat 67 1984

27 F M C
616 FEDERAL MARITIME COMMISSION

North Atlantic ports PRMSNPRMMI claims unfairness and unjust discrimi

nation to it as a carrier and to the shippers of Puerto Rico Both the

Port Authority s case and that of PRMSNPRMMI are based on the alleged

unfairness of the present formula Specific challenges are made concerning

allegedly unlawful special privileges granted under that formula whereby

certain activities handling of empty containers stuffingstripping containers

and maintenance work at marine terminal facilities are unassessed and

certain other activities are assessed at an excepted or man hour rate

eg transshippedrehandled cargoes domestic trade cargoes

The Port Authority seeks modification of the present assessment formula

to fund most costs about two thirds on a man hour basis and the remainder

on a per container basis PRMSNPRMMI seeks modification of the formula

to allow most costs about two thirds to remain on a tonnage basis but

to assess the remainder on a man hour basis PRMSNPRMMI also seeks

an additional 25 reduction for cargo moving in the Puerto Rican trade

on the tonnage portion of the new assessment assessment adjustments

for the period from the filing of its complaint to date of Commission

decision plus interest on its adjustments and reparations from October

1 1983 the date of LM 86 to February 27 1984 the date of the filing

of its complaint

Following extensive discovery 10 informal telephonic conferences 2 for

mal pre hearing conferences seven days of evidentiary hearings and the

filing of briefs the Presiding Officer issued his Initial Decision on Novem

ber 9 1984

In his Initial Decision the AU found the whole tonnage formula which

is presently the basis of LM 86 unfair and unjustly discriminatory to

the Port Authority and PRMSNPRMMI He ordered the Agreement modi

fied substantially along the lines suggested by PRMSNPRMMI but without

the additional 25 reduction for the tonnage portion of the new assessment

for cargo moving in the Puerto Rican trade While granting PRMSNPRMMI

assessment adjustments for the period from the date of filing its complaint

to date of Commission decision he denied interest on the adjustments

and reparations from the date of LM86 to the date of the filing of

PRMSNPRMMl s complaint

We find that the Initial Decision is in general well reasoned supported

in law and by the preponderance of the evidence of record and reaches

the proper resolution of the matters in issue We therefore adopt it except

for certain factual and legal clarifications which we here make and for

the treatment of transshippedrehandled cargo for which we find all ex

cepted treatment is unlawful and should be removed

We turn now to a detailed consideration of the Initial Decision and

the exceptions and replies to exceptions

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 617

NEW YORK SHIPPING ASSOCIATION ET AL

THE INITIAL DECISION

Respondents Affirmative Defenses

In his Initial Decision the Presiding Officer first disposed of several

affirmative defenses raised by NYSA and ILA going to the ability of

the Commission to deal with the merits of the complaints I claims

of waiver estoppel and res judicata based on the Commission s approval

of a settlement between NYSA ILA and PRMSAlPRMMI s predecessor

carrier and approval of a whole tonnage formula in 1974 2 the timeliness

of the complaints here as a challenge to a formula which NYSA and

ILA assert has existed since 1974 3 the binding effect of the collective

bargaining agreement and the grievance and arbitration procedures and

4 the inapplicability under the MLAA of any other substantive provisions

of the shipping statutes and the unavailability of reparations as a

remedy

for periods prior to the time of the filing of PRMSAPRMMIs complaint

The Presiding Officer rejected all but the last category of affirmative de

fenses holding that he had authority to entertain the claims on the merits

but that the Port Authority s

remedy was limited to modification or dis

approval of the assessment agreement the only relief they had requested

and that PRMSAPRMMIs relief was confined to disapproval or modifica

tion and one year s prospective assessment credits ID 8 38

More specifically the Presiding Officer found 1

PRMSA s prede

cessor s settlement dealt only with the 1969 1977 period and was not

intended to be a permanent bar to later challenges and that the Commission

had never approved or investigated the assessment agreements for 1971

1974 and 19741977 on their merits so that no defenses could be based

on their approval ID 21 26 33 38 2 each three year agreement

must be treated as a separate agreement regardless of its terms in accord

ance both with Commission precedent and the practice of the parties in

renegotiating and refiling them every three years ID 12 16 3 the

MLAA was intended to preserve the right of parties to collective bargaining

agreements and others to challenge the lawfulness of assessment provi

sions and the collective bargaining agreements grievance procedures were

inadequate and arbitration irrelevant with respect to PRMSAPRMMIs

claims of unlawful contract provisions under federal law ID 1620 26

33 and 4 the MLAA established limited standards of agency review

for assessment agreements and created assessment adjustments and dis

approval or modification as exclusive assessment agreement remedies and

specifically removed application of other substantive standards and remedies

ID 38 5965

Applicable Legal Standards

After a discussion of the contentions of the parties ID 38 52 see

also 3 7 the Presiding Officer established preponderance of the evi

dence as the standard for burden of proof in the proceedings ID 52

54 and benefit burdens as the applicable general test for judging the

27 F M C
618 FEDERAL MARITIME COMMISSION

lawfulness of the assessment formula s application to different categories

of assessees 10 5458 3As far as the Port Authority is concerned

the standard is conceded to be port discrimination as enunciated in

cases like Boston Shipping Association v FMC 706 F 2d 1231 1240

1st Cir 1983 and Port of New York Authority v AB Svenska et al

4 F M B 202 1953 The Presiding Officer clarified this standard by hold

ing that unfairness or unjust discrimination to a port need not involve

naturally tributary cargo or adsorptions but might also include such

lesser factors as limitation of ability to participate in a market or clear

probability of substantial harm 10 659 4 The Presiding Officer then

found it unnecessary to make a specific determination as to whether the

Shipping Act 1916 1916 Act or the Shipping Act of 1984 1984 Act

applies to the proceeding since he determined that the provisions of the

MLAA applicable to these proceedings are substantially the same under

both Acts 10 69 70 5

The Port Authority s Case

The Presiding Officer then turned to the merits of the Complainants

cases He concluded that the Port Authority has carried its burden of

proof by demonstrating by the preponderance of the evidence that the

present tonnage assessment formula is unfair and injustly discriminatory

to it because it injures the Port by placing it at a competitive disadvantage

especially with regard to Midwest containerized cargo such disadvantage

resulting from a 200 300 cost differential on containerized cargo which

could be alleviated if NYSAlILA would modify their formula to one rec

ognizing both man hours used and cargo or containers transported He

also found that the facts are that the Port of New YorkNew Jersey

competes with other ports especially with Baltimore that the differential

handicaps the Port in its efforts to attract carriers to serve New York

rather than Baltimore for example and that the differential is unnecessary

being the product of an unreasonable and unfair formula which taxes

3

Although NYSA and LA at fllSt contested this as the proper test they suggested no other and concluded

that it is unnecessary to decide whether that test still applies because the current formula satisfies that test

1 0 44 see also NYSA op br at 127 That NYSAlILA fmally admit that benefitslburdens is the proper

test may be seen from their criticism on their Reply to Exceptions of aformula suggested by the Port Author

ity Suffice it to say that it is patently illegal because it doesn t even make apretense of balancing benefits

and burdens Reply to Except 2

4The AU discounted as beyond the scope of the proceedings the creation of a superfund to be raised

by assessments at all ports as a

remedy for possible discrimination against the Port of New York Concern

oversuch superfund had been raised by MPA and Massport 1 0 51 fn 18

NYSA PRMSAlPRMMI and Hearing Counsel would have the Commission apply the 1916 Act while

the Pon Authority and Sea Land contend that the 1984 Act applies see ID 69 Although we agree with

the AU that as a practical maller it makes little difference in most instances whether we apply the MLAA

before or after the 1984 atnendments we will make specific fmdings under the MLAA before such atnend

ments to insure that manifest injustice does not occur as could be the case at least under one interpreta

tion with respect to the requirements relating to the payment of interest under the 1984 atnendment SeeFMC

Notice 49 Fed Reg 21798 May 23 1984 and pages 113 116 ilfra

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 619

NEW YORK SHIPPING ASSOCIATION ET AL

carriers in inverse proportion to the amount of labor used for all costs

10 73

The Presiding Officer explained that his findings were based upon written

documentary and testamentary evidence as well as inferences drawn from

such evidence and credibility determinations with respect to testifying wit

nesses 10 7475 Among his critical findings supporting the Port

Authority s case are

1 Although the assessment formula at New York in general provides

for assessment on a whole tonnage basis there are numerous

exceptions both with respect to certain excepted cargoes which

are assessed on a man hour basis and special status cargoes

which are assessed by special rates of payment or special status

with regard to measurement 10 78 79

2 Since empty containers by definition do not contain any assess

able tons no fringe benefits are collected from the handling or

movement of empty containers through the Port of New York

New Jersey 10 81

3 In most other ports assessments are on a man hour basis and

hence fringe benefit assessments are collected there on empty

containers 10 81 82

4 Empty containers constitute 32 of all containers handled at the

Port of New York and 29 of containers in the Far East Trade

10 82

5 There is no assessment at the Port of New York on stuffing

and stripping containers even though containers which are stuffed

and stripped required 3 times as many man hours as throughput

containers Assessment at other ports including Baltimore reflects

man hours used and is proportional to their use 10 82 83

6 No assessment at New York is made for man hours used in

maintenance work since assessment is on a tonnage basis yet

one carrier used between 25 and 30 of its over one million

man hours on such work 10 83

7 A tonnage assessment assesses labor costs in inverse proportion

to the use of labor It therefore shifts costs from low producti ity

operators to high productivity operators because low productiv ty

operators do not pay labor costs in proportion to their use

labor 10 83

8 Tonnage assessments are paid by steamship lines Man hour as

sessments at New York and other ports are paid by the direct

employer of the longshore labor i e the stevedore or terminal

operator 10 84 101

9 Cost studies of several carriers serving both New York and other

ports show that fringe benefit costs per container at New York

are much higher than at other ports 10 85 86

27 F M C
620 FEDERAL MARITIME COMMISSION

10 Carrier officials indicated that they take assessment costs into

consideration in making cargo routing decisions 10 85 86

11 One carrier s cost study contains the notation The killer is

NYSA assessment of 7 50 ton compared to Baltimore 8 10

Man hour Portsmouth 1O 35 Man hour 10 86

12 On average a loaded container handled at the Port of New

YorkNew Jersey costs from 200 300 more in assessments than

a similar container handled at other U S ports 10 87 6

13 If other North Atlantic ports used the NYSA tonnage assessment

system for funding fringe benefit requirements the assessment

differential between New YorkNew Jersey and these ports would

be an average of 90 per container 10 87

14 If the Port of New YorkNew Jersey were to use a man hour

assessment method to collect fringe benefit obligations the assess

ment differential between New YorkNew Jersey and other North

Atlantic ports would average less than 50 per container The

man hour rates of New YorkNew Jersey would have been 17 73

based on 1983 collection requirements 10 87

15 The fact that fringe benefit packages at Baltimore Hampton

roads and Philadelphia are considerably less costly than at New

York does not account for the magnitude of the assessment dif

ferential per container at New York as seen from the preceding

comparisons 10 87

16 The Port Authority s primary competition for Midwest containers

comes from the Port of Baltimore but costs and competitive

advantages of the two ports apart from the container assessment

differential are about the same 10 88

17 Steamship lines control cargo routing through the use of intermodal

rates and route code systems port to port rate limitations quoted

to exclude New York New York surcharges and outright denial

of a particular port 10 89

18 Ports also solicit sales directly from steamship lines 10 89

19 A shipper has indicated that it can no longer use New York

because carriers refuse him space there but attempt to direct his

cargo to other ports 10 89 90

20 Steamship lines route cargo away from New York because of

assessment differentials 10 90

21 NYSA ILA Contract Board Members have frequently expressed

concern that too high an assessment will divert cargo away from

New York 10 90

6NYSNILA claimed that the differential is 150 The AU s finding of the 200 300 cost differential

is based to some extent upon the credibility of a witness who contradicted himself in this respect having

earlier testified as to the 200300 range of cost differential 1 0 87 An assessment differential of roughly

250 between Baltimore and New York is corroborated independently by a carrier witness in these proceed

ings See Tr 847 848

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 621

NEW YORK SHIPPING ASSOCIATION ET AL

22 Twelve different steamship line executives of eleven different lines

admitted that the New York tonnage assessment caused them to

divert cargo to other ports 10 91 94 7

23 Of all the containers handled in the Port of Boston in 1983

475 were transshipped through the Port of New YorkNew Jer

sey 10 96

24 But for the tonnage assessment at New York it would be less

expensive to move the cargo between New York and Boston

by Truck The payment of assessments for cargo transshipped

between New York and Boston on a manhour basis see page

4

supra results in an assessment cost of 300 per container

less than the tonnage assessment for cargo moving by truck be

tween these two ports 10 96

25 The Contract Board which grants assessment exceptions or special

status to cargoes to keep them in the Port or to regain cargo

which formerly moved through the port sometimes grants relief

and sometimes denies it In some circumstances denial results

in further cargo loss to the Port 10 9698

26 Although the amount of tonnage handled at New York has re

mained relatively stable New York s market share with respect

to other North Atlantic ports has decreased particularly with re

spect to containerized cargoes 10 98 99

27 A fairer system of assessment would distinguish between present

fringe benefit costs of employed longshoremen assessed on a

man hour basis and transition costs of containerization assessed

on a

tonnage basis as advocated by the Port s

expert witness

Mr Leo Donovan 10 101 102 8

The Presiding Officer summarized his conclusions with respect to the

Port Authority s case stressing the significance of the limited relief re

quested by the Port Authority i

e some formula adjustment the strength

of carrier admissions respecting cargo diversion from New York the de

creasing proportion of New York cargo vis a vis other Atlantic ports the

fact of the 200 300 container cost differential at New York carrier cost

studies which reflect the differential and at least in one instance specifically

link it with diversion and the possibility of full funding of assessment

costs at New York using several fairer alternative formulas 10 103

108

7Respondents allempted to discredit these admissions as alleged statements and hearsay The fact

they were made has not been rebulled admissions are not hearsay under the Federal Rules of Evidence

and in any case hearsay is not excludable solely on such grounds in administrative proceedings 1 0 94

105 106

8Mr Leo Donovan suggested several alternative formulas which would reduce the burdens of the assess

ment at New York by shifting to variants of acombinationcontainer man hour formula The Presiding Officer

found it unnecessary to choose between the Donovan formulas as he found the formula of PRMSAlPRMMJs

economic expert Dr Silberman will give the Port relief and at the same time is more appropriate in its

analysis of categories of assessment benefitslburdens See JD 101 102 107 108 Mr Leo Donovan should

not be confused with Mr Paul Donovan the Port Authority s counsel

27 F M C
622 FEDERAL MARITIME COMMISSION

Problem of Witness Credibility and Evidence Admissibility

The Presiding Officer explained that he found Complainants cases more

persuasive because Respondents improperly attempted to impose a higher

standard of burden ofproof than preponderance of the evidence and improp

erly characterized their own officials admissions as hearsay He also

found Respondents witnesses advocating their own self interest to preserve

special treatment under the present formula with respect to empty containers

or transshipped cargoes less credible than the above discussed carrier admis

sions 10 105 108 The AU s main findings on credibility however

were centered around NYSA s economic expert witness Mr Sc1ar The

AU found Mr Sclar not credible in expounding support for a

tonnage

assessment because he testified in support of a man hour assessment on

the West Coast failed to make cogent and internally consistent arguments

with respect to the characterization of different types of longshoremen s

benefits and contradicted another highly qualified NYSA witness with re

spect to the apportionment of pension benefits 10 109112 In the

course of discussing Mr Sc1ar s testimony the Presiding Officer denied

a motion of Respondents to strike Exhibit 48 Mr Sclar s West Coast

testimony on the grounds that Respondents had adequate opportunity at

the hearing to re examine Mr Sc1ar with respect to the exhibit The AU

pointed out that he and the parties even offered Respondents several addi

tional days to recall Mr Sclar 1 0 113 120

PRMSAIPRMMls Case

The Presiding Officer then considered the merits of PRMSAMI s

case Basically PRMSAlPRMMI contends that while all containerized cargo

benefited equally from containerization the burdens under the present as

sessment formula on containerized cargo are not equal It asserts that such

improperly allocated burdens result from a whole tonnage formula because

such a formula imposes on all carriers the costs related to current employ

ment of longshoremen which should be borne by individual employers

rather than the industry as a whole and also penalizes carriers for effi

ciencies not related to containerization The present formula in addition

gives favored treatment to certain carriers like those who operate in the

domestic trades and rehandle or transship containers who pay excepted

man hour assessments and carriers engaged in moving empty containers

stuffing and stripping and maintenance work who pay nothing toward

the fringe benefits of longshoremen engaged in these activities 10 120

123

The Presiding Officer cited five critical facts showing unfair distribution

of burdens at New York caused by the assessment formula

1 In 1982 1983 PRMSA paid 16 1 million under the formula and

moved 59 142 containers for an average assessment cost of 272

per container Another carrier moving V3 more containers paid

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 623

NEW YORK SHIPPING ASSOCIATION ET AL

only 141 per container and another bigger carrier moving more

than twice the containers of PRMSA paid 168 per container

2 PRMSA employed 25 of man hours at the Port but paid 8 5

of the total assessment

3 Three carriers avoided 20 million in assessments because of the

special treatment for domestic and transshippedrehandled cargoes

4 PRMSA must pay the assessment costs for stuffing and stripping

and handling of empties because the fringe benefits of longshore

men engaged in these activities are covered by assessments funded

under the agreement and these activities are assessed nothing

under the present formula

5 In 1982 1983 PRMSA paid 50 74 per man hour to fund fringe

benefits under the formula whereas the direct wage was only

14 per man hour 10 123 127

The Presiding Officer found a sound theoretical basis for removing such

inequities in the formula proposed by PRMSNPRMMI s expert economic

witness Dr Silberman Like the formulas proposed by the Port s expert

Mr Leo Donovan the Silberman formula would divide longshoremen s

fringe benefits into costs of different types Dr Silberman divides fringe

benefits costs onto Type I costs which relate to the current labor costs

of presently employed workers which costs are essentially substitutes for

direct wages holidays vacations welfare and clinics or deferred compensa

tion pension and Type II costs which are industry wide expenses related

to containerization and include benefits for displaced workers GAl and

those portions of holiday vacation welfare clinic and pension benefits

attributable to GAl recipients Welfare and clinic benefits for retirees and

their dependents and the unfunded portion of pension benefits for retirees

would also be treated as Type II costs under Dr Silberman s approach

10 174 176 Type I costs would be assessed on a man hour basis

and Type II costs on a tonnage basis Under Dr Silberman s formula

67 of the costs of assessments would be Type II costs and thus would

still be assessed on a tonnage basis To prevent breakbulk cargo which

is very labor intensive from being unduly burdened however Dr Silberman

would place a

cap on breakbulk contributions so that they will not

exceed present levels He would also continue the present special treatment

for all activities other than domestic and transshipment transportation and

the transportation of empty containers and stuffing and stripping 10

127 130 See also PRMSNPRMMI Opening Brief 2425

The ALl rejected Respondents contention that all ILA men are industry

wide employees for all purposes and thus all fringe benefits may be funded

by tons on an industry wide basis The facts that ILA longshoremen work

for more than one employer and accrue benefits by working 700 hours

or achieving GAl credits from different employers do not he found mean

that all benefits should be paid on an industry wide basis Wages for

which fringe benefits are substitutes are not paid on an industry wide

17 1 II ro
624 FEDERAL MARITIME COMMISSION

basis and the requirement for eligibility for benefits does not determine

who is responsible for labor costs related to the use of eligible employees

ID 133 134

In examining in detail the special privileges granted to transshipped or

rehandled cargoes and domestic cargoes the AU concluded that three

carriers Sea Land United States Lines U S Lines and McAllister Broth

ers Inc barge service McAllister are the only beneficiaries and cost

the industry an additional 20 million a

year of which PRMSA pays

over 3 million Transshipped cargoes alone constitute 12 of the containers

subject to the tonnage assessment On transshippedrehandled and domestic

cargoes Sea Land paid an average assessment of 23 per container and

U S Lines 13 05 compared to PRMSA s 272 In fact Sea Land and

U S Lines failed to pay even their direct labor utilization Type I costs

with respect to domestic and transshippedrehandled cargoes which would

have been 6 35 per man hour rather than the 5 50 per man hour presently

assessed under the current formula 9 ID 135139

The Presiding Officer rejected the defense that Sea Land and U S Lines

require special treatment for transshipped and rehandled cargoes to prevent

such cargoes from leaving the Port of New YorkNew Jersey and thus

aggravating the GAl costs at the Port He found that the additional cost

to Sea Land of paying for these services on a man hour tonnage basis

is small that leaving New YorkNew Jersey would cause major unrealistic

modifications of Sea Land s operations and that there is no credible evi

dence to support its likelihood of making such changes 10 139142

The AU found U S Lines transshipment expanding and unlikely to change

because of assessment formula modifications 1 0 142 143

The exception for domestic cargoes rests upon an assumption that

the AU found the record does not support i e that these cargoes are

marginal based On declining volume and profits and the existence ofinland

competition U S Lines moves over half a million tons a

year in these

trades and pays only an average of 10 per container compared to

PRMSA s 272 There is no credible evidence that U S Lines domestic

cargoes will be lost to the Port of New YorkNew Jersey if a modified

version of Dr Silberman s formula is adopted the AU concluded He

further found that U S Lines vessels involved in the domestic movement

would make their sailings in any case and that the domestic cargoes are

incremental in nature and could thus be carried at very low rates

1 0 143 148

PRMSA the Presiding Officer found unlike U S Lines and Sea Land

has already shown actual diversion from New YorkNew Jersey because

of the operations of a competing carrier at the Port of Philadelphia Trailer

9u s Lines actually paid even less than this because it pays under a fonnula which only approximates

the 550 per man hour rate 1 0 138 145

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 625

NEW YORK SHIPPING ASSOCIATION ET AL

Marine Transport Inc TMT which does not employ ILA labor and

thus does not pay assessments 10 149 150

The Presiding Officer found no justification for the failure to pay anything

toward fringe benefits on the transportation of empty containers and on

stuffing and stripping of containers There is no likelihood he determined

that a man hour assessment on these activities would drive work away

from the Port There is already a higher man hour assessment on these

activities at other ports than would exist under Dr Silberman s formula

1049 at Baltimore and 12 28 at Philadelphia as compared to an estimated

635 per man hour at New York under Dr Silberman s formula 10

81 10 Appendix Moreover the stuffing and stripping activity cannot

be lost to New York because it is mandated by the Rules on Containers

Dr Silberman and the Presiding Officer would retain the total exemption

for maintenance activities because of the substantial likelihood that any

payment for that activity would lead to utilization of non ILA deep sea

ILA METRO labor which PRMSA already uses and consequently

aggravate the funding situation 10 150155

The AU preserved a man hour exception to the Silberman man

hour tonnage assessment for the transshipment services of the McAllister

barge service between New YorkNew Jersey and BostonProvidence He

found that to assess McAllister under the Silberman formula would kill

this service which depends upon the absence of a tonnage assessment

to survive and would grossly aggravate the GAl situation at Boston See

page 13 supra findings 23 and 24 It would also the AU found remove

an alternative routing for shippers A McAllister exception does not

let the service off free however since it would still pay for its Type

I benefits under the man hour portion of the Silberman formula 10

155 159 10

The AU made another and major departure from the Silberman formula

in denying an additional 25 reduction from the tonnage portion of the

new assessment for Puerto Riccan cargoes He did so on the grounds

that 1 Such additional reduction is not supported by quantitative evidence

2 PRMSA will obtain substantial benefits for the people of Puerto Rico

in modifying the basic formula and obtaining assessment adjustments 3

PRMSA s relief in the past in assessment cases has not gone beyond

protecting it against assessments it should not have borne because of lack

ofresponsibility 4 the MLAA does not contain a public interest stand

ard and 5 the burden on the public might not be affected by the requested

25 reduction in the tonnage charge since PRMSA is in a loss position

and has increased its rates some 70 since February 1981 10 159

168

IOTo protect against unfairness between carriers all carriers offering competing services with McAllister

including Sea Land would be given the same excepted man hour treatment 1 0 159

27 F M C
626 FEDERAL MARITIME COMMISSION

The Presiding Officer then turned to problems related to the allocation

of specific types of fringe benefits to Dr Silberman s Type I and Type

II costs Such procedure is necessary to assure proper credit adjustments

for PRMSAlPRMMI and to provide for proper application of the assessment

formula in the future JD 169

Insofar as holiday payments are concerned holiday payments for pres

ently employed workers were allocated to Type I costs GAl recipients

holiday payments to Type II costs The AU rejected NYSAlILA s conten

tion that an additional 5 million should have been allocated to holiday

payments for GAl recipients for the 1982 1983 contract year on the grounds

that the NYSAlILA witness who so testified Mr Fier was not credible

and that Dr Silberman made the best calculations he could from the evi

dence submitted by NYSA JD 170172 11

The Presiding Officer allocated all vacation payments between Type I

and Type II workers rejecting NYSAlILA s contention that two of the

vacation weeks should be allocated to Type II benefits as industry wide

costs and obligations on the grounds that insofar as currently employed

workers are concerned vacations are like holidays compensation in lieu

of wages and should be paid by the employers of such workers who

have the benefit of their skills and not by the industry as a whole ID

172 174

PRMSA and NYSAlILA agree that welfare and clinic costs should be

allocated so that benefits for GAl recipients and for all retirees and their

dependents should be treated as Type II costs but disagree with respect

to exact allocation the difference is 3 1 million The AU accepted Dr

Silberman s allocation as more accurately reflecting that portion of welfare

and clinic costs attributable to GAl recipients Since no contributions are

made on behalf of retirees and dependents he agreed with Dr Silberman

that it would be improper to base GAl upon contributions made to the

fund rather than upon benefits received JD 174175

The most difficult allocation problem faced by the AU related to pension

liability There is theoretical agreement between Respondents and PRMSAI

PRMMI that Type Icosts include contributions for currently working em

ployees and that Type II costs include contributions for currently enrolled

GAl recipients and the as yet unfunded portion attributable to retirees

There are at least four methods of calculating this unfunded liability for

retirees one suggested by PRMSA s expert Mr LoCicero and three sug

gested by NYSA s expert Mr Camisa Although the AU found all of

the methodologies reasonable he accepted Mr Camisa s lowest estimate

because he felt Mr LoCicero s method had not been shown to be better

and PRMSA had the burden of persuasion Mr Camisa s lowest figure

was tantamount to a statement against interest and its acceptance would

11 Although Respondents assert that the allocation between Type I and Type II benefits is unnecessary and

improper see page 18 supra they go on to attack someof the allocations made by Dr Silberman assuming

arguendo that allocation is a proper procedure See page 34 infra

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 627

NEW YORK SHIPPING ASSOCIATION ET AL

cause least disruption of the status quo and finally that the unfunded

nature of the pension liability and large proportion of retirees was due

in some unquantified way to the advent of containerization the expenses

of which are to be borne on an industry wide basis JD 175 181

Lastly the Presiding Officer allocated NYSA s administrative costs in

the same proportion as benefit costs in general i e he required that the

same proportion be divided between Type I and Type II costs as is divided

between them for the total of fringe benefits The AU however directed

a separation from administrative expenses of those which relate to a labor

contract with a different union and found that the proper allocation to

the contract in issue is 7 million JD 182 183

The Presiding Officer then summarized what he felt to be the most

significant factors indicating the reasonableness of those portions of Dr

Silberman s formula which he had adopted i e those other than the

McAllister barge treatment and the special 25 discount for the Puerto

Rican trade

1 The willingness to allocate 67 of the benefit costs to Type

II benefits which is contrary to PRMSA s interest

2 The cap on breakbulk assessments which is also contrary to

PRMSA s interest although of benefit to the industry as a whole

in reducing GAl costs by retaining work for the Port of New

YorkNew Jersey on breakbulk cargoes

3 The willingness to allow maintenance activities to remain free

of benefit assessments in spite of the fact that PRMSA doesn t

use ILA deep sea labor for maintenance work

The AU noted that any hardship from the shift to the Silberman formula

could be protected against by the joint NYSA ILA Contract Board s ability

to give special consideration to specific commodities and by the Commis

sion s ability to phase in the increases in assessments for carriers which

had formerly enjoyed unjustified special privileges JD 183 187

The Presiding Officer then discusses the remedies to be employed in

making adjustments in PRMSAlPRMMI s favor suggesting that a period

for verification and resubmission of contested computations to the Commis

sion may be proper He denied interest however as a part of PRMSAI

PRMMI s adjustments on the grounds that it is not equitably warranted

JD 187 189 12

12A good summary of the Presiding Officer s conclusions and reasoning is contained in the final portion

of his Initial Decision which is styled U timate Conclusions and found at ID 189 95 Also useful for

quick analysis is the appendix to his decision which is agraphic display of the effects of the various assess

ment formulas upon different categories of cargoes and transportation activities

27 F M C
628 FEDERAL MARITIME COMMISSION

PosmONS OF THE PARTIES ON INITIAL DECISION

Exceptions

All of the parties except to some extent to the Initial Decision their

exceptions ranging from minor requests for clarification to full scale attacks

on the major findings and holdings of the Presiding Officer

NYSAllLA

The most far reaching of the exceptions are those of NYSAlILA which

assert that the AU erred to the extent he ordered any modification of

the assessment formula and granted any relief to the Port Authority and

PRMSAlPRMMI

NYSAlILA s basic attack on the Initial Decision is their contention that

the AU substituted his own judgment for that of the parties to the assess

ment agreement without properly fmding that the present assessment formula

is unlawful Brief on Excep 36

Attack on the Port Authority s Case

In analyzing the Presiding Officer s conclusions with respect to the Port

Authority s case NYSAlILA contend that the Port Authority has failed

to carry its burden of proof on three of the four critical elements necessary

to show an unlawful effect on the Port created by the assessment formula

NYSAlILA acknowledge the existence of competition between the Port

of New YorkNew Jersey and the other North Atlantic ports Brief on

Excep 8 but contend that the AU improperly found the existence of

injury proximate causality of injury due to the formula and

unreasonableness of the formula Brief on Excep 7 32

NYSAlILA contend that the Presiding Officer applied the wrong legal

standard in determining the existence of harm Brief on Excep 8

12 They maintain that the AU confuses the substantive element of

injury with the standard of proof needed to establish it Brief on Excep

9 and that the proper standard is real harm either existing or certain

to occur Id They further contend that in order to show injury a

port must show loss of naturally tributary cargo Brief on Excep 11

12

NYSAlILA then contend that the facts of record relied upon by the

AU were lacking in probative value because they consisted only of a

study showing that New YorkNew Jersey s share of the market for contain

erized cargo decreased from 69 to 56 from 1972 to 1982 and testimony

of a Port Authority official who recited statements made by carrier rep

resentatives Brief on Excep 12 21 They assert that the market share

study is as easily explainable by conclusions that consumption demand

in New York has not kept pace with that of other ports or that other

ports have been containerizing their breakbulk cargoes at a faster rate

than that experienced in New York Either of these explanations they

maintain is as likely as the AUs conclusion that the loss of market

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 629

NEW YORK SHIPPING ASSOCIATION ET AL

share is attributable to a shift of container cargoes from New York to

other North Atlantic ports Brief on Excep 13 14

NYSNILA then contend that the testimony of the Port official Mr

Robert N Steiner which the AU had characterized as containing admis

sions see ID 105 106 94 fn 30 is not of sufficient probative value

because it merely relates his impressions of statements made to him by

others and fails to contain quantification of the tonnages involved specifica

tion of the favored ports or in the originsdestinations of the cargoes

particularization of the entities having control over the routing or indication

that the statements which were made more than a

year prior to institution

of these proceedings remain viable today Brief on Excep 1421

NYSNILA then asserts that the record evidence in fact shows lack

of injury because it demonstrates that the carriers lack the control over

the routing of cargo which would be necessary to divert it away from

the Port of New YorkNew Jersey They assert that carriers no longer

use intermodal rates for 90 of their traffic and that even where point

to point rates are used shipper preference stilI usually dictates the choice

of port NYSNILA further assert that routing cargo away from New York

to avoid the assessment there would be self defeating because lost work

in New York would increase GAl there and cause carriers to pay twice

once in New York on remaining cargo and once in the port to which

cargo has been diverted Brief on Excep 21 23

NYSNILA then turn to the third test of unlawful discrimination against

a port proximate causality They maintain that any loss of cargo which

New YorkNew Jersey may have suffered because of the assessment cost

differential between that port and other North Atlantic ports is due solely

to the higher assessment costs at New YorkNew Jersey and not to the

formula for apportioning those costs NYSNILA make computations which

they purport show that even under the modified assessment formula adopted

by the AU the differential of assessment costs per container between

New York and Baltimore is stilI in the range of between 13135 and

227 72J3 There is no showing NYSNILA assert that reduction in the

differential would help the Port compete for cargo A straight man hour

formula would greatly reduce the assessment differential per container but

would do so at the price of shifting the cost to the breakbulk sector

which allegedly would be unfairly burdened by man hour assessment Brief

on Excep 23 31

Lastly NYSNILA assert that the Port Authority has failed to demonstrate

the unreasonableness of the present formula since the AU sfinding

that the formula is unreasonable because it taxes carriers in inverse propor

tion to the amount of labor used for all costs ID 73 is based on

an error of law borrowed from PRMSA s case Brief on Excep 31 32

13 NYSAlILA compute the assessment cost differential per container between New York and Baltimore

under the present formula as ranging between 158 58 and 335 02 Brief on Excep 27 see also Excep

Nos 2630

27 F M C
630 FEDERAL MARITIME COMMISSION

i

Attack on PRMSAIPRMMIs Case

NYSAILA maintain that the Presiding Officer erred in finding their

formula unlawful with respect to PRMSAlPRMMI because PRMSA

PRMMI s higher payments under the formula result from its own business

judgments rather than the formula itself Specifically NYSAILA assert

that the AU erred in his conclusions that the formula is unfair because

it contains no man hour component and that it gives unwarranted special

privileges to certain categories of cargo and transportation activities Brief

on Excep 3249

Insofar as the absence of a man hour component in the present formula

is concerned NYSAILA assert that there is no requirement in law that

an assessment formula contain a man hour component and that the Commis

sion has approved assessment formulas without such components Brief

on Excep 33 35 NYSAILA claim that the AU s treatment of mainte

nance work and of the cap on breakbulk cargo are admissions that a

man hour component is not necessary even for funding benefits due pres

ently working employees Brief on Excep 35 36 They assert that the

formula adopted by the Presiding Officer benefits only PRMSAMI

and that the efficienciesPRMSAPRMMI claims are being taxed arise

only from its use of non deep sea ILA workers and non compliance with

the Rules on Containers not from the employment of more efficient work

ers PRMSAlPRMMI NYSAILA assert is thus able to shift its costs

to other container carriers Brief on Excep 3642

NYSAILA s objection to the AU s disallowance of excepted i e

man hour treatment for transshippedrehandled cargoes is based on their

contention that the exception is fair because PRMSAPRMMI can utilize

it to the same extent as any carriers which have operations involving

transshipment or rehandling The statute they assert forbids discrimination

between carriers not between carrier operations The exception for the

McAllister barge service a type of transshipment on the other hand does

they maintain create an unlawful discrimination between carriers To impose

a tonnage assessment on transshipmentrehandling NYSA ILA maintain

would result in making such operations pay for lost man hours due to

containerization when they are actually adding man hours through an activ

ity only tangentially related to containerization and not in the minds of

the parties when they negotiated to protect against lost man hours due

to containerization Brief onExcep 42 47 see also Excep 45

NYSAILA contend that the absence of assessments for handling empty

containers and stuffing and stripping is justified because all carriers are

treated equally with respect to these activities these activities are not bene

fits of containerization but rather add hours and hence reduce GAl

and that assessing them will drive cargo from the port of New York

New Jersey Brief onExcep 478

NYSAILA contend that the excepted man hour treatment of domestic

cargo is justified because such cargo is marginal that volume is declin

27 FM C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 631

NEW YORK SHIPPING ASSOCIATION ET AL

ing and that it will be diverted from the Port to move via inland carriers

if the exception is removed Brief on Excep 49

NYSAlILA maintain that the overall labor cost to PRMSAlPRMMI i e

the total of direct wage costs container royalty and tonnage assessment

is roughly the same as that of Sea Land and U S Lines and thus the

assessment formula treats PRMSAlPRMMI fairly under the benefitsbur

dens test Brief on Excep 5053

NYSAlILA conclude that regardless of the legality of the AU s decision

it would be virtually impossible to implement because the necessary data

could not be collected Brief on Excep 53 54

Appended to the Brief on Exceptions of NYSAlILA is a separate listing

of some 62 numbered exceptions To the extent they have not been elabo

rated upon in the above discussion they include the following

1 The alleged misreading of PRMSAlPRMMI s complaint by the

AU to include an allegation of diversion of cargoes naturally

tributary to the Port of New York Excep 1

2 The preservation of the affirmative defenses to the assessment

agreement rejected by the ALJ See pages 68 supra Excep

2

3 The characterization of NYSAlILA s argument with respect to

the burden ofproof Excep 36

4 The AU s characterization of the benefitslburdens test under

Volkswagen v FMC 390 U S 261 1968 Excep 5

5 The AU s reference to an alleged NYSAlILA plan not of

record which they state merely is an intent to reduce the tonnage

assessment rate based on projected tonnage increases Excep 13

6 An alleged inconsistency in the AU s witness credibility rulings

Excep 14

7 The AU s

findings with respect to NYSA control over fringe

benefit funds NYSA member control over formulas at other ports

and the amounts of pension and welfare benefits at various ports

Excep 15 17

8 The AU s failure to find that the increase in empty containers

is due to trade imbalance Excep 18 20

9 The AU s failure to find that the handling of empties and the

stuffingstripping of containers are funded through the assessment

formula Excep 21

10 The AUs use of carrier cost studies in connection with the

Port Authority s case which NYSAlILA claim are flawed in meth

odology and underlying data Excep 22 25 39

11 The AU sfindings that New York has lost midwest cargo to

Baltimore that ships discharging loaded minibridge containers on

the West Coast pick up the empties at New York that intermodal

ratemaking is the wave of the future and that carriers generally

control routing Excep 31 35

27 F M C
j

632 FEDERAL MARITIME COMMISSION

12 The Initial Decision s allegedly inconsistent findings with respect

to the effect of the assessment on diversion from New York

by U S Lines and Sea Land on the one hand finding that the

assessment differential has forced them to divert cargo from New

York and on the other hand asserting that removal of the ex

cepted treatment for transshippedrehandled cargo will not create

such diversion Excep 37 53

13 The findings that New York lost frozen meat to Philadelphia

because of the tonnage assessment at New York New York

is an ever increasing consumption and production area and that

New York has lost a substantial share of cargo and is losing

its share of containerized cargo to other North Atlantic ports

Excep 403

14 The treatment of NYSAlILA witnesses in general and Mr Sclar

in particular and the refusal to strike Exhibit 48 Mr Sclar s

testimony in the West Coast case Excep 44 7 60

15 The failure to find that longshoremen are industry employees for

all benefit assessment purposes EKcep 49

16 The failure to find that the domestic trade is declining rather

than expanding Excep 50

17 The failure to find that 16 steamship lines rather than 3 use

the McAllister barge transshipment service Excep 51

18 The failure to find that U S Lines will incur a 14 5 million

increase in assessment costs if Dr Silberman s formula is adopted

rather than the 3 5 million increase found by the AU Excep

52

19 The distinction between Type Iand Type II costs and the alloca

tion between them assuming such distinction is proper Excep

58 In this connection NYSAlILA maintain that a proper alloca

tion of costs shows that the excepted 5 50 man hour rate fully

funds Type Icosts Excep 54

20 The finding that U S Lines domestic cargoes will not be lost

to New York if exposed to a tonnage assessment Excep 55

21 The finding that PRMSAlPRMMI has established a case of diver

sion to TMT because of the NYSAlILA assessment formula

Excep 56

22 The finding that 5 million in holiday payments to GAl recipients

was already involved in the GAl Fund account Excep 59 see

pages 22 23 supra

23 The finding that administrative costs properly allocated to the

NYSAlILA labor contract amount to only 7 million Excep

51 see pages 2425 supra

24 Lastly NYSAlILA object to certain procedural rulings relating

to 1 subpoenas which they attempted to obtain directed to TMT

2 carrier cost studies and 3 testimony by a PRMSA official

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 633

NEW YORK SHIPPING ASSOCIATION ET AL

Mr Carr relating to alleged diversion of PRMSA cargo to TMT

Excep 62

Hearing Counsel

Hearing Counsel adopt a position similar to that of NYSAILA contend

ing that neither PRMSAPRMMI nor the Port Authority has made out

a case against the legality of the present assessment formula Hearing

Counsel assert that the AU misapplied the benefitsburdens test as enun

ciated in Volkswagen v FMC 390 U S 261 1968 and its successor

cases asserting that only a reasonable relationship between benefits and

burdens is required They further assert that all container carriers benefited

equally from containerization and so should be taxed equally under the

formula as they are under the tonnage basis Excep 3 5 Hearing Counsel

contend that the AU s treatment of maintenance work is inconsistent with

his treatment of stuffing stripping empties and rehandledtransshipped con

tainers because all of these activities add work and therefore should be

similarly treated They attack the Type I

Type II cost dichotomy on the

grounds that all employees are industry wide employees for all purposes

and thus all costs are industry wide costs To the extent the dichotomy

is proper they maintain that container carriers are equitably assessed because

even if they overpay for Type I costs they underpay for Type II costs

just as non containerized operators overpay for Type II costs and underpay

for Type I costs Excep 5 7

Insofar as the Port Authority s case is concerned Hearing Counsel con

tend that the Port has failed to show that it has lost naturally tributary

cargo which should have moved through New YorkNew Jersey and that

such showing is a legal requirement of its case It must also show they

assert that any cargo loss was the result of an unjust diversion The

essential elements missing from the Port Authority s case Hearing Counsel

assert are a showing that the assessment formula was the proximate

cause of cargo loss and that the loss if any was unreasonable The

Port Authority Hearing Counsel contend has shown neither that the assess

ment formula was the sole cause of the higher container handling costs

at New York or that it is the sole cause of New York s declining market

share Excep 8 13

Sea Land

Sea Land also generally supports NYSAILA and contends that the

present formula has not been shown to be unlawful Insofar as PRMSA s

case is concerned Sea Land contends that the AU improperly and inconsist

ently held that a tonnage formula is unlawful per se and that his findings

that excepted or exempt treatment for certain cargoes or types of activities

is not justified are an improper shift of the burden of proof and contrary

to the preponderance of record evidence Excep 3 9 Sea Land contends

that the excepted treatment of relay cargo is justified because Sea Land

27 F M C
634 FEDERAL MARITIME COMMISSION

pays for its direct costs on a man hour basis and adds rather than reduces

man hours Excep 911 Sea Land maintains that it can easily shift its

operations to other ports to avoid paying a tonnage assessment at New

YorlcNew Jersey and has done so in the past and that the records shows

it would be prohibitively expensive for it to stay in New YorkNew

Jersey if it had to pay such assessment Excep 11 16 Sea Land asserts

that the Initial Decision s excepted treatment of the McAllister barge service

is inconsistent with its denial of excepted treatment to relay and trans

shipment services in general Excep 17 18

Insofar as the Port Authority s case is concerned Sea Land contends

that the Port has failed to show that it has been injured by the assessment

formula at New York since it has not shown that the formula rather

than the total costs at New York is responsible for any diversion from

New York or that carriers have the ability to control cargo routing The

record Sea Land asserts is to the contrary Sea Land also contends that

the AU s conclusion with respect to diversion of cargo from New York

New Jersey by Sea Land in the Port Authority s case are inconsistent

with his conclusions that such diversion would not occur as a result of

the removal of the transshipment rehandling exception in PRMSA s case

Excep 21 25 Sea Land contends that the AU erred in choosing another

assessment formula over the present one merely because it is fairer

Excep 2627

Lastly Sea Land asserts that the Commission cannot modify the Agree

ment as opposed to directing the parties to modify the Agreement and

in any case should allow the parties to work out any modification them

selves if such proves to be necessary Excep 28 32

PRMSAIPRMMI

PRMSAlPRMMI excepts to only four conclusions ofthe Initial Decision

1 the denial of a 25 discount from the tonnage component of the

assessment for the Puerto Rican trade 2 the exeption i e man hour

assessment created for the McAllister barge service and competitive serv

ices 3 the denial of interest on the adjustments due PRMSAlPRMMI

for the period from date of filing its complaint to date of decision and

4 the denial of reparations for the period from formation of the assessment

agreement to filing of the complaint 14

PRMSAlPRMMI asserts that the 25 reduction for the Puerto Rico

trade is justified because of the unique problems of the Puerto Rican

economy and the Commission s

recognition of Puerto Rico s problems in

rate and other assessment cases Excep 410 PRMSAlPRMMI contends

that the Presiding Officer erred in failing to give proper weight to the

Commission s actions and articulated reasons for those actions in earlier

14 PRMSAlPRMMI has chosen not to pursue its contention that the allocation of pension costs was im

proper under one of the fonnulas outlined by Respondents witness Mr Camisa and adopted by the Presiding

Officer Excep 4 fn 2

J M r
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 635

NEW YORK SHIPPING ASSOCIATION ET AL

cases It asserts that the removal of the public interest standard from

the MLAA does not prevent the Commission from considering the welfare

of Puerto Rico under the unfair and unjustly discriminatory provisions

and that PRMSAPRMMI s recent rate increases far from showing that

PRMSAPRMMI is not harmed by the assessment formula show that the

failure to grant the 25 reduction would cause greater harm PRMSA

PRMMI also states that it requires relief in addition to that granted by

removing the special privileges and that the 25 reduction is based on

expert judgment similar to that which the Commission has exercised in

favor of the Puerto Rican trade in the past Excep 1018

PRMSAPRMMI objects to the McAllister exception because it results

in making other carriers pay for McAllister s

fringe benefits solely to

preserve a service which is not necessary fully to fund all fringe benefits

The exception will extend not only to McAllister but competing carriers

including new ones If cargo can move more cheaply by truck absent

the exception if should do so and there is no showing of shipper support

for McAllister s service PRMSAPRMMI suggests the possibility of phasing

in a man hour tonnage assessment or freezing assessment at the present

revenue level to protect against hardship Excep 18 27

PRMSAPRMMI asserts that it has an absolute right to interest under

the MLAA Excep 28 32 but that even if the award of interest were

discretionary the facts here show it should be granted Excep 32 55

PRMSAPRMMI lastly argues that its claim for reparations for the period

between the creation of the assessment formula agreement and the filing

of the complaint is preserved by the MLAA as shown by its legislative

history and California Cartage Co Inc v United States 721 F 2d 1199

9th Cir 1983 cert denied 53 U S LW 3230 U S Oct 2 1984 Cal

Cartage Except 35 40

Port Authority

The Port Authority agrees with the conclusions of the Initial Decision

with respect to the unlawful effect of the assessment formula on the Port

of New YorkNew Jersey but excepts to the failure of the Initial Decision

to adopt the formulas proposed by its expert Mr Leo Donovan which

would have allocated only GAl and some GAl related costs on a

per

container basis and funded the costs for other benefits on a man hour

basis The Port Authority s latest proposal would impose a 9 00 per man

hour charge on all uses of labor including maintenance and assess container

cargo a flat 87 96 per container charge The Port Authority would remove

all exceptions and exemptions except the 05 per box rate for bananas

and assess transshipped cargo the per container rate only once The Port

Authority specifically charges that the exemption for maintenance work

is unjustified and that the excepted treatment of the McAllister barge

service is discriminatory and an unlawful burden on other carriers The

Port Authority concludes that the formula adopted by the ALJ does not

27 FM C
636 FEDERAL MARITIME COMMISSION

sufficiently remove the unlawful discrimination against the Port of New

YorkNew Jersey and that the formula it proposes will do so and at

the same time be of greater benefit to PRMSAlPRMMI than Dr Silberman s

formula

Other Exceptions

MPA excepts generally to the Presiding Officer s conclusions with respect

to the Port Authority s case asserting that he improperly ignored cases

relating to cargo diversion and absorptions and maintaining that the Port

Authority s problem of lost cargo relates not to the formula but to the

overall size of the benefit package at New York compared to that of

other ports MPA also expresses continued concern over the use of a

superfund as a possible remedy in assessment cases

Massport urges that if the Presiding Officer s approach is adopted his

treatment of transshipment services between New York and Boston see

10 155 159 esp fn 43 and 21 supra be clarified to insure that all

transshipment between the two ports not only those of the McAllister

barge service be assessed on an excepted man hour basis Transshipment

Massport asserts is a substantial and expanding service upon which the

Port of Boston depends

Replies to Exceptions

All parties have filed replies to exceptions to the Initial Decision the

most lengthy being those of PRMSAlPRMMI and the Port Authority the

Complainants who largely prevailed before the AU

PortAuthority

The Port Authority reaffirms its position that the AU properly found

that the present assessment formula is unfair and unjustly discriminates

against the Port It details 13 specific factual findings which the AU

made which it claims constitute the necessary evidence to support his

conclusion Reply to Excep 24 It reasserts its contentions that the

naturally tributary concept is not applicable that the Port s limitation

on its ability to compete is legally cognizable injury and that the Port

has in fact shown actual cargo loss Reply to Excep 58 The Port

Authority states that the statements made by various carrier officials to

Mr Steiner were admissions of considerable value which were not chal

lenged by cross examination or presentation ofthe admitters as witnesses

The one admitter who was presented as Respondents witness was not

even examined on the matter Reply to Excep 7 8 In response to specific

errors alleged by NYSAlILA on exceptions the Port Authority asserts

1 The 100300 container cost differential is admitted by one of

Respondents own witnesses and the lower 158 58 differential

is based upon an admittedly erroneous productivity figure Reply

to Excep 9

I

i

i

27 FM C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 637

NEW YORK SHIPPING ASSOCIATION ET AL

2 The formula rather than the greater costs at New York is respon

sible for the differential Reply to Excep 9 10

3 Carriers diverting cargo from New York are not worried about

GAl increases Any increase in GAl caused by diversion would

be minimal compared to costs savings from the diversion Reply

to Excep 10 11

4 It is absurd to contend that a reduction in cost differential does

not ease competitive disadvantage because a differential which

could cause diversion still remains Reply to Excep 11

5 The record does not support NYSAJILA s assertion that carriers

don t control routing because 90 of container traffic moves under

port to port rates The record evidence does not support the 90

figure and moreover shows that lines do control traffic even

under port to port rates Reply to Excep 11 12

Due weight must be given to the AU s credibility determinations the

Port Authority asserts which show from his observation and consideration

that NYSAJILA s witnesses in general were not credible Excep 12 13

The New YorkBoston transshipment service should the Port Authority

maintains be treated like any other transshipment service and under the

formula suggested in the Port s Exceptions would be taxed substantially

less than under the AU s formula The Port Authority ends its Reply

to Exceptions with a reiteration of its argument in support of its latest

proposed formula Reply to Excep 13 18

PRMSAIPRMMI

PRMSAJPRMMI contends that the AU properly found that the present

formula was unfair and unjustly discriminatory in its general treatment

of benefitslburdens and that this unfairness is exacerbated by additional

special favoritisms 15 Contrary to NYSAJILA s position PRMSAJPRMMI

asserts that the AU found the present formula unlawful because of its

basic unfairness shown on the record not because Dr Silberman s formula

was better Dr Silberman s formula was adopted because once the present

formula was shown to be unfair it appeared to be the best way to remedy

the defects Reply to Excep 5 7

PRMSAJPRMMI contends that the Presiding Officer properly found the

present formula unlawful because it improperly assigned Type I costs and

penalized efficiencies having nothing to do with the problems of

containerization which the tonnage formula was designed to meet Dr

Sliberman s alternative formula recognizes the distinction between current

individual employer costs and industry costs and does not penalize carriers

The bulk of PRMSAlPRMMIs comments is directed to the exceptions of NYSAlILA PRMSA briefly

challenges Sea Land s assertion that the Commission cannot legally modify the agreement and Hearing

Counsel s

support of NYSAlll A s position The special treatment for transshipment cargo of concern to

Sea Land and Massport PRMSAlPRMMI treats in response to similar arguments by NYSAlILA See Reply

to Excep 45

27 F M C
638 FEDERAL MARITIME COMMISSION

for efficiencies unrelated to containerization It also is neutral with re

spect to the breakbulk sector by freezing breakbulk s contribution at the

present level Reply to Excep 7 17

PRMSAPRMMI contends that NYSAILA s error with respect to carrier

responsibility is caused by NYSAILA s use of the word productivity

to include both innovations related to containerization loadingunloading

and efficiencies not so related but having to do with non loadingunloading

functionsi e handling of empties stuffmglstripping and maintenance

PRMSAMI argues that its efficiency is so great that the proper calcula

tions show that even with the exclusion of non loading and unloading

functions PRMSAMI is still about twice as efficient as Sea Land

and U S Lines Reply to Excep 17 30

The Presiding Officer did not find PRMSAMI asserts that a ton

nage formula is illegal per se he held that it is unfair here because

of the improper allocation of costs in general The result allegedly would

have been different if containerized operations of the different carriers

were more uniform and if there were not a substantial Type I component

of overall fringe benefit costs Reply to Excep 3033

PRMSAMI attacks NYSAILA s argument that the formula is fair

because all carriers have the equal opportunity to tailor their operations

to take advantage of exceptions It asserts such argument is legally defective

because it is contrary to a court decision and the legislative history of

the MLAA and also factually defective It further contends that all parties

do not in fact have equal ability to take advantage of exceptions Reply

to Excep 33 36 16

PRMSAMI contends that practical difficulties in administration of

an alternative formula cannot justify the perpetuation of unfairness of the

existing formula It notes however that a combined man hour tonnage for

mula has been used by NYSAILA in the past and is used by many

other ports at the present time It further notes that the present formula

contains many special classifications which require separate calculations

some on a man hour basis Reply to Excep 3639

PRMSAMI contends that the AU properly found the favoritisms

which he disallowed to be unfair and unjustly discriminatory The ex

cepted treatment of transshipped rehandled cargo was allegedly properly

denied because it is not necessary to prevent diversion PRMSAPRMMI

accuses NYSAILA of attempting to create a new justification fairness

post hoc which it cannot lawfully do having invited the Judge to utilize

the diversion test They further argue however that the exception is

not required by fairness because GAl GAl related obligations welfare

and clinic benefits for retirees and their dependents and unfunded pension

benefits for those now retired are industry wide costs a fair share of

16 PRMSA notes that NYSA expressly defines domestic to exclude the Puerto Rican trade

Reply to Excep 35

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 639

NEW YORK SHIPPING ASSOCIATION ET AL

which must be borne by transshippedrehandled cargo Reply to Excep

39 44

The BostonNew York transshipment service for which Massport asserts

a broad exception is in fact increasing and will PRMSAlPRMMI contends

further burden those who must pay for the costs evaded by the carriers

taking advantage of the exception Reply to Excep 45 46

PRMSAlPRMMI maintains that Sea land mischaracterizes the AU s treat

ment of the handling of the transshipmentrehandling exception He did

not shift the burden of proof as Sea Land contends but found on

the record that the cargo diversion which Sea Land and U S Lines claimed

would take place under the tonnage assessment would not be likely to

occur PRMSAlPRMMI contends that the evidence of record supports this

finding since cross examination defeated the self serving claims of the Sea

land and U S Lines witnesses The facts of record PRMSAlPRMMI main

tains show that the diversion would not occur but that if diversion did

occur and only 23 5 of the Sea Land and U S Lines transshipped

rehandled and domestic activities were returned the Port s

fringe benefit

funding program would have been better off in the 1982 83 contract year

without the exception Reply to Excep 4651

PRMSAlPRMMI claims that the unfairness of the transshipmentrehan

dling exception is shown by its own proof of already existing diversion

of New York cargo by TMT to Pennsauken New Jersey a part of the

Port of Philadelphia which NYSA has refused to recognize while accepting

the arguments of Sea Land and U S Lines with respect to a diversion

which the record here shows in unlikely to occur Reply to Except 51

54

PRMSAlPRMMI asserts that NYSAlILA offer virtually no defense for

the continuation of the exception for domestic cargoes The problem of

diversion is the only proferred excuse and the record shows none The

isolated statistic of cargo decline since 1973 which NYSAlILA highlight

is misleading since in fact cargo has shown a steady increase from 1980

to 1983 Reply to Excep 55 The record shows U S Lines which receives

95 of the benefits for the domestic cargo exception will continue to

transport such cargo regardless of cost increases because it is incremental

in nature Moreover even if U S Lines lost all domestic cargo it admitted

it would be reasonable to expect that such cargo would be replaced with

additional cargoes from the Far East to the East Coast Reply to Excep

5459

PRMSAlPRMMI maintains that assessment of empties and stuffingstrip

ping for direct man hour costs is not unfair as such activities would pay

only their own direct labor costs and nothing for GAl or other industry

wide costs PRMSAlPRMMI further contends that such assessment will

not divert cargo because it would be operationally infeasible and too costly

to divert empty containers and the Rules on Containers forbid diversion

of stuffingstripping work Reply to Excep 59 62

27 F M C
j

640 FEDERAL MARITIME COMMISSION

PRMSAlPRMMI appends an Appendix A to its Reply to Exceptions

in which it responds to the specific numbered exceptions of NYSAILA

which it feels are not otherwise adequately dealt with and which are signifi

cant for decisional purposes as follows

1 NYSA ILA incorrectly state that PRMSAMMl s complaint

didn t allege diversion of cargo naturally tributary to New York

Reply to Excep 1 A2

2 The AU s

ruling on NYSAlILA s affirmative defenses was

based not on presence or absence of changed circumstances

but on the findings that NYSNILA s

tonnage formula was never

approved on the merits the new agreement LM 86 gave rise

to a new cause of action and principles of labor law cannot

extinguish a carrier s

rights under the Shipping Act to challenge

an assessment agreement Reply to Excep 2 A 2 3

3 The AU correctly stated the burden of proof A 3

4 The AU correctly stated the benefitslburdens standard Reply

to Excep 3 and 4 A 3

5 The AU correctly characterized the present formula as shifting

labor costs from low productivity operators to high productivity

operators This is the necessary effect of a whole tonnage formula

which includes Type Icosts Reply to Excep 12 A3

6 The AU properly found the extent to which credibility determina

tions influenced his decision Reply to Excep 14 A 3 4

7 NYSNILA err in asserting that empties stuffingstripping and

maintenance are assessed under the formula Reply to Excep

21 A 45

8 The AU criticized NYSAlILA s witnesses not because they had

strong feelings but because they were doctrinaire and un

duly rigid Reply to Excep 44 A 5

9 The AU did not exclude or strike Mr Sclar s

testimony or give

it little weight solely because of its inconsistency with his testi

mony in another proceeding He give it minimal and proper weight for seven specified reasons Reply to Excep 46 A 5

10 The motion to strike Exhibit 48 was properly denied for the

reasons stated by the AU Reply to Excep 47 A 6

11 The AU did not find that longshoremen were not industry employ

ees for any purpose He found that certain costs were single

employer costs which should not be borne by the industry as

a whole The benefit of containerization is the same for all carriers

with efficiencies differing among them due to their effectiveness

of labor use All carriers continue to pay for continuing costs

of containerization under the formula adopted by the AU Reply

to Excep 49 A6

12 The AU properly found the removal of the transshipment excep

tion would increase U S Lines assessment burden by 3 5 million

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 641

NEW YORK SHIPPING ASSOCIATION ET AL

and that the total increase for U S Lines would be 6 9 million

He properly declined to find that U S Lines assessment will

actually increase by 14 5 million Reply to Excep 52 A 7

8

13 The AU properly found that transshippedrehandled and domestic

cargoes do not even pay their own Type I costs under the proper

allocation of Type I costs under the proper allocation of Type

Iand Type II costs Reply to Excep 54 A 8

14 NYSAlILA were not prejudiced by the AU s failure to subpoena

data from TMT since NYSAlILA had adequate opportunity to

test PRMSAlPRMMIs diversion claims by cross examining

PRMSAlPRMMI s witnesses The AU also properly disregarded

arguments concerning PRMSAlPRMMIs purported loss of Balti

more cargo to TMT and New York cargo to Sea Land since

the argument was based on meaningless statistics Reply to Excep

56 A 8 9

15 The AU made properly supported findings with respect to the

apportionment of Type I and Type II costs Reply to Excep

58 A 9

16 The AU correctly accorded little weight to Mr Fier s

testimony

with respect to the accounting of holiday payments received by

GAl recipients because the record showed Mr Fier did not know

how the auditors prepared their accounts Reply to Excep 59

A 9

17 The AU correctly found that Mr Sclar s position respecting vaca

tion benefits as in part involving Type II costs was inconsistent

with his prior testimony in another case Reply to Excep 60

A 10

18 The AU properly found that the assessments should not fund

administrative costs for other collective bargaining agreements

The discrepancy between assessment revenues and NYSAlILA ex

penses arises from the fact that neither all fringe benefits nor

all admini trative expenses are funded from assessments Reply

to Excep 61 A 10 11

19 The AU properly denied the various motions to strike Mr Carr s

testimony on diversion Reply to Excep 62 d e A 11

NYSAllLA

NYSAlILA respond to the exceptions of both the Port Authority and

PRMSAlPRMMI They contend that the Port s proposed formulas are not

justified by the benefits burdens test but rely solely on a reduction

of the impact of the present assessment formula on New York without

showing that such impact is unlawful Reply 2 3 They contend that

PRMSAlPRMMIs four exceptions to the Initial Decision are all unwar

ranted They assert that the 25 discount for the Puerto Rican trade is

outside the Commission s authority to grant and that the need for and

27 F M C
642 FEDERAL MARITIME COMMISSION

benefit from such discount are unsubstantiated by the record Reply to

Excep 4 They maintain that the MLAA creates an exclusive damage

remedy under a single provision of the Shipping Act and thus forecloses

reparations for a period prior to the filing of PRMSAPRMMI s complaint

Reply to Excep 45 They contend that the remedy of interest on assess

ment adjustments is a discretionary one under the MLAA and that the

ALJ correctly denied such interest based on the usual and proper consider

ations in assessment agreement cases Reply to Excep 5 8 They maintain

that PRMSAMI s exception to the Initial Decision s treatment of the

New YorkBoston transshipment service is a sacrifice of the Port of

Boston to eke out a few more dollars for PRMSA s purse Reply to

Excep 4 NYSA ILA s

reply concludes with a reiteration of their contention

that the Initial Decision merely constitutes a substitution of judgment by

the ALJ for that of the parties to the assessment agreement Reply to

Excep 8 9

Hearing Counsel

Hearing Counsel limit their replies to a defense of the Presiding Officer s

denial of the 25 discount on the tonnage portion of the assessment for

the Puerto Rican trade They contend that such discount is justified neither

by Commission precedent nor the record in these proceedings

Sea Land

Sea Land replies in support of the ALJ s determination with respect

to the four types of relief denied PRMSAMI Specifically Sea Land

asserts that Puerto Rico has made out no case for a 25 discount on

the tonnage assessment Reply to Excep 7 8 that it is not entitled to

reparations as a matter of law Reply to Excep 45 that it is not entitled

to interest Reply to Excep 5 7 17 and that the transshipment exception

recognized by the ALJ was proper but should be broadened to include

all transshipment operations which Sea Land contends is required by fair

ness and shown as needed by the facts of record Reply to Excep 8

9 Sea Land concludes that the parties to the assessment agreement should

be allowed to negotiate a settlement Reply to Excep 24 10

Other Replies

MPA supports the ALJ s conclusion that the Port Authority s formula

was not proper merely because it would have reduced the container handi

cap between New York and Baltimore to a greater extent It also generally

associates itself with the exceptions of Hearing Counsel Sea Land and

NYSAILA

Massport supports the ALJ s conclusion with respect to the propriety

of excepted treatment for New YorkBoston transshipment services on the

17 Sea Land maintains in fact that the Commission has no authority to grant interest on assessment adjust

ments Reply to Excep 67

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 643

NEW YORK SHIPPING ASSOCIATION ET AL

grounds that such services should not be required to pay for GAl because

they are adding hours of work and that to deny the exception would

act to kill the McAllister barge service and severely injure the Port of

Boston which depends on transshipment cargo for half of its container

operations Massport further asserts it would be unfair to make such services

pay for full labor costs at New York when they already pay full labor

costs at Boston Reply to Excep 26 Massport asserts that the formula

suggested by the Port Authority of New YorkNew Jersey in its exceptions

will not adequately solve Boston s problem because the per container charge

element of it will improperly burden transshipment services with labor

costs they should not have to bear Reply to Excep 67

DISCUSSION

We find that the exceptions to the Initial Decision are for the most

part merely reiterations of matters raised before and fully and correctly

disposed of by the AU

NYSAIILA s Affirmative Defenses

As a threshold matter the Commission finds no merit to the various

arguments that we should not or cannot entertain one or both complaints

because of problems relating to res judicata estoppel waiver settlement

timeliness and the effects of labor law principles These defenses were

adequately addressed and correctly rejected by the AU See pages 6

8 supra and ID 9 38 18

Correction and Clarification of Certain Factual Findings

We find that in general the factual determinations of the Presiding Officer

are proper and well supported by the record Although there are minor

errors none of them is outcome determinative For the sake of accuracy

however we here correct those findings which we feel could be the source

of confusion

1 On page 19 of the ID at fn 7 the Presiding Officer refers

to Council of North Atlantic Shipping Associations v FMC

672 F 2d 171 D C Cir cert denied 459 U S 830 1982

as holding that the MLAA preserved our jurisdiction over certain

portions of collective bargaining agreements The statement should

more correctly read that the MLAA preserved our jurisdiction

over rates charges regulations or practices required to be set

forth in tariffs regardless of whether or not such matters arose

out of or were otherwise related to a collective bargaining agree

ment

IBAs PRMSNPRMMI correctly points out Reply to Excep A 2 3 the AU s ruling on NYSNILA s

affmnative defenses was based not merely on the presence or absence of changed circumstances but

also on findings inter alia that NYSNILA s

tonnage formula was never approved on the merits the new

agreement LM86 gives rise to a new cause of action and principles of labor law cannot extinguish rights

under the Shipping Actto challenge an assessment agreement

27 F M C
644 FEDERAL MARITIME COMMISSION

2 On page 49 of the 10 at fn 16 the Presiding Officer states

that Sea Land pays nothing on its relay containers As will

be seen from other portions of the 10 eg

135 137 it is

clear what is meant is that Sea Land pays nothing on a tonnage

basis It pays on a man hour basis The movement is excepted

not exempt from assessment

3 On page 73 of the 10 the Presiding Officer states that the

tonnage formula taxes carriers in inverse proportion to the

amount of labor used for all costs As will be seen from his

statement in finding 27 on page 83 what the Presiding Officer

intended to express is the idea that the effect of a whole tonnage

assessment as opposed to a man hour assessment is to assess

costs with respect to work performed in an inverse proportion

to the labor used in that work Thus since the assessment is

used to fund all fringe benefit costs including costs for those

benefits that are substitutes for wages or that represent deferred

compensation the effect is to shift labor costs for expenses of

direct employment of labor from low productivity operators to

high productivity operators Industry wide costs GAl GAl related

costs welfare and clinic costs for retirees and their dependents

and unfunded pension liability for pensioners are properly borne

by all in proportion to cargo handled The statement might better

read taxes carriers in inverse proportion to the amount of labor

used for direct costs of their employees

4 On page 77 at findings Nos 8 and 9 the Presiding Officer

makes certain determinations with respect to the relationship of

the master contract and local contracts insofar as pension and

welfare benefits are concerned The findings on this matter should

more properly read The master contract sets the rate of contribu

tion for pension and welfare benefits but the amounts of these

benefits vary from port to port and are negotiated on a local

basis

5 The Presiding Officer found that the assessment differential be

tween New YorkNew Jersey and other North Atlantic ports if

all ports funded fringe benefits on the tonnage basis used at

New YorkNew Jersey would be an average of 90 per container

NYSNILA maintain that the differential should be higher because

the Port Authority used an average load factor of 217 assessment

tons rather than the correct figure of 28 78 ton We acknowledge

the correctness of this observation See e

g page 137 of the

10 where the AU used a load factor of 29 assessment tons

in his computations We note however that the proper load

factor only acts to magnify the differential between ports based

on a whole tonnage formula and a different type of formula 19

19We also take this opportunity to correct minor wording errors in the 1 0

I The reference on line 9 on page 82 should be to Port Authority opening brief

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 645

NEW YORK SHIPPING ASSOCIATION ET AL

LAWFULNESS OF THE PRESENT NYSAlILA ASSESSMENT

FORMULA AGREEMENT

INTRODUCTORY STATEMENT ON APPLICABLE STANDARD

The basic issue for Commission determination is the question of whether

or not the present NYSAlILA assessment formula agreement is unfair

or unjustly discriminatory as between shippers carriers or ports within

the meaning of the MLAA Such determination requires application of

the benefitsburdens test about which some confusion appears to exist

There is no dispute at this stage of the proceeding over the applicability

of the benefitsburdens test See page 8 supra The benefitslburdens

test is the appropriate one for determining the legality of the assessment

formula As the Initial Decision found it is the well established test and

the one which the Congress intended to preserve see LD 5458 The

test requires that an assessment formula impose charges which are reason

ably related to benefits Volkswagen v FMC 390 U S 261 295 1968

Opinion of Justice Harlan and that the formula achieves a broadly

equitable arrangement of benefits and burdens New York Shipping Ass n

v FMC 571 F 2d 1231 1238 D C Cir 1978 It does not require

absolute equity Transamerican Trailer Transp Inc v FMC 492 F 2d

617 620 D C cir 1974 TTT or perfect or exact correlation

of benefits and burdens Volkswagen at 295 Opinion of Justice Harlan

It is true as NYSAlILA assert that any analysis of the present problem

must leave room for the implementation of some uniform practical general

rule of assessment even though it have some features that are less desirable

than some alternative imperfect rule Volkswagen at 293 Opinion of

Justice Harlan It appears that the present formula could not however

be defended on that basis It is neither general nor uniform It imposes

special and lower types of assessments on particular commodities It also

creates numerous exceptions for certain cargoes or activities Domestic

transshippedrehandled cargoes as well as numerous other commodities

are excepted from the tonnage assessment and pay on a man hour basis

LD 78 79 Other activities such as handling empty containers stuffing

stripping and maintenance work are totally exempted from assessment

and pay nothing LD 81 83

While the present system may be practical it is no more practical

than the one the AU requires Both will fund the assessments and to

the extent that practical problems arise with respect to the administration

of the formulas they should be no greater under the formula adopted

by the AU than the present one In fact the type of problems that NYSAI

ILA recite with respect to difficulties caused by exceptions and different

systems of assessment Brief on Excep 53 54 are present now Ifanything

2 The first sentence on page 108 should read But for the existence of Dr Silbennan s alter

native fonnula which with modifications to eliminate certain excessive features I adopt I would

recommend Mr Donovan s fonnula third alternative with some modifications

27 F M C
646 FEDERAL MARITIME COMMISSION

the removal of some of the special treatment may simplify the adminis

tration of the assessment formula A small uniform charge evenly applied

might be reasonable even if all did not receive equal benefits See Volks

wagen at 281 Evans Cooperage Co v Board of Commissioners of the

Port of New Orleans 6 F M B 415 1961 20 A large charge unevenly

applied however would not See Volkswagen at 281 293 294 opinion

of Justice Harlan

Nor may it be sufficient to say that since an assessment may be uniform

within a single group it is fair as required by the statute The uniform

ity of an assessment does not necessarily make it fair and reasonable

TIT at 629 In fact in TIT the Commission was upheld by the Court

of Appeals in finding that the container operators in the Puerto Rican

trade were not responsible for a shortfall in man hours and thus should

not have to bear the assessment burden based on shortfall while other

container operators had to bear such burden TIT at 6258 see also

Agreement No T 2336 15 F M C 259 265 272 1972

In addition where as here special treatment of large assessments is

created for certain categories of cargoes and shipping activities the Commis

sion as both Justice Harlan and the Court of Appeals for the District

of Columbia Circuit have observed has the obligation to examine different

methods of allocation to see if the special rules created are the fairest

that could be devised It also has the obligation in the case of different

assessments on different groups to see that the charges are as appropriately

proportioned as would be feasible See Wolfsburger Transport v FMC

562 F2d 827 829 830 D C Cir 1977 Wobtrans see also Volkswagen

at 293 294 TIT at 624

As noted above precise calculations are elusive and absolute equity

is beyond concrete demonstration TIT at 620 charges need only be

reasonably related to benefits and not perfectly or exactly related Volks

wagen at 295 Opinion of Justice Harlan and the Commission need

only see that the parties acting independently have achieved a broadly

equitable arrangement of benefits and burdens New York Shipping Ass n

v FMC 571 F 2d at 1238 Nevertheless the inquiry required to assure

that such equity exists must as Volkswagen TIT and Wobtrans mandate

be sufficiently searching to see that adequate explanation exists both for

the formula in general and any of the special treatment created under

it

The burden of proof is of course on complainants See Boston Shipping

Ass n v FMC 706 F 2d 1231 1239 1240 1st Cir 1983 This means

that complainants must at least summon record support for contentions

that any special treatment is unfair or unjustly discriminatory

20 Another example of asmall uniform charge evenly applied is the container royalty charge See Brief

for Respondent Federal Maritime Commission at 3032 Boston Shipping Association v FMC 706 F 2d 1231

1st Cir 1983

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 647

NEW YORK SHIPPING ASSOCIATION ET AL

The Port Authority s Case

As the Port Authority itself recognizes it must show competitive injury

caused proximately by the tonnage assessment formula here chal1enged

See e g Port of New York Authority v AB Svenska Amerika Linien 4

F M B 202 1953 The Port Authority must also show that the effect

upon it is unreasonable which in the context of this proceeding means

unjustified by the benefits and burdens test Boston Shipping Ass n v

FMC 706 F 2d at 12401241

Although the matter is not one on which the record evidence is so

overwhelming that an argument could not be made that reasonable men

could not have made the contrary conclusion we are convinced that the

preponderance of the evidence 21 is such that the Port Authority has

established that the present formula is unfair and unjustly discriminatory

to the Port of New York and New Jersey

The Commission finds that the Port Authority has shown by a preponder

ance of the evidence that competitive cargo has been diverted from the

Port of New YorkNew Jersey by the assessment formula and that it has

been injured by such diversion 22

We do not agree as opponents to the Port Authority s claim contend

that any diversion must be caused solely by the assessment formula or

that unlawful diversion may take place only with respect to natural1y

tributary cargoes Proximate cause is not the same as sole cause

While there must be sufficient evidence to show that the assessment formula

is the cause in fact of the diversion there is no authority for the proposition

that so long as other factors contribute to the diversion the Commission

is powerless to act Cf e

g McDonald v Santa Fe Transportation Co

427 U S 273 282 1976 Similarly NYSAlILA s contention that only

natura y tributary cargo can be diverted from a port and that the

diversion of any other cargo even if intentional and the result of unlawful

practices is not unlawful Excep 11 12 is completely unfounded No

authority is cited for such proposition and none exists Obviously if a

diversion exists as a result of an unlawful practice it is unlawful

As a general matter as we have explained in Pacific Westbound Con

ferenceEqualization Rules 26 F MC 313 332 1984 PWC the natu

ral1y tributary concept seems to have little continuing validity and the

proper means of determining the lawfulness of port competitive practices

in the container age is to examine whether the contested practice is directed

against certain commodities or exists at the expense of economic or oper

21 The AU properly determined that preponderance of the evidence is the criterion for testing MLAA

complaints It is true as NYSAlILA contend Excep No 4 that they were not the proponents before Con

gress of a clear and convincing standard of proof in MLAA cases Nevenheless this latter higher standard

was rejected by the Congress as the AUcorrectly found

22 As the AUproperly found the Commission need not find that the one causing an unlawful discrimina

tion must control both the action relating to the discrimination and the actions relating to those not discrimi

nated against i

e in the context of these proceedings the Commission need not find that the same carriers

control assessments at pons other than New YorkNew Jersey See JD 67 fn 22 and cases thus cited

27 F M C
648 FEDERAL MARITIME COMMISSION

i

ational efficiencies The Port Authority s case is buttressed by an analogy

to PWC If the assessments could be fully and fairly funded by a means

which would reduce the per container cost at New YorIc New Jersey vis

a vis the other ports with which it competes then the failure to adopt

such means could be said to be economically and operationally ineffi

cient

A finding of unlawful discrimination against a port has never necessarily

depended upon a showing that the cargo involved was naturally tributary

to the port See eg

Boston Shipping Association v FMC 706 F 2d

and Port of New York Authority v AB Svenska et al 4 F M B neither

of which relies on naturally tributary considerations Similarly Port

of New York Auth v FMC 429 F 2d 663 5th Cir 1970 cert den

401 U S 909 1971 and Intermodal Service to Portland Oregon 17 F M C

106 128130 138139 1973 hold that the ability of ports to be able

to compete for all cargoes regardless of origin without unlawful impedi

ments is the goal of the Commission s

regulatory activities

Hearing Counsel s attempt at oral argument to reconcile the court

decisions in Boston Shipping Association v FMC 706 F 2d BSA and

Dart Containerline Co Ltd v FMC 639 F 2d 808 D C Cir 1981

Dart from a naturally tributary approach is misguided It is true that

Dart involved naturally tributary cargo and the Commission there found

unlawful diversion It is also true that so far as appeared BSA did not

involve naturally tributary cargo and the Commission there found no unlaw

ful diversion The distinction however is irrelevant for our purposes here

Dart involved an absorption of land transportation cost expenses which

was found to be operationally and economically inefficient and which

discriminated against shippers of a particular commodity See PWC 22

S RR at 962 BSA on the other hand involved the payment of container

royalties on transshipped cargoes to longshoremen at New York rather

than to longshoremen at the Port ofBoston

Boston had two theories for recovery one of which depended upon

a naturally tributary approach and one of which did not Boston s main

theory was that the payment of royalties to New York longshoremen rather

than to Boston longshoremen caused Boston to impose greater assessments

and carriers to divert cargo because of these greater assessments The

origin or destination of the cargo was irrelevant for purposes of this theory

and neither the Commission s decision nor that of the Court considers

it The theory failed for lack ofproof See pages 72 73 infra

Boston s second theory was that the payment of the royalties to New

York longshoremen rather than Boston longshoremen was basically wrong

See BSA brief in Boston Shipping Association v FMC 706 F2d at 15

see also FMC brief in BSA at 2425 33 In order to prove this Boston

would have had to show that Boston longshoremen were somehow fun

damentally entitled to that cargo and that New York longshoremen were

not Itfailed to do so

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 649

NEW YORK SHIPPING ASSOCIATION ET AL

The second theory of Boston in BSA and the Port Authority s

theory

here are entirely different Boston had to prove that Boston longshoremen

alone were entitled to the royalties in order to prevail and thus some

sort of tributary approach was necessary to its case The Port Authority

here however does not seek to prove and need not prove such entitlement

As the cases above discussed show it need only show an improper impedi

ment to its ability to compete for cargo with other ports

NYSAILA err when they contend that the AU confuses the substantive

element of injury with the standard of proof needed to establish it Brief

on Excep 9 The Presiding Officer correctly held that injury of the type

shown by the Port Authority here is injury of the type of which we

may take legal cognizance In NARI v FMC 658 F 2d 816 827 D C

Cir 1980 the court held that injury amounting to detriment to commerce

could exist in the form of market place disadvantage even if a shipper s

sales were increasing Insofar as the standard of proof is concerned

the AU correctly found that Dart clearly indicates that no smoking gun

is necessary to show the existence ofinjury

In point of fact there is much evidence of record of injury to the

Port s ability to compete caused by the assessment formula both of a

general and of avery specific nature Simple mathematical computations

show that the greater assessment cost at New YorkNew Jersey vis a

vis the ports with which it competes is not alone responsible for the

assessment differential on containerized cargo at New YorkNew Jersey

See 10

page 87 findings 41 44 and page 12 supra

23

The evidence also shows that the proportion of cargo moving through

the Port of New YorkNew Jersey in comparison to other North Atlantic

ports has decreased particularly with respect to containerized cargo 10

98 99 That decrease cannot be fully explained by other factors such

as later expanding containerization at other ports since the record does

not show this to be true As the AU found even in New YorkNew

Jersey a good deal of container facilities were not developed until 1975

or later completion of Sea Land Maersk Terminal Red Hook South

Brooklyn Marine Terminal etc Ex 31 pp 67 There was also much

23A differential of approximately 250 on loaded containers is admitted by acarrier witness in these pro

ceedings see page 12 supra and is confirmed by NYSNILA s own figures

NYSA 1LA Formula

New York Throughput Container 2 manhours 28 78 tons x 890 256 14

Baltimore 2 man hours x 10 49 20 98

Per Container Differential 235 16

The differential if 4 man hours in moving the container is used would be 214 18 See NYSN

ILA Brief on Excep 27

NYSA s witness Mr Sclar had originally used as 93 man hour number as the time required to

handle an average container Since this figure included non cargo handling hours like mainte

nance and empty stuffed stripped and throughput containers which have very different

productivities it was not meaningful Ex 29 pp 1II 11 through 1II I3 Mr Sclar admitted on

cross examination that the incremental manhours required to move one throughput container was

inthe range of 45 rather than 9 3 man hours Tr 554556

27 F M C
650 FEDERAL MARITIME COMMISSION

development of container facilities at other North Atlantic ports by 1970

although it continued to 1975 Also the same full containerships calling

at New York also called at Baltimore and Hampton Roads ld

The uncontradicted testimony of record moreover shows that the tonnage

assessment was responsible for carrier diversion from the Port of New

YorkNew Jersey This testimony came from officers of Respondents and

constituted as the AU found admissions very much against the declar

ers interests One would hardly expect a carrier to declare that it could

not afford to serve a certain port if it were not true in light of the

effect such declarations would have on the activities of shippers wishing

to use that port It is particularly interesting to note NYSAlILA s attempt

to discredit these admissions Despite NYSAllLA s assertions to the con

trary a simple reading of these statements quoted in NYSAlILA s Brief

on Exceptions to the Initial Decision at pages 2425 shows repeated

references to the tonnage form of assessment mandated by the NYSAI

ILA assessment agreement as the cause of carrier concern and determina

tions relating to use of the Port of New YorkNew Jersey 24

NYSAlILA Brief on Excep 1421 exaggerate the imprecision of the

admissions While they in most cases specifically do not quantify lost

cargo they do highlight the severity of the problem The Chairman of

Dart Line admitted that Dart was forced whenever possible to move

cargo around the Port of New YorkNew Jersey due strictly to the tonnage

assessment 10 92 finding 63 Ex 1 Testimony of Steiner 10 Attach

ment 1 Emphasis supplied Similar statements are made by officers of

Costa Line and Barber Blue Sea 10 92 93 findings 62 68 Ex 1

Testimony of Steiner 911 Attachment 1 Quantifications are made by

officials of Sea Land and Hapag Lloyd The present container assessment

at the New YorkNew Jersey ranges from 256 14 to 356 00 on throughput

containers See NYSAlILA Brief on Ex 27 Sea Land admitted that

it could not afford to pay assessment costs at New YorkNew Jersey in

the 300 500 range 10 93 94 finding 69 Ex I Testimony of Steiner

12 Attachment 1 The present container assessment differential on through

put containers ranges from 214 18 to 335 02 See NYSAlILA Brief

Ex 27 Hapag Lloyd admitted that a 128 assessment differential would

make a difference in how it would route cargo 10 90 finding 54

Ex 9 Att F p43 25

24Ifthe statements were untrue or misleading the fact could have been shown by calling the admillers

as witnesses NYSA chose not to do so Sea Land indicates on brief that one of them may not have been

available at the time of hearing See Sea Land Ex 25 Assuming this is so Sea Land could have protected

itself against consequences flowing from the unavailability of the witness for cross examination at the time

of the hearing by attempting to depose the witness and submilling his deposition See Rule 209 a 3 FMC

Rules of Practice and Procedure 46 C F R fi502 209 a 3 No reason appears why the other admillers

were not called or why the admiller who was called Mr Scioscia of US Lines was not examined about

his admission

25 It is not surprising that the admissions of the carrier executives are not more detailed or defmitive as

to actions which will be taken whenone realizes such actions would be highly detrimental to their interests

As the Supreme Court observed in FMC v Svens1ca Amerl1ca Unlen 390 U S 238 249 1968 in upholding

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 651

NEW YORK SHIPPING ASSOCIATION ET AL

The record moreover does show some smoking gun type evidence

from a carrier and from a shipper of diversion away from the Port of

New YorkNew Jersey caused by the assessment formula Spanish Lines

lost 25 000 tons of waste paper to another carrier through the Port of

Boston because the NYSAJILA Contract Board refused to give waste paper

an exception from the tonnage assessment as shown by evidence from

NYSA s own files See ID 97 finding No 82 Ex 1 Steiner Testimony

pp 15 17 Att 3 4 An importer of Perrier water can no longer use

the Port of New York because steamship lines refuse to handle his cargo

there but will handle it at Baltimore or Norfolk Perrier is a low rated

commodity that would have approximately 40 revenue tons per container

See ID 89 90 Steiner Testimony Ex 1 1415

The arguments about who controls the routing of cargo and the effects

of such routing miss the point The evidence of record shows as the

AU properly found wide spread and expanding use of intermodal rates

Exhibit 1 Testimony of Tozzoli p 13 Exhibit 1 Testimony of Steiner

p

56 Exhibit 1 Testimony of Longschein pp 56 Exhibit 9 Attachment

A Deposition of Everhard pp 41 42 Exhibit 9 Attachment F Deposition

of Leedy p13 Exhibit 10 Attachment N Deposition of Halpin pp

64 68 Exhibit 10 Attachment W Deposition of Moriconi pp 21 23

Exhibit 14 d Attachment B Deposition of Tozzoli pp 8485 It also

shows however as indicated by the Perrier shipper s experience that the

question of who technically controls routing doesn t matter as a shipper

can and is persuaded by carriers not to use certain ports Uncontradicted

testimony shows that competing ports actively solicit lines for cargo Ex

10 Att N and that steamship lines control routing by influencing shippers

to choose certain ports route code systems port to port rates quoted with

the understanding that they would not be used through New YorkNew

Jersey surcharges only on cargo moving through New YorkNew Jersey

as well as in the case of the Perrier shipper outright denial of a

particular port Ex 1 Steiner Testimony pp 13 15

The cost studies cited by the AU ID 85 85 as supporting the Port

Authority s position have been attacked by NYSAJILA as fatally flawed

because of defective methodologies If the studies were intended to make

exact comparisons between assessment costs at different ports there might

well be merit in NYSAJILA s contention We believe however that the

AU intended to use the studies as we use them only as supplying corrobo

ration for the recognition by carriers of the higher per container assessment

a factual finding of the Commission that travel agents were forced by a disparity in commissions paid by

sea and air carriers to direct prospective passengers to air transport

It is true that no agent testified that he had everpersuaded acustomer to travel by air overthe

customer s preference to travel by sea Agents heavily dependent on ocean conference business

could hardly be expected to make such an admission but one agent did go so far as to concede

that under some circumstances there was a definite tendency to encourage acustomer to choose

air travel because it is easier to sell and you make more money This amply supports the Com

mission s conclusion

27 F M C
652 FEDERAL MARITIME COMMISSION

burden created by the tonnage assessment at New YorkNew Jersey vis

a vis other ports At least one comparison shows that when the assessment

at New YorkNew Jersey was only 7 50 per ton rather than the present

8 90 per ton it was described as the killer compared to the Baltimore

assessment of 8 10 per man hour and the Portsmouth assessment of 10 55

per man hour Other cost studies not attacked by NYSAlILA 10 86

finding 39 moreover clearly show the much greater container cost created

by the tonnage assessment at New YorkNew Jersey vis a vis the total

stevedoring container costs at other ports

Perhaps the most instructive comparison that can be made for burden

of proof purposes is one of the record in this case with the record

in BSA In BSA the Commission was upheld by the Court of Appeals

for the First Circuit in its determination that the Port of Boston had not

made out a case of unjust discrimination or unfairness to it caused

by the payment of container royalties to New York rather than Boston

longshoremen The failure there to make a case however resulted apart

from the inability to show entitlement on the exclusive part of Boston

longshoremen alluded to above see pages 646 from the fact that the

record rebutted any causal connection between the payment of royalties

to New York rather than Boston longshoremen and injury to the Port

of Boston The record there demonstrated that contrary to Boston s conten

tion the additional dollar per ton assessment imposed by the Port of Boston

Boston dollar was unrelated to any injury caused by loss of con

tainer royalties The Boston dollar was not necessary to protect long

shoremen s pensions since all benefits had always been paid pension bene

fits had frequently been increased over the period in question and would

have substantially increased without the additional dollar assessment The

record moreover did not show that a carrier s decision to call at Boston

was in any way influenced by the existence of the Boston dollar revealed

Boston witness admissions that a carrier s decision to serve Boston was

not influenced by the Boston dollar and reflected the expansion of

services between Boston and Canadian ports on which the Boston dollar

was also imposed Lastly the record showed that the decline in Boston

cargo could have been due to other factors because cargo not subject

to the dollar suffered a worse decline than that which was and competing

over the road services expanded In the light of such evidence it was

appropriate for the Commission to expect Boston to come forward with

some evidence to show the necessary connection between the practice and

alleged injury It failed to do so See generally BSA v NYSA et at

24 F M C 1110 1135 1138 adopted 24 F M C 1104 1107 1108 1982

BSA 706 F 2d at 1235 1239 1241 FMC brief in BSA p

36

Here the facts of record are much different There is a definite nexus

shown between injury and the assessment formula at New YorkNew Jersey

by carrier admissions corroborated by cargo statistics and carrier cost

studies Shipper and carrier testimony relating to their activities shows

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 653

NEW YORK SHIPPING ASSOCIATION ET AL

diversion caused by the assessment formula Injury has been shown to

the Port by relative cargo decline vis a vis other portS 26

We also find that the Port Authority has shown by a preponderance

of the evidence that the present assessment formula is unreasonable

because it improperly assesses users of longshore labor forcing some users

to pay the cost of others 27 Moreover such unreasonable assessment formula

creates unfairness and unjust discrimination to the Port of New York

New Jersey by creating a diversion from the Port of cargo which has

been routed away from the Port because of the assessment formula 28

We therefore conclude that the Port Authority has sustained its burden

of showing that the present assessment formula must be modified

The major problem of the Port Authority s case lies not so much with

the question of proximate cause or the reasonableness of the present

formula but with the propriety of the relief sought by the Port Authority

As we have explained there is sufficient evidence ofrecord to demonstrate

that the formula acts to inhibit the movement of cargo through the Port

of New YorkNew Jersey There is also as we have found and will explain

in detail in connection with PRMSAPRMMIs case a sufficient showing

that the present formula is unreasonable This alone however does not

demonstrate that the formulas proposed by the Port Authority are proper

Unreasonableness arises when a formula improperly allocates benefits and

burdens relating to the subject matter of a particular assessment agreement

See pages 5761 supra and cases there cited The fact that the formula

proposed by the Port Authority would reduce the assessment burden at

the Port of New YorkNew Jersey more than another formula may show

or help show injury resulting from the latter formula but it shows

nothing about the appropriate apportionment of benefits and burdens

By failing to take cognizance of all of the expenses relating to industry

wide cost the formulas suggested by the Port Authority understate that

proportion of benefit expenses which should be borne on a tonnage basis

i

e

by the industry as a whole in proportion to the amount of tonnage

26While other factors may have contributed to the relative cargo decline here unlike the situation in BSA

we have evidence that injury was caused by the tonnage assessment in the form of carrier admissions and

the smoking guns of Spanish Line and the Perrier shipper which should be contrasted with the absence

of any evidence of linkage of injury to the challenged practice in BSA

We are uncertain of the intent of NYSAlILA s argument that the unreasonableness argument of the

Port Authority in Docket No 846is derived by the AU from PRMSA PRMMIs

case in Docket No 84

8 See Excep 31 It certainly would not have been improper for the ALl to have so acted since by his

rulings of March 20 and April 3 1984 the proceedings were consolidated forevidentiary purposes However

the statement is in error The unreasonableness of the current assessment formula and the need for modi

fication was as the Presiding Officer found demonstrated by Mr Leo Donovan the Port Authority s expert

witness 10 10 1 102 107 108 Only the data as to the extent of the necessary modifications come from

PRMSAlPRMMIs cases

2

Contrary to NYSAlILA s assertion Brief on Excep 22 23 diversion away from the Port of New York

New Jersey would not be selfdefeating because of the increase in GAl caused by such diversion As the

port Authority points out Reply to Excep 1011 while the assessment differential caused by the tonnage

formula is in the neighborhood of 250 per container the additional GAl cost per container would be mini

mal say at the high end 60 4 man hours x 15 per man hour which would be spread across all cargo

remaining in the Port

27 F M C
i

i

654 FEDERAL MARITIME COMMISSION

each carrier transports All pension welfare clinic holiday and vacation

costs of GAl recipients are industry costs related to reduced manhours

and were properly treated as such by the AU Similarly welfare and

clinic costs of retirees and their dependents and unfunded pension costs

of pension recipients cannot be allocated directly to any single employer

and should as the AU found be borne on a tonnage basis by the industry

as a whole

While the Port Authority s proposals would undoubtedly be a greater

benefit to the Port of New YorkNew Jersey any adjustments shifting

more expenses to the Type I category would result in improperly relieving

carriers of industry wide burdens which they should bear 29 Moreover the

greater shift to Type I expenses would create an even greater burden

on labor intensive carriers which all parties including the Port Authority

agree must be protected against further assessment cost increases

The Port Authority s latest proposal would make no allowance for any

of the categories of cargo for which special treatment was adopted other

than bananas The Commission finds however that the record supports

the need for a broader protection for all breakbulk cargo since it shows

that breakbulk cargo has experienced an extreme decline in tonnage in

contrast to virtual constancy in total assessment tons and that although

breakbulk cargo accounts for less than 10 percent of the Port s assessment

tons it is responsible for nearly one quarter of total cargo man hours

See PRMSAPRMMI Opening Brief 119 121 and record references there

cited Moreover the Port Authority s expert Mr Leo Donovan himself

testified that breakbulk cargoes are extremely important to the port s

welfare and that care must be taken to assure that no assessment formula

change causes a substantial increase in breakbulk assessment charges

Ex 31 at 30 The man hour basis of assessment adopted by the AU

will protect breakbulk cargo from bearing any share for costs relating

to containerization and the cap placed on total breakbulk assessments at

present levels will protect against further breakbulk cargo loss to the Port

While the Port Authority s proposed 9 00 per man hour would be lower

than the current man hour rates at other ports it cannot be justified on

a benefitsburdens basis and we cannot act on the basis of figures

lacking proper analytical support

Moreover the record will not support a conclusion that the present spe

cial treatment for cargoes other than transshipped cargoes and domestic

cargoes and the handling of empty containers and stuffingstripping is unlaw

ful and these are matters upon which as we have noted see page 61

29We do not mean to imply that the formula we here adopt will not be beneficial to the Porl The remain

ing container assessment differential under the formula adopted by the AU is computed by NYSAlILA to

be between 16152 and 153 24 on average throughput containers This is areduction from differentials of

between 235 16 and 214 18 on such containers under the present formula See NYSAlILA Brief onExcep

27 28 It also is in the neighborhood of the 128 assessment differential that a Hapag Lloyd official said

could make adifference in cargo routing by carries and thus should be of some benefit to the POrl Ex

9 All F p 43

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 655

NEW YORK SHIPPING ASSOCIATION ET AL

supra the Port Authority has the burden of proof The Port Authority

itself observes in its Exceptions page 15 Ifthe NYSNILA Contract

Board determines that other exceptions are necessary it could design future

exceptions in a way that it finds administratively feasible The Contract

Board has however already granted such exceptions and absent some

showing that it should not have done so they cannot be overturned here

Lastly the Port s proposed charge on container rather than a charge

on tonnage seems less appropriate to fund Type II benefits since the

amount of cargo actually moved is a better measure of benefits accruing

from containerization

We conclude our consideration of the Port Authority s case by observing

that even if the Port Authority had not made out its case the ultimate

result here reached with respect to the lawfulness and necessary modifica

tions to the present formula would be the same because of our conclusions

with respect to PRMSNPRMMI s case In other words since we find

that PRMSNPRMMI has sustained its burden of proof and shown that

the present assessment formula is unfair and unjustly discriminatory

as to it and other carriers not given unjustified special treatment the effects

of the necessary modification would also redound to the benefit of the

Port Authority The injurious effect of the whole tonnage formula will

be mitigated to the extent it has been shown to be unreasonable in the

apportionment of benefits and burdens and to that extent the Port will

be better able to compete for the cargo which it has lost because of

the tonnage formula

PRMSAIPRMMI s Case

PRMSNPRMMIs case depends upon contentions of two types that

the basic structure of the Agreement is unlawful and that this unlawfulness

is exacerbated by various unjustified special privileges

The NYSAIILA Whole Tonnage Formula

The Commission agrees with the AU that the basic structure of the

NYSA ILA whole tonnage formula is unlawful under the facts and cir

cumstances of this case There is no hard and fast rule as to how assess

ments must be funded in all situations A whole tonnage formula could

be found lawful in some circumstances although we have never found

it to be so in a fully litigated proceeding 3o The examples of Volkswagen

30 Sea Land s contention that the ALl found the whole tonnage formula to be unlawful per se is incorrect

He found it unlawful here for the reasons enumerated See 1 0 120 122 Moreover Sea Land s whole ap

proach to the question of the relationship of man hour and tonnage formulas and legality is confused at best

First it contends on brief Excep 5 that apure man hour form of assessment is lawful per se because

it has been removed from our jurisdiction If this is true why doesn t it follow that the farther one moves

from aman hour form of assessment the less likely the result is to be lawful How can one say that a

man hour form of assessment is presumed good and then criticize the ALl for incorporating man hour ele

ments in an assessment formula Moreover is it really true that the removal of a

pure man hour assessment

from our jurisdiction shows that that form of assessment is good The injury caused by aman hour assess

Continued

27 EM C
1

656 FEDERAL MARITIME COMMISSION

and Wobtrans are of little utility here as they involved only the assessments

on automobiles and in any case the Commission actions there were re

versed on review Those cases moreover involved a mix of carrier

productivities and mix with respect to the kinds of benefits far different

from that involved here Where as here and unlike the situations in Volks

wagen and Wobtrans we deal with a mix of fringe benefits which includes

many not related to work displacement caused by containerization e g

pensions welfare clinic holidays and vacations of currently employed

workers and an industry where within a single sector i e containerized

carriers there are marked differences in productivities a whole tonnage

formula does not meet the benefitslburdens standard In this situation

industry wide expenses eg Guaranteed Annual Income GAl and fringe

benefits paid to those on GAl as well as welfare and clinic benefits

for retired employees and their dependents and the unfunded pension liability

for those now on pension which cannot be directly and quantitatively

related to responsibility of current employers are properly applied to the

industry at large on a tonnage basis But expenses relating to currently

employed workers are not

Use of a whole tonnage formula in the circumstances shown in these

proceedings will have the effect as explained by the AU 1 0 120

122 125 126 129133 of taxing PRMSAlPRMMI and other containerized

carriers which have developed efficiencies in non cargo loadingunloading

functions not related to the containerization which lay behind the adoption

of the full tonnage formula for those efficiencies by assessing benefits

for currently employed workers on a tonnage basis 3 Moreover the excep

tions to the formula for transshippedrehandled cargoes and domestic car

goes exacerbate this basic unfairness by creating additional penalties on

efficiencies not directly related to the containerization which was the concern

of LM 86 and its predecessor agreements See ID 122 125 126 32 As

PRMSAlPRMMI has shown the present formula is particularly unfair to

it because it has great efficiencies not related to the decision to containerize

both in the non cargo loadingunloading functions and in cargo loading

unloading functions See ID 123 126 130131 and PRMSAlPRMMI

Reply to Ex 23 30 and record computations there made

The best means of record to remedy the unfairness created by the whole

tonnage formula in the context of the proceedings is the Type IType

II formula adopted by the AU where Type I costs those related to

current fringe benefit expenses for currently employed workers are funded

ment to brealcbulk cargo because of its low productivity was the very reason for the creation of aformula

based panially on tonnage in the first place See NYSA v FMC S71 F 2d at U33l234 nT 492 F 2d

at 622

31 An elaboration of the unfairness of the effects of awhole tonnage formula on non cargo loadingunload

ing functions is found at pages 8589 itifra

33 An elaboration of the unfairness of the exceptions to the whole tonnage formula for transshipped

rehandled and domestic cargoes is found at pages 89101 itifra

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 657

NEW YORK SHIPPING ASSOCIATION ET AL

on a man hour basis and all other expenses are funded on a

tonnage

basis 33

The argument in support of the whole tonnage formula here rests upon

the expert testimony of Respondents witness Mr Sclar and upon the

general contention that longshoremen are industry wide employees for all

purposes

There is nothing in law or fact to convince us that all longshoremen

are industry wide employees for the purpose of determining who should

bear the expense of those longshoremen actually employed for benefits

which are substitutes for wages or designed as deferred compensation

The ALJ s treatment of this matter is thorough and correct The facts

are as found by the ALJ and the law is not to the contrary See JD

133 134 NLRB v Truck Drivers Local Union No 449 353 U S 87

1957 Truck Drivers cited by Hearing Counsel does not stand for the

proposition that all longshoremen should be treated as industry wide employ

ees for the purposes of allocating responsibility for benefits It merely

holds that in a multi employer bargaining unit employer solidarity to pre

serve that unit could be enforced by an industry wide lock out of union

employees when a union struck a single employer It does not address

employer responsibility for benefit cost or how employees are to be treated

with respect to such costS 34

Respondents own actions moreover are inconsistent with the idea that

all benefits must be borne by the entire industry on a tonnage type basis

Wages like benefits are fixed generally by the multi employer collective

bargaining agreement Yet these wages are paid not on some proportion

of tonnage moved basis but on an hourly basis by the employer utilizing

the labor Why should not fringe benefits which are substitutes for such

wages or wages deferred for men actually working not be paid on

the same basis

Insofar as witness Sclar s testimony is concerned we find it unconvincing

on the point of appropriate assignment of assessment burdens here Even

if it were not inconsistent with his earlier testimony in the West Coast

33We reject Hearing Counsel s contention that the present NYSAlILA formula is fair because it over

assesses some cargo for some benefits and underassesses it forothers and makes up for it by under assessing

certain other cargo for some benefits and overassessing it for others See Excep 5 7 and pages 35 36

supra Such aformula would hardly appear to be fair Cf the famous dietum in the Constitutional realm

of fairness the equal protection clause of the 14th amendment Equal protection of the laws is not

achieved through indiscriminate imposition of inequalities Shelley v Kraemer 334 U S I 22 1948 More

importantly however the present formula does not balance over assessments and under assessments

It properly assesses breakbulk cargo in light of the great burden upon it which would be imposed by aman

hour assessment The cap on the total breakbulk assessment we and the AU adopt preserves this treatment

The present formula also properly assesses containerized cargo for industry wide Type II costs However

the present formula overassesses certain containerized cargoes for wage type benefits for other containerized

operators employees afault corrected by the man hour tonnage formula required here

34Justice Harlan sreference to Truck Drivers in his concurrence in Volkswagen was solely for the purpose

of noting that the longshore industry like the trucking industry was one in which collective bargaining was

done with multi employer units at 283 Nothing was said about the consequences of this for the purposes

of assigning responsibility for benefit funding and aside from the fact that benefit responsibility must be

assigned within such unit nothing follows from it

27 F M C
658 FEDERAL MARITIME COMMISSION

case

35 it would not convince us Regardless of the existence of the West

Coast testimony we find that because of the varying productivities within

the containing sector and the mix of benefits here involved many of

which relate to benefits paid in lieu of wages or as deferred compensation

to presently working longshoremen a whole tonnage assessment is not

appropriate

NYSAlILA s criticism of the AU s treatment of witnesses as inconsistent

Excep 14 is unwarranted The AU s statement that the case does not

essentially appear to rely upon sense perception memory reputation etc

which are amenable to crossexamination was made in a preliminary

order prior to hearing whereas the AU s credibility determinations were

made after hearing and after he had had the opportunity to observe and

analyze the conduct of witnesses on the stand Nor is it fair to contend

as NYSAlILA do see Excep 44 that the AU found their witnesses

generally not credible The Presiding Officer found witness Sclar and wit

ness Fier not credible but only in the context of these proceedings and

only for sufficient reasons fully described See 1 0 108112 171 172

On the other hand the AU found Respondents witness Camisa very credi

ble and in fact adopted his analysis of computation of unfunded pension

benefits for pensioners over that proferred by PRMSAlPRMMI s witness

The Special Privileges

We agree with the AU that the special privileges for domestic and

transshippedrehandled cargoes and for the handling of empty containers

and the stuffingstripping activity are unwarranted As NYSAlILA recog

nize the standard justification for special treatment is the likelihood that

the cargo or work involved will be diverted away from a port On exception

NYSAlILA argue for the first time that fairness is also a justification

and PRMSAlPRMMI criticizes such approach as improperly timed See

page 46 supra We are inclined to agree with PRMSAlPRMMI but need

not decide the question Assuming arguendo that the justification is prop

erly raised at this time it adds nothing to NYSAlILA s case Fairness

in the context of these proceedings means a proper allocation of benefits

and burdens a matter which must be reached in any case See pages

5761 supra

It must be borne in mind that under the present formula the carriers

engaged in handling of empty containers and the stuffingstripping activ

ity pay nothing toward the fringe benefits of their employees who perform

such activities This is so because the present formula is based on tonnage

and these activities involve no cargo transportation The consequence of

35 We find that the AUproperly admined Exhibit 48 Mr Sclar s West Coast case testimony for impeach

ment purposes and that the Respondents had adequate opportunity to rehabilitate Mr Sclar both on oral

examination which they declined and on brief We further fmd that although points of difference between

the West Coast case and this one were pointed out by Respondents on brief they did not adequately rebut

Mr Sclar s basic admission in the West Coast case that there is a substantial overkill potential in assess

ment on a tonnage basis during times of declining man hours See 1 0 III

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 659

NEW YORK SHIPPING ASSOCIATION ET AL

this is that because all deep sea employees are covered by the assessment

formula agreement including those involved in handling empty containers

and stuffingstripping other employers must pay for the benefits due the

employees of those carriers who engage in such activities NYSAlILA s

assertion that the handling of empties and the stuffingstripping of containers

are assessed under the NYSA ILA formula Excep 21 is merely a

euphemistic way of saying that carriers who do not engaged in these

activities pay for all of the fringe benefit expenses of those who do

including employee wage type benefits

There is no showing that either the handling of empty containers or

the stuffing stripping activities will be diverted away from the Port of

New YorkNew Jersey if the special privilege they now enjoy is removed

Removal of the privilege will result in their paying the man hour portion

of the man hour tonnage assessment found by the ALJ to be proper The

man hour rate at the other ports is considerably higher than the approxi

mately 635 per man hour rate which would apply at New YorkNew

Jersey under the modified formula See ID 81 finding 20 Similarly

the stuffing stripping activity is required under the Rules on Containers

in the Master Contract in effect at all relevant ports One cannot evade

the Rules by diverting cargo to other portS 36

Nor is there anything unfair or unjustly discriminatory in making

the carriers for whom these activities are performed bear the cost of paying

for the fringe benefits of the longshoremen they actually use in these

activities The fact that as NYSAlILA point out the increase in empty

containers is due to trade imbalance refers to a peculiarity of certain carriers

operations the direct wage type expenses of which should not be borne

by carriers not engaging in those operations We agree with NYSAlILA

that so far as GAl and related activities are concerned there should be

no assessment against the handling of empty containers and stuffing

stripping As NYSAlILA assert with respect to transporting empties stuff

ingstripping and maintenance work containerization is irrelevant See

NYSAlILA brief on Excep 45 48 These activities do not involve the

transportation of cargo and are in effect in no different position now from

that which would have obtained in pre containerization days Stuffingstrip

ping is like breakbulk cargo handling NYSAlILA brief on Excep 48

and the repositioning of empties is not a benefit the carriers secured

at the bargaining table NYSAlILA Brief on Excep 47 48

36 NYSAlILA contend that PRMSA does not comply with the Rules on Containers and therefore enjoys

aspecial privilege its competitors do not The record appears to indicate that the ILA may have granted

some concession to PRMSA with respect to compliance with the Rules on Containers See Ex 14 Att E

pp 445 Tr 244248 Ifthis is true it is hardly free to complain about the consequences of its actions

The Rules themselves provide for no such exception The question of the Rules validity under the labor

laws is now pending before the Supreme Court Docket No 84861 NLRB v JLA and the Commission

is presently investigating their lawfulness under the shipping laws in Docket No 81 11 50 Mile Container

Rules Their existence is however a fact of transportation life and their necessary embodiment in tariffs

renders compliance with them until their validity has ultimately been determined a

necessity

27 F M C
f

660 FEDERAL MARITIME COMMISSION

The man hour component of the assessment formula is however so

constructed that no assessment will be levied under it for anything other

than benefits due employees actually working This frees those carriers

handling empty containers and engaged in stuffingstripping from paying

for GAl and other industry costs related to containerization It also provides

another very significant advantage to such carriers It frees such carriers

from paying for industry wide expenses not related in any tangible way

to containerization i e welfare and clinic benefits for retirees and their

dependents and the unfunded liability for pension benefits for already retired

longshoremen See pages 7680 supra Ifin fact some special recognition

should be given employers engaged in these activities because of the man

hours which they add and hence reduce port wide GAl obligation surely

this additional privilege provides sizeable special recognition 37 We therefore

concur that a man hour assessment on these activities for Type Ibenefits

is proper

We also agree with the AU that the likelihood of diversion to ILA

Metro labor for maintenance work justifies the retention of the exemption

of such activity from assessment There is no requirement that deep sea

labor be used for such work and PRMSA in fact already uses Metro

labor for maintenance work Its willingness to bear the cost ofother carriers

maintenance work in the interests of reducing GAl is indeed commendable

Transshipment and Domestic Cargoes

At this point some preliminary discussion seems appropriate with respect

to a contention that runs through NYSAlILA s position with respect to

the exceptions generally that no assessment should be made for GAl

and GAl related benefits for transportation services on which man hours

are expanding It is not true that the mere fact that man hours are increasing

means that an activity should be excepted from the responsibility to pay

for an increasing GAl obligation This is precisely the argument made

by the Puerto Rican carriers in Agreement No T 2336 and rejected by

the Commission and the Court of Appeals See 15 F M C at 255 270

see also TTT at 6258 The obligation to pay for GAl is unrelated

to the question of whether or not man hours are expanding or contracting

on an absolute basis The critical question is the relationship of the man

hours utilized in the involved activities before and after the advent of

containerization The fact that man hours are expanding fails to take into

account the much greater extent to which man hours for those activities

would expand if such operations were not containerized

37The Port Authority which seeks manhour assessment which would include industry wide costs not relat

ed to containerization computes such assessment as in the neighborhood of 900 per man hour See Excep

11 12 The man hour assessment which would have obtained during 1982 1983 under the modifications we

require would have been about 63S per man hour Thus the additional saving to carriers engaged in han

dling of emply containers and performing stuffmgtsttipping activities over and above what they receive

from the freedom of paying for expenses related to containerization would appear to be around 26S per

man hour

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 661

NEW YORK SHIPPING ASSOCIATION ET AL

Insofar as transshipment is concerned NYSNILA themselves recognize

that The ability to transship cargoes is not a benefit provided by the

NYSA ILA labor contract The benefit received by the carriers was the

union s permission allowing them to transport cargo in containers

Transshipment is not synonymous with containerization Breakbulk carriers

can transship NYSAILA Brief on Excep 45 46 It is the use of

transshipment in connection with containerization rather than for breakbulk

transportation that creates a GAl problem for which carriers utilizing the

containersized service are responsible There is no unfairness in making

them bear the burden of such operation As NYSNILA continuously point

out all carriers are free at least theoretically to engage in any particular

type of transportation service Those choosing to engage in containerized

transshipment should not make carriers not so choosing bear the increase

in GAl due to their containerized as opposed to breakbulk operations 38

The more difficult issue relates to the likelihood of diversion which

will be created if the exception for transshippedrehandled cargo is re

moved Sea Land claims that it will occur because it cannot be expected

to bear the additional 8 3 million which will be assessed against it as

a result of the removal of the exception See ID 138 The AU found

that removal of the exception will cause Sea Land to bear an additional

6 or so per ton under the modified assessment formula and that there

is no showing that it cannot afford to do so without leaving New Y ork

New Jersey See ID 140141 The matter comes down to one of drawing

inferences from the available evidence See Svenska 390 U S at 249

On the one hand it is not at all clear that transshipped cargo will be

lost if the exception is removed Although Sea Land s witness stated in

prepared testimony that Sea Land would seriously consider leaving the

Port of New YorkNew Jersey if the transshipmentrelay exception were

removed on cross examination the seriously consider was rendered vir

tually meaningless by testimony that even a 05 increase would cause

consideration Tr 725 726 39 Moreover as the AU found Sea Land s

operations are such that a shift away from New YorkNew Jersey as its

primary transshipment center is neither likely nor feasible 40

Removal of the transshipment exception does not cause inconsistency

between the treatment of the likelihood of diversion in the Port Authority s

case and such likelihood in PRMSAPRMMI s case On the other hand

the AU finds that the assessment differential between New YorkNew

38 The fact that transshipment services pay assessment costs at one port should not as Massport alleges

see page 53 supra relieve them of theobligation of paying such costs at the other port they utilize Carriers

engaging in containerized transshipments operate for their own reasons in afashion which utilizes labor

and creates GAl and related problems at both ports and should bear the responsibility for their actions

39Sea Land stestimony here should be contrasted with the admissions of the carriers in the Port

Authority s case which ware unequivocal and not undermined by cross examination

40The case of possible diversion for U S Lines because of the removal of the transshipment exception

is even weaker and is adequately and correctly dealt with by the AU See JD 142 143 In this connection

we agree with PRMSA PRMMI that the AUsfigures with respect to the increase of U S Line s assessment

burden because of tbe removal of the exception for transshipped cargo are correct See pages 34 50 supra

27 F M C
662 FEDERAL MARITIME COMMISSION

Jersey and other ports is responsible for diversion of cargo from New

YorkNew Jersey On the other hand he finds that the removal of the

excepted treatment for transshipped cargo will not result in diversion

of such cargo from New YorkNew Jersey The inconsistency is apparent

rather than real First of all the removal of the exception would result

in an average assessment cost for throughput containers of about 203 75

6 15 per ton x 29 tons per container plus 6 35 per man hour x 4

man hours or an increase in per container assessment cost of about 178 35

6 15 per ton x 29 tons per container This is far removed from the

300 500 per container assessment cost which Sea Land indicated would

cause a diversion from the Port Moreover the AU s factual finding of

diversion in the Port Authority s case was made in quite a different context

from his finding of lack of diversion in the transshipment situation It

is one thing to divert containers from the Port of New YorkNew Jersey

to avoid an assessment differential It is something entirely different to

change one s entire operations to avoid an increased cost which as shown

would be less per container than the assessment differential under the

present formula

The Port of New YorkNew Jersey is presently the only Atlantic Coast

port served by both Sea Land s European services and its Central American

Caribbean service and the only North Atlantic port with more than one

Sea Land service of any type Tr 687 94 7l5 The only other North

Atlantic call at Portsmouth presently produces only small amounts of

cargo under 320 weekly units compared to the 2200 weekly slots available

in Sea Land s North Atlantic operation Tr 68 89 Sea Land s existing

terminal facility in Portsmouth consists of only 2022 acres Tr 703

and is insubstantial in comparison to its 194 acres of space 5 383 trailer

spaces and six cranes in Elizabeth New Jersey Ex 49 at 15 Its feeder

vessels from Baltimore do not stop at Portsmouth because they must go

up to New York to connect with the three line haul vessels which serve

that port Tr 688 89 Under these circumstances any substantial shifting

of Sea Land s

relayed cargoes away from the Port of New YorkNew

Jersey is extremely unlikely 41

The AU although finding that a general transshipment exception was

not justified found that a special transshipment exception was justified

for services between New York New Jersey Boston Providence See 1 0

155 159 As we have shown above the mere addition of man hours does

not justify an exception from paying for GAl and related expenses The

exception of the New York New Jersey Boston Providence service must

rest upon something else The AU justified the exception on the basis

41 Contrary to Sea Land s contention on exceptions page 13 there is no evidence of record that it has

previously used its Portsmouth facility as a relay point Such relay activity does not show up in Sea Land

cargo canying evidence Ex 23 All D at oo12 14 Sea Land s witness Mr Sutherland testified that

Baltimore cargoes are moved through Portsmouth only on an exceptional basis force majeure or

misconnection something like that Ex 14d All A at 38

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 663

NEW YORK SHIPPING ASSOCIATION ET AL

of the injury its removal would cause to McAllister the Port of Boston

and shippers It is clear that McAllister will be forced out of its present

transshipment service if the exception is removed It is also clear that

removal of the exception will aggravate the GAl problem at Boston There

was no shipper testimony on the mauer but as a theoretical maUer it

is always to a shipper s advantage to have alternative forms of service

The problem is whether it is fair to preserve the exception based on

these considerations We find that it is not McAllister is able to perform

its transshipment service only by virtue of its exception If there is as

we have found no justification for the transshipment exception for Sea

Land and U S Lines it should follow that there should be no exception

for the same transshipment when performed by McAllister McAllister is

not a member of NYSA and does not directly pay assessments Ex 27

Au A 21 23 Ex 30 Au D 2 It performs its service for NYSA

members who reap the benefit of the exception U S Lines itself uses

McAllister s barge service Tr 810 and Sea Land alleges that it uses

McAllister s

tugs for some of its transshipments See Sea Land Excep

17 The result of the removal of the exception for Sea Land and US

Lines but its preservation for McAllister would be the expanded use of

McAllister s service for Sea Land and U S Lines Massport informs us

that new towing and barge services similar to that of McAllister are entering

the market See Excep of Massport 7 The result of all of this will

be that what the AU intended to be a limited exception will be turned

into a broad exception allowing carriers to do indirectly what they cannot

do directly

The sole justification for the AU s treatment was his well intentioned

desire to protect McAllister The possible desire of shippers to use an

alternative service and the protection of the Port of Boston against increasing

GAl liability were not deemed sufficient to grant an exception to Sea

Land and U S Lines The AU recognized that O ne can argue as

may PRMSA that private industry at New York which has its own costs

and problems ought not to be called upon to subsidize McAllister or

the Port of Boston and there is no evidence on this record that any

New England shippers are asking for a choice between truck and water

service through Boston ID 158 The exception was given because

McAllister is not Sea Land nor U S L but a single operation carrier

ID 158 and because fairness required that an exception be given to

competing carriers ID 159 fn 43 The basic reason for the exception

was the AU s determination that Although PRMSA s evidence and logic

is for the most part appealing I cannot find under a standard of fairness

and unjust discrimination that killing McAllister is the right thing to do

ID 157

We cannot allow the McAllister type exception to remain There

is no record shipper support for it and if shipper support exists the service

may continue without such exception Moreover the carriers at New York

27 F M C
664 FEDERAL MARITIME COMMISSION

cannot be called upon to protect against industry problems at Boston so

long as the formula itself is reasonable and fair See BSA 706 F 2d at

12401241 Finally McAllister should not be allowed to retain the cargo

as the record clearly shows it does solely because of the existence of

the exception in the absence of which All the Boston Providence container

traffic would be diverted to competing truck transport Ex 30 Au D

34 see also Ex 46 at 26 JD 156 The exception provides an economi

cally artificial prop the expense of which must be borne by other carriers 42

We recognize that our conclusion with respect to the lawfulness of ex

cepted treatment may cause a peculiar problem for the McAllister service

Unlike the other transshipment services there is a clear showing that but

for the man hour exception for transshipped cargo the McAllister service

will not survive This places McAllister in a special situation Although

one should not be allowed to profit from activities which are found to

be unlawful it seems unfair to impose a sudden shift in assessment burden

the result of which would be to drive a carrier apparently operating in

good faith reliance upon an existing exception to the tonnage formula

out of a particular service PRMSAlPRMMI itself recognizes the peculiarity

of McAllister s situation and suggests that some method might be used

to protect it against sudden great shifts in financial burdens PRMSA

PRMMI Exceptions 2627

The Commission finds one ofthe suggestions ofPRMSAPRMMI appeal

ing We agree that a gradual phasing outo tbe man hour assessment

and a phasing in of a man hour tonnage assessment of the type prescribed

will act as a cushion against too sudden a shift in cost burdens 43 Such

an approach is similar to the approach proposed in the past with respect

to credits granted to those due assessment adjustments Partial credits spread

over a larger period of time have been deemed proper if a grant of full

credits at once might create too sudden a shift in costs See Agreement

j

I

42 The contention that the transshipment exception should be preservedbec ause it provides additional work

for longshoremen is without merit As noted above see pages 8990 thetransshipment exception Improperly

removes the obligation to pay for GAl related expenses which should be borne by containerized trans

shipment operaton Moreover the contention that more man houn may be consumed in barge transportation

as compared to truck transportation acontention which may be presumed but is cenainly not proved in the

record see Tr 404 408 does not justify the exception The ream shOws forexample that even assuming

a loss at the Pan of New YorkNew Jeney of all man houn for McAllister s service to man houn fortruck

transport the assessments would be fully funded See Excep of PRMSAlPRMMI 21 22 and computations

there made The contention that the llAwishes jobs rather than GAl because GAl is based only on amini

mum hourly guarantee Oral Argument Tr 5455 5859 Is of course true However insofar as assessment

agreemenli are concerned the coutts have observed that the union has no proper interest in how assess

ments are funded long as they are funded See eg Judge Friendly s opinion in NYSA de lLA v FMC

495 F 2d 1215 1222 2d CIr 1974 and Justice Harlan s concurrence in Volkswagen v FMC 390 U S 261

290 1968 NYSA and llAthemselves recognize that it Is notthe function of the assessment formula agree

ment here in Issue to provide full work opponunlty as opposed to the GAl guarantee As they themselves

state afringe benefit assessment has one objective to ensure that thecollective bargaining contractual obli

gations are funded and the benefits provided See NYSAlILA Opening Brief 7374 see also Ex 29 VI

2 An assessment formula could well provide for a guarantee in excess of an hourly minimum but this

one did not do so

43We reject the other PRMSAlPRMMI suggestion that a

cap could be placed on the assessment payments

of McAllister and competing services at present levels as toomuch akin to an award for unlawful operations

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 665

NEW YORK SHIPPING ASSOCIATION ET AL

No 2336 19 F M C 248 263 1976 affd sub nom New York Shipping

Association v F MC 571 F 2d 1231 D C Cir 1978

The choices of phasing out the man hour excepted treatment are many

and could range from complete exception for a certain time period with

a shift to regular man hour tonnage assessment at the end of the period

to a gradual increase by small increments over that period We leave

the choice to NYSAlILA and the parties involved in such services Only

three conditions will be imposed with respect to the phasing out process

First the phasing out ought not to extend beyond September 30 1986

the expiration date of LM 86 the agreement upon which a carrier s good

faith reliance may be presumed to be founded Secondly although the

phasing out is intended to protect the McAllister service from sudden

shifts in costs and to allow it an opportunity of finding other means

of operating it would be unfair to competing services not to allow them

the ability to compete with McAllister on an equal basis Therefore the

phasing out must be made available to all competing carriers 44 Lastly

to protect against unfairness and the possible expansion during the phasing

out period of services at BostonProvidence at the expense of such services

at other ports the phasing out of the excepted treatment will apply to

all transshipment services With these three limitations the parties are free

to fashion a means of gradually removing the unfairness and unlawful

discrimination caused by the special treatment of the transshipment services

The Commission recognizes of course that the remainder of the present

collective bargaining period may not in fact be sufficient to permit accom

modation of transshipment operations to a man hour tonnage assessment

We cannot presume however that commitments or capital expenditures

have been made or operational difficulties exist which would prevent

the phasing out of the special privilege within the period remaining

under the present collective bargaining agreement If in fact such is the

case and data is submitted to us to support such commitments expenditures

or operational difficulties we would pursuant to our authority under the

MLAA see page 110 infra permit an additional period up to and including

September 30 1987 to allow such phasing out Those supporting a

phasing out beyond September 30 1986 should however so advise us

together with supporting data within the time set herein for implementation

ofour Order

Insofar as the exception for domestic cargoes is concerned we agree

with the AU s disposition of the matter See JD 143 148 The only

data that NYSAlILA are able to muster in support of the need for the

continuance of this exception besides the discredited argument that ex

panding man hours should result in the relief of GAl responsibility are

the isolated statistic that the domestic trade has experienced a decline

44 The necessity for equality of treatment of McAllister and its competitors in the interests of fairness was

recognized by bothPRMSNPRMMI Exceptions 2627 and the AU ID 159 fn 43

7

A r
666 FEDERAL MARITIME COMMISSION

in volume since 1973 and the fact that the Commission at one time found

the exception lawful See NYSNILA Brief on Excep 49 Excep 50

NYSA s own statistics however show a steady increase in domestic con

tainer carryings from 1980 to 1983 Ex 51 Moreover whatever the

situation may have been when the Commission last examined the assessment

burden on the domestic trade 45 it is clear as found by the AU LD

143 148 that the trade is now healthy and expanding

Respondents accuse the AU of inconsistency with respect to the treatment

of certain activities for which continued special treatment was allowed

i e breakbulk cargoes maintenance work and the New York New Jersey

Boston Providence transshipment service They claim that activities such

as handling of empties stuffingstripping and transshipment in general

like the activities for which special treatment was sanctioned add manhours

and thus should be given special treatment What respondents fail to con

sider however is that the AU did not base his conclusions with respect

to the special treatment which is preserved merely upon the addition of

manhours A reading of his decision will show that each special assessment

sanctioned is based upon special consideration i e breakbulk cargoes

inability to bear the consequences of a straight man hour assessment LD

184185 and page 77 supra and the clear possibility of driving mainte

nance work away from deep sea ILA labor if an assessment were imposed

on such work LD 154155 and page 89 supra

46

There is no inconsistency in our treatment of handling of empty containers

and stuffingstripping which will be assessed on a man hour basis

breakbulk cargo which will be assessed on a capped man hour basis

and transshippedrehandled and domestic cargoes which will be assessed

on a man hour tonnage basis The assessment of transshippedrehandled and

domestic cargoes on a man hour basis alone would allow them to escape

liability for GAl related expenses which in light of the containerized nature

of these operations would be unfair see pages 89 90 100101 supra

Handling empty containers and stuffing stripping however bear no GAI

type responsibility and should be relieved from such obligation See pages

85 88 supra The additional relief of handling of empties and stuffing

stripping from industry expenses not related to containerization in any

definable way i e welfare and clinic benefits for retirees and their depend

ents and unfunded liability for pension benefits for those now retired

acts to reward those activities for reduction of port wide GAl expenses

Similarly it would be unfair to tax breakbulk cargoes on a straight

man hour basis in light of the substantial disparity between man hours

4

The record before the Commission during its last examination showed asmall and declining domestic

trade SeeAgreement No T 2336 15 F M C at 274

46The ALJ s exception for the New York New Jersey Boston Providence transshipment was also based on

a circumstance apart from the addition of man hours lhe certainty of the demise of a

transshipment carrier

so far as the subjectlransshipment is concerned if excepted treatment were not granted to such carrier We

have disallowed this exception because it is based upon an inequity of cost burdens but have permitted a

phasing out of the transshipment exception to cushion the impact of our decision See pages 97 100 supra

t
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 667

NEW YORK SHIPPING ASSOCIATION ET AL

of labor employed and amount of cargo moved See page 77 supra

The cap adopted by the ALJ is a sensible and equitable solution which

at the same time preserves the essential soundness of the man hour tonnage

type fonnula and protects against inequities which could arise from a too

rigid application of that fonnula On the other hand transshippedrehandled

and domestic cargoes like containerized cargoes in general bear some

responsibility for industry wide expenses not directly related to

containerization The removal from breakbulk empties and stuffing

stripping of the burden of these industry wide expenses relates not to

the mere fact that man hours are expanding on those activities but to

the fact that they are expanding in ways which are not related in any

way to benefits of containerization Breakbulk is a pre containerization

operation stuffingstripping is a surrogate for breakbulk operations and

handling of empties is really a burden rather than a benefit of

containerization On the other hand as the ALl explained the fact that

there are more pension beneficiaries than employees actively working or

available for work in the New YorkNew Jersey longshore industry is

attributable to some extent to containerization and consequent incentives

to men to retire ID 181 see also Ex 36 Au A at 3 56 The

indirect containerization expenses are and should be borne by carriers

which as NYSA ILA notes could perfonn their operations in a non

containerized fashion Brief on Ex 45 46 and choose to take advantage

of containerization in connection with their operations

NYSAILA s contentions that the assessment is fair to PRMSAPRMMI

because it could engage in the activities for which special treatment is

granted under their current assessment fonnula Brief on Excep 42 44

and that over all PRMSAPRMMI is as well off as other carriers Brief

on Excep 5053 are without merit PRMSAPRMMI bears the burden

under the current assessment fonnula of other carriers lesser productivities

not the result of the containerization expansion which was the problem

which the assessments were designed to solve As we have noted a unifonn

assessment is improper where responsibilities and productivities vary even

within a single transportation sector See pages 79 81 supra and nT

492 F 2d at 52569 Agreement No T 2336 15 F M C at 265 272 47

Nor can it be seriously argued that PRMSAPRMMI is as well off as

other containerized carriers when wages and container royalties are factored

into the equation Wages and container royalties are not funded under

the assessment agreement Their validity does not depend upon the

lawfullness of the assessment fonnula agreement and the Commission has

been upheld in making a separate decision relating to container royalties

without reference to the assessment agreement See BSA 706 F 2d

47 The full extent of the inequities caused to PRMSA by the special privileges is seen graphically in the

comparisons set forth at pages 125 126 of the Initial Decision

27 F M C
668 FEDERAL MARITIME COMMISSION

We need not reach PRMSAPRMMI s diversion arguments in light of

our resolution of its complaint Since the Commission finds that the formula

is unfair and unjustly discriminatory to PRMSAMI and must be modi

fied on the basis of PRMSAMI s benefits burdens arguments it

is unnecessary to go on to determine if it has also made out a case

of unlawful diversion The exceptions to the Initial Decision based on

PRMSAMI s diversion theory are therefore rendered moot

The Specific Type IType II Allocations

We concur with the AU s determinations with respect to the specific

allocations of assessment expenses between Type I and Type II costs

See 1 0 169 187 We find them to be well reasoned and correct and

adopt them as our own

The 25 Reduction On The Tonnage Assessment For The Puerto Rican

Trade

The Commission agrees with the AU s conclusion that an additional

25 reduction in the tonnage portion of the assessment for the Puerto

Rican trade is not warranted First the 25 figure is admittedly merely

the product of an expert s opinion See Excep of PRMSAPRMMI 16

18 Ex 46 at 28 This in itself might not be fatal but there seems

to be no practical way to quantify how much relief the trade needs or

how much any relief granted will actually find its way to the citizens

of the Commonwealth 48 Moreover even were we able to make such quan

tifications relief of the type here sought for the Puerto Rican Trade does

not appear to be appropriate in these cases

In part PRMSAPRMMI S position rests on its contention that it should

be taxed no more heavily with assessment burdens than the domestic trades

because it has similar expenses eg

the employment of ILA labor at

both water terminals for its transportation See Exc 5 Our modification

of the assessment formula agreement to remove the excepted treatment

for domestic cargoes however places the Puerto Rican trade on an equal

footing with the domestic trades

The main legal argument raised by PRMSAMI in support of its

requested 25 reduction is that the reduction is in keeping with the special

treatment given the Puerto Rican trade in our earlier consideration of Puerto

Rico s position vis a vis assessments in Agreement No 2336 15 F M C

which was affirmed by the Court of Appeals in TIT Examination of

our action in the earlier proceeding however reveals that the relief there

granted the Puerto Rican trade from a particular man hour assessment was

based on its lack of responsibility for the short fall in man hours funded

by that assessment See 15 F M C at 265 272 TTT at 52568 and

page 60 supra Although the Commission and the Court noted the beneficial

It us quite possible that none of any special relief we did grant would reach Puerto Rican citizens be

cause of PRMSA s fmancial situation See ID 162 166168

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 669

NEW YORK SHIPPING ASSOCIATION ET AL

effect of cushioning the Puerto Rican economy from severe shifts in assess

ment burdens no greater relief was granted the Puerto Rican trade than

that based solely on its lack of responsibility for man hour shortfall There

fore Agreement No 2336 and TIT do not offer a precedent for the 25

reduction over and above the assessment burden which PRMSAPRMMI

would otherwise bear On the other hand the effect of such reduction

would be to make other carriers bear the Puerto Rican trade s

responsibility

for GAl precisely the approach rejected in Agreement No 2336 See 15

EM C at 255 270 see also TIT at 6258

The requirement that carriers be made to bear other carriers GAl burden

is precisely that to which PRMSAPRMMI rightly we have found objects

with respect to the McAllister barge service That a broader interest is

represented by the Puerto Rican trade than is represented by the McAllister

service is undoubtedly true It is not however the type of interest which

an organization like NYSA should be made to bear in proceedings of

this type We assume arguendo that the removal of the public interest

standard from the MLAA would not prevent the Commission from consider

ing public interest factors in making determinations under the unfair

and unjustly discriminatory standards Cf Reduction in Freight Rates

on Automobiles North Atlantic Coast Ports to Puerto Rico 8 F M C 404

1965 Automobiles The situation presented in a rate case like Automobiles

is however far different from that presented here Although as PRMSA

PRMMI correctly observes NYSA s members are profit making entities

NYSA itself is not and its objective here is only to pay the employers

obligations to the longshoremen to whom they are due These obligations

do not involve any profit but are merely necessary business expenses

which are paid under the collective bargaining agreement It would be

unfair to require that these expenses be shifted to force carriers to pick

up other carriers GAl type responsibilities a course of action which

as noted above was explicitly rejected in Agreement No 2336 in requiring

the Puerto Rican trade to pay its own GAl expenses

49

The Remedies

Modification and Assessment Adjustments

If as we have found the present Agreement is unlawful the MLAA

requires both disapprovalmodification and assessment adjustments 5o Such

adjustments are due only Complainant PRMSAPRMMI since it is the

only complainant which has paid them The Port asks only for and would

49 As the court in TIT noted even the Commonwealth s economic witness properly conceded that

Puerto Rico must be prepared to bear some fair share of the common burden at 628

sOThe MLAA states that the Commission shall disapprove cancel or modify any assessment

agreement or charge or assessment pursuant thereto that it finds to be unjustly discriminatory orunfair

as between carriers shippers or ports and shall remedy the unjust discrimination or unfairness caused

by an assessment of charge forthe period of time between the filing of the complaint and the final decision

by means of assessment adjustments Emphasis supplied

27 F M C
670 FEDERAL MARITIME COMMISSION

be entitled only to modificationdisapproval In the context of these proceed

ings direct modification by the Commission is preferable to a simple dis

approval to be foIlowed by negotiation or conditional type Commission

action for several reasons Mere disapproval or in the alternative conditional

modification could result in a lapse in the funding of the Agreement

which would be contrary to the public interest in maintaining continuous

funding of such agreements which lay behind the MLAA S Rep No

854 96th Cong 2nd Sess 14 1980 Moreover Justice Harlan made

clear in his concurrence in Vokswagen that the Commission should not

reject an assessment formula when there are no preferable alternative

routes to coIlection of the necessary amount at 290 This implies a

requirement that there be some minimal determination by the Commission

of what preferable alternative routes exist The time constraints of MLAA

which mandate that the Commission s proceeding end by February 27

1985 require a final form of agreement by that date S Rep No 854

at 11 14 Amend the Shipping Act 1916 Hearing on H R 6613 Before

the Subcommittee on Merchant Marine and Tourism of the Senate Commit

tee on Commerce Science and Transportation 96th Cong 2d Sess 20

22 1980 Statement of Peter Lambos Counsel NYSA As a practical

matter the parties to these proceedings do not have the usual option of

rejecting a conditional modification since there is an existing obligation

to fund agreements independent of the shipping statutes Lastly direct modi

fication is the traditional form of Commission action for assessment agree

ments shown to be unlawful See Agreement No T 2336 15 F M C at

287

While the Commission is required by the MLAA to issue its final

decision within one year of the date of filing of the complaint PRMSAI

PRMMI as a successful complainant is entitled to assessment adjustments

for the period of time between the filing of the complaint and the final

decision Therefore if the period of adjustments extends to the

final day of decision the Commission cannot as a practical matter issue

an order on that day finaIly disposing of the case Until the final day

the total of adjustments due does not even exist and of necessity its

value will not be known until some time thereafter We find therefore

that the final decision language relates to the substantive modifications

of the assessment formula and not to the necessary assessment adjustments

Congress expressly recognized the complexity of the assessment adjust

ment process and advised that the Commission has broad discretion

unfettered by the constraints of other provisions of the Shipping Act

to fashion appropriate remedies for unfair or discriminatory assessments

S Rep No 854 at 14

This broad discretion to fashion appropriate remedies aIlows

us to resolve another quandary posed by the assessment adjustment process

Since the present formula is unlawful it must be modified and since

the Commission s final decision must be issued by February 27 1985

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 671

NEW YORK SHIPPING ASSOCIATION ET AL

the modification must be effective on that day We realize however that

as a practical matter this may be difficult Moreover insofar as the assess

ment adjustments are concerned as noted above the effectuation of a

remedy on the final decision date is impossible The flexibility granted

us to fashion a

remedy for unlawful assessment adjustments however

provides a solution to the quandary and one which permits Respondents

sufficient time in which to implement the mixed man hour tonnage method

of assessment here mandated without undue disruption to their operations

We will as we must modify LM 86 as of February 27 1985 We will

however permit NYSNILA 61 days from the date i

e until April 29

1985 to make the adjustments to effectuate any necessary changes By

that date of modified LM 86 conforming to the requirements here set

down as well as a statement of the adjustments made in PRMSNPRMMI s

favor must be filed To the extent such adjustments cannot be made until

after February 27 1985 additional adjustments must be made to insure

that PRMSNPRMMI receives credits for any portion of the period between

February 27 and April 29 during which it may have been assessed at

the rate applicable under the formula which we here modify NYSA and

PRMSNPRMMI are directed to exchange any information necessary for

the computation and verification of any credits due PRMSNPRMMI during

the 61 day period

The Commission urges the parties to act reasonably in carrying out

this computation and verification process If for example it can be shown

that holiday payments for GAl recipients for the period following February

27 1984 in fact were properly accounted for in the Vacation and Holiday

Fund see pages 22 23 supra we would expect PRMSNPRMMI to accept

this showing Tonnages and man hours should in most instances be easily

verified from NYSNILA carrier and terminal operator records and the

parties are expected not to demand extended verification of such data

We believe that the parties here best understand their own operations and

trust that they will act intelligently and reasonably in implementing our

Order

Additional Remedies Sought by PRMSA PRMMI

Although we find that PRMSNPRMMI is entitled to assessment adjust

ments we do not agree that it is entitled to the additional relief it seeks

namely interest on the assessment adjustments or reparation from the time

of the formation of LM 86 to the date of the filing of its complaint

It seems clear that as a matter of law a cause of action exists for

interest on assessment adjustments and that the grant of such interest

is discretionary Although the Commission may decide to deny such interest

on equitable grounds as it has done in the past see Agreement No

T 2336 19 F M C 248 261 262 1976 affirmed sub nom New York

Shipping Ass n v FMC 571 F 2d 1231 1241 1242 D C Cir 1978

the MLAA makes clear that the Commission s broad discretion with respect

27 F M C
672 FEDERAL MARITIME COMMISSION

to assessment adjustments is preserved S Rep No 854 at 14 There

was no specific grant of authority in section 22 of the Shipping Act

1916 46 U S C 821 to grant interest yet this was routinely done in

the agency s discretion Although the MLAA says the Commission shall

remedy unjust discrimination and fairness it does not state how

and the legislative history indicates the statute is to permit not require

full restitution See S Rep No 854 at 11 emphasis supplied The

fact that the word full is used in connection with restitution is to

be compared to the words full reparation in section 22 where it has

frequently been held as in Agreement No T 2336 that an award of interest

is discretionary We believe the AU properly denied interest here and

adopt his decision in that regard 51

PRMSAMI contends that the remedies existing prior to the MLAA

were presented under the rationale of CalCartage which indicated that

at least for standing purposes section 22 of the Shipping Act 1916 was

applicable to actions under the MLAA On the other hand supporters

of the present formula assert that the holding in CalCartage was restricted

to standing and did not reach the question of remedies available to

one who had standing It could also be contended that the reparation rem

edies which were preserved were only those which related to interests

other than carriers shippers or ports with respect to which specifically

named interests the adjustment remedy was intended to be exclusive 52

The Shipping Act of 1984 removed any damage remedy for assessment

agreements other than adjustments See Conf Rep No 600 98th Cong

2d Sess 30 1984 53 We find that the best reading of the legislative

history of the MLAA as originally enacted is that the statute was intended

to provide assessment adjustments as the exclusive remedy for unfair or

discriminatory type treatment of shippers carriers and ports because such

interests are specifically mentioned a

remedy with respect to them for

I The fact that the Commission has awarded interest more or less as a matter of course in reparation ac

tions does not control our action here As noted in our report and order in 19 F M C on the adjustments

due carriers which had been overassessed adjustment actions are factually different from ordinary reparation

actions and somewhat different considerations necessarily apply The most significant differences are that

as we noted in 19 F M C at 260262 and as the AU noted here see I D 188189 see also 136 125

fn 36 neither the fact of overcharge nor the amount could have been expected to have been detennined

prior to conclusion of the Commission s proceedings The AU correctly applied the standards used in the

earlier case and correctly limited those standards to consideration of theperiod in question since as PRMSAl

PRMMI recognizes see page 54 supra each assessment period and actions relating to it must be consid

ered on its own The fact that generally reparations are mandato under the MLAA as revised by sectIon

11g of the Shipping Act of 1984 46 U S C app 1710g the 1984 Act once violation and causal con

nection between it and the claimed injury has been shown is irrelevant for our purposes here both because

it is clear as PRMSA admits Except 36 that under the 1984 Act the only substantive and remedial provi

sions applicable to cases involving assessments are those of the MLAA and because it would in any case

create manifest injustice to apply such standard retroactively See FMC Notice 49 Fed Reg 21798 May

23 1984

2

The complainants to whom standing was granted in CalCar age are off dock container freight statIon

operators i e not shippers carriers orports

3

Although Conference Report No 600 states that assessment adjustments were always the exclusive dam

age remedy under the MLAA as noted above CalCar age could be read to the contrBl

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY v 673

NEW YORK SHIPPING ASSOCIATION ET AL

such treatment detailed i e adjustments and a clear conflict would be

created by supplementing such remedy with an additional remedy 54 We

need not here reach the question of whether remedies under section 22

exist for the complainants in CalCartage a matter which is before us

on remand in that proceeding 55

Even were we to find that a

reparation remedy were preserved to PRMSAI

PRMMI under the MLAA in this particular case that conclusion would

not affect the result The agreement in issue LM 86 was not filed until

February 15 1984 and did not become legally effective until that day

As PRMSA acknowledges each filing must be treated as a separate agree

ment and its claim is only against LM 86 PRMSAlPRMMIs complaint

was filed February 27 1984 In the circumstances of PRMSAlPRMMI s

complaint we would deny reparations 56 If PRMSAlPRMMI is correct

then a complainant could wait up to two years to file its complaint under

section 22 and recover reparation an action plainly inconsistent with the

one year statute of limitations in the MLAA Even if such action were

deemed too inconsistent with the MLAA to prevail a complainant could

wait 11 months and 30 days before filing a complaint and recover repara

tion for such period This would plainly be inconsistent with the MLAA

remedy and procedures provided at least for shippers carriers and ports

see fn 54 supra and would clearly be improper All of this is really

also another way of proving the intent of Congress to make assessment

adjustments the exclusive remedy for assessment claimants like PRMSAI

PRMMI 57

54 See e

q

To the extent that complainant has borne either directly or indirectly assessment charges

ultimately set aside or modified by the FMC complainant shall be entitled to and the FMC shall award

assessment adjustments from the date of the filing of the complaint S Rep No 854 at II

The remedy for an assessment found unfair or discriminatory by the Commission shall be in the

form of adjustments to future assessments except for a complainant who has ceased the shipping

activity subject to assessment Ibid at 14

The language of the legislative history stating the bill retains the existing protections of the Shipping

Act for shippers carriers and localities which may be adversely affected by shipping practices which may

arise out of maritime labor agreements must be read in context The full quote is

By enlarging the numbe of such agreements which will be exempt from filing and approval and

by providing expedited procedures for those assessment agreements which remain subject to FMC

jurisdiction the bill should significantly reduce the costs of regulation At the same time the bill

retains the existing protections of the Shipping Act for shippers carriers and localities which may

be adversely affected by shipping practices which may arise out of maritime labor agreements

Ibid at 13

The existing protection language clearly is intended to refer to things required to be set forth in tar

iffs rather than to assessment agreements See 5 MLAA Section 45 Shipping Act 1916 46 U S c 841c

We also need not here reach the question of what separate remedies might have been applicable under

the detriment to commerce standard when it appeared in the MLAA since such standard is not an issue

here See D 70

56 Section l1 g

of the 1984 Act makes reparations like interest mandatory in the case of violation and

injury caused thereby We find for the reasons stated with respect to the mandatory award of interest that

were ll gof the 1984 Act applicable here it would not be equitable to apply it See page 1l3 supra

57 PRMSNPRMMI does raise avalid point with respect to LM 86 albeit one outside of the scope of these

proceedings We do nOl know under what authority NYSNILA claimed to operate between October I 1983

and February 15 1984 for collection of assessments This is amailer we will pursue independently of these

proceedings

27 F M C
674 FEDERAL MARITIME COMMISSION

CONCLUSION

In concluding we wish to emphasize several points about our decision

and the procedures employed in reaching it First the modifications here

required will in no way adversely affect the funding of the fringe benefits

required under the collective bargaining agreements between NYSA and

ILA In fact the modifications would had they been in effect during

the 1982 1983 contract year have fully funded all benefits unlike the

present formula which in fact underfunded the benefits Ex 41 Table

II Moreover the changes from the present formula are relatively small

Over two thirds of the benefit costs will continue to be funded on a

tonnage basis under the combination man hour tonnage formula The cap

on breakbulk cargoes will ensure that they continue to pay no more than

their present assessment costs All exceptions and special privileges are

preserved except those for handling empty containers stuffingstripping

domestic cargo and transshipments which we find on the record to be

unjustified To the extent that financial difficulty may arise from the removal

of exceptions a gradual phasing in of the new assessment treatment has

been provided

The Commission has not been able to treat specifically and in detail

every exception to the Initial Decision Nevertheless we have considered

all the exceptions and those not specifically treated have been disposed

of otherwise in the decision either by rulings on their merits or by rulings

which rendered such exceptions moot or immaterial for purposes of the

decision This decision is after all substantially an adoption of the Initial

Decision and the discussions factual findings reasoning and conclusions

of the AU are those we have utilized unless explicitly overruled or unless

such use would create an obvious inconsistency

An order will be entered requiring that the necessary modifications to

Agreement No LM 86 be made along with assessment adjustments in

favor of PRMSAPRMMI and establishing a time period and procedures

for such modifications and adjustments

S BRUCE A DOMBROWSKI

Assistant Secretary

CommissionerMoakley dissenting in part

While I concur in the majority s decision that many aspects of the

subject assessment formula are unfair and unlawful I cannot concur with

their conclusions and rationale with respect to transshipped cargo Unlike

the decision of the majority or the initial decision I would not find that

complainants have carried their burden of demonstrating the unlawfulness

of the exception of transshipped cargo from the tonnage assessment In

order to do so they would have had to establish that breakbulk cargo

was routinely transshipped in the port of New York prior to containerization

a conclusion which is contrary to economic logic as well as the limited

evidence of record in this proceeding Therefore Iwould leave transshipped

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 675

NEW YORK SHIPPING ASSOCIATION ET AL

cargo as we found it free from a tonnage assessment designed to com

pensate the union for a problem to which transshipped cargo does not

contribute and which in fact it may help to alleviate

Commissioner Robert Setrakian concurring in part and dissenting in part

I concur in every aspect of the majority s Report except for its departure

from Administrative Law Judge Kline s treatment of the transshipment issue

The majority s decision considers but rejects several factors critical to

the administrative law judge s determination not to remove the special

transshipment exception Removal of the exception he reasoned would

have a fatal impact on the McAllister operation would be detrimental

to the ports of BostonProvidence and would eliminate a service option

for shippers I am swayed by these considerations and would adopt the

Initial Decision on this issue

The Maritime Labor Agreements Act charges the Commission to consider

whether an assessment agreement is unjustly discriminatory or unfair to

carriers shippers or ports or operates to the detriment of the commerce

of the United States I fear that the desirability of providing uniform treat

ment for three essentially unequal carriers McAllister vis a vis U S Lines

and Sea Land does not outweigh the resulting deleterious effects on this

small single operation carrier the shippers who have chosen this means

of transport and not least this small port and its work force now dependent

in part on cargo transshipped via a major load center as well as the

negative impact ofall of these factors on U S commerce generally

Therefore to the extent the majority s decision modifies the Initial Deci

sion on this issue I

respectfully dissent In all other respects I

fully concur

with the majority s Report

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 846

THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

v

NEW YORK SHIPPING ASSOCIATION ET AL

DOCKET NO 84

PUERTO RICO MARITIME SHIPPING AUTHORITY AND PUERTO

RICO MARINE MANAGEMENT INC

v

NEW YORK SHIPPING ASSOCIATION

Respondents New York Shipping Association and its members udlize a formula to fund

all fringe benefits under a collective bargaining agreement which unlike that at any

other port is based on assessment rates per ton but also allows lower excepted man

hour rates or other special chazges on certain types of acdvities and even no charges

whaucever on other activides The Pon of New York Authoriry complains that the

formula is unfair and unjustly discriminatory as to New York because it imposes higher

assessments per container than are necessary PRMSA the main carrier serving the

Puerto Rican trade also complains that the formula is unfair and unjustly discriminatory

as it affecu PRMSA and the Puerto Rican trade in violation of the Maritime Labor

Agreements Act of 1980 MLAA and other provisions of the Shipping Act 1916

Both complainants urge adoption of alternative formulas and PRMSA seeks monetary

adjustments and reparation Respoadents and other parties defend the formula contending

that complainants have not carried their burden of proof Addidonally respondents ask

that PRMSA s

complaint be summarily dismissed on various legal grounds and argue

that its remedies have been limited by law It is held

1 Respondents legal defenses have no basis in law or fact and cannot preclude the

Commission from considering the merits of the complaints

2

The applicable standard of proof is preponderance of the evidence and the substandve

standard is whether the cument assessment agreement is unfair orunjustly discriminatory

As to PRMSA this standard employs the benefits burdens test and as to the Port

Authority this standard employs the test of unfair competltive disadvantage to a port

The MLAA excludes sections 16 17 18aand 22 of the 1916 Act and limits monetary

remedies to prospective adjustments forPRMSA The 1916 and 1984 Acts are essendally

unchanged in this regard

3 As to the merits of iu case the Port Authority has shown competitive harm and

disadvantage resuldng from the type of formula currently in use PRMSA has similazly

shown an unfa and discriminatory shift of cost burdens among containerized carriers

caused by unjusdfied favoridsms to certain carriers and by a conceptually unsound formula

which lumps different types of costs together and tes individual carriers efficiencies

unfairly

676 zFMc
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V E77

NEW YORK SHIPPING ASSOCIATION ET AL

4 Alternative formulas modifying the current tonnage formula have been proposed which

would alleviate the unfaimess and unjusUy discriminatory aspects of the current formula

PRMSA sproposed formula based on credible expert testimony and supporting evidence

is the most carefully fashioned and with certain modifications which would etiminate

its excessive discount for the Puerto Rican trade should be ordered adopted under

the Commission sexpress authority to modify an unfair or unjusUy discriminatory agree

ment Appropriate prospective credits forPRMSA should likewise be ordered as provided

by law

Paul M Donovan Jean C Godwin and Lauren V Kessler for complaint Port Authority

of New York and New Jersey

Amy Loeserman Klein William E Cohen and Marc A Berstein for complaints PRMSA

and PRMMI

CP Lambos Donato Caruso and Wi liam M Spelman for respondents NYSA and

89 of its members

Thomas W Gleason and Ernest LMathews Jr forintervenor ILA

Robert S Zuckerman Eldered N Bell Jr and Ann E Isaac for respondentlintervenor

Sea Land Service Inc

Richard A Lidinsky Jr and Thomas K Farley for intervenor Maryland Port Adminisua

tion

Dorothy Sanders and R Moriconi forintervenor Massachusetts Port Authority

John Robert Ewers Aaron W Reese Stuart James and Janer F Katz for Hearing

Counsel

I1vITIAL DECISION 1 OF NORMAN D KLINE ADMINISTRATIVE

LAW JUDGE

Partially Adopted February 27 1985

This proceeding involves the question as to whether a formula devised

by respondents New York Shipping Association Inc NYSA its members

and the International Longshoremen s

Association ILA and incorporated

into a collective bargaining agreement for the purpose of funding various

fringe benefits to labor at the Port of New York violates standards set

forth in the Maritime Labor Agreements Act of 1980 PL 96325 94

Stat 1021 MLAA which Act as relevant here was codified as section

15 of the Act 1916 46 USC sec 814 fth paragraph and effective

June 18 1984 as section 5dof the Shipping Act of 1984 46 USC

app 1704 The proceeding was initiated by the filing of two complaints

The first complaint was filed on February 22 1984 by the Port Authority

of New York and New Jersey Port Authority and the second compliant

on February 27 1984 by the Puerto Rico Maritime Shipping Authority

PRMSA and by Puerto Rico Marine Management Inc PRMMI The

Port Authority alleged that the agreement between the NYSA and the

ILA filed with the Commission as Agreement LM86is unjustly discrimina

tory and unfair as between carriers shippers and ports and operates to

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

mission Rule 227 Rules of Practice and Procedure 46 CFR 502227

27FMC
E7g FEDERAL MARITIME COMMISSION

the detriment of the commerce of the United States because it imposes

assessments on containerized cargo which are much higher at the Port

of New York than at competing ports in violation of section 15 fifth

paragraph of the 1916 Act The Port Authority asked that the Commission

modify the allegedly harmful assessment ageement so as to establish some

basis for the assessments which woutd be nondiscriminatory and fair as

between carriers shippers and ports

The second complaint was filed by an ocean carrier PRMSA which

is also a public corporation created by the Legisladve Assembly of the

Commonwealth of Puerto Rico on June 10 1974 to provide reliable ship

ping services to the citizens of Puerto Rico at the lowest possible cost

and by its operating agent PRMMI which incidentally is a member

of the NYSA PRMSAMI alleged that the subject assessment agree

ment is unlawful in a number of respect not only under section 15 of

the 1916 Act but under sections 16 17 and 18aof that Act as well

More specifically PRMSAMI alleged that the subject assessment

agreement treats Puerto Rican trade carriers unfairly and with unjust dis

crimination by assessing that trade as a

foreign trade and unduly burdening

it with costs not reasonably related to any benefits received under the

labor contract or related to any responsibility for decrease in man hours

worked at the Port of New York PRMSAMI also alleged that shippers

and ports suffered unfair or unjustdscriminatory treatment because the

assessments imposed under the subject agreement aze higher than those

imposed on other domestic trade cazgces and lead to diversion of cargces

away from the port of New York in favor of other competing mainload

ports which cazgces are tributary to the Port of New York This unfavorable

situation to the Puerto Rican trade furthermore allegedly ignores prior

Commission recognition that special and less detrimental treatment is re

quired for Puerto Rico in the light of the Island economy and extreme

dependence upon maritime commerce with the US Mainland Therefore

PRMSA alleged that the assessment agreement is unjustly discriminatory

and unfair in violation of section 15 of the 1916 Act and also confers

undue and unreasonable preference and advantage and creates undue and

unreasonable disadvantages among carriers localities and cazgoes unjustly

discriminatory rates and charges and unjust and unreasonable rates and

charges and practices in violation of sections 16 17 and 18aof the

1916 Act 46 USCsecs 815 816 and 817 PRMSAMI accordingly

ask the Commission to order Agreement LM86 modified to remove the

various violations alleged and to order appropriate assessment adjustments

and full reparations to remedy the past impact of the alleged violations

On May 15 1984 PRMSAMI filed an amended compliant which

repeated the essential allegations of the original complaint but modified

portions of it to emphasize that the essential basis of the complaint was

not related to PRMSA sfinancial situation or ability to pay assessments

in relation to PRMSA s

profitability or to oss of cazgo to a non ILA

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V E79

NEW YORK SHIPPING ASSOCIATION ET AL

carrier although diversion of cargo to that carrier was still a factor indicating

hann to PRMSA and the Port of New York resulting from the assessments

PRMSAMMI also clarified their original complaint by specifying that

they sought full reparations with interest back to October 1 1983 ie

the beginning of the labor contract year rather than the date of filing

of the assessment agreement LM86which was February I5 1984

Respondents NYSA Inc and its members answered the two complaints

denying any violations of law In addition respondents raised a number

of affirmative defenses having to do with the possible lack of Commission

jurisdiction over the assessment agreement because of previous Commission

approval of the assessment formula the conduct of PRMSAMMIin

failing to file their complaint eazlier doctrines of laches estoppel waiver

the statute of limitations or the applicability of doctrines of labor law

as they affect PRMSA s

ability to maintain such a complaint before the

Commission and the nonapplicability of sections 16 17 18aor 22 of

the 1916 Act These defenses all deal with matters other than the merits

of the complaints and if valid would preclude the Commission from consid

ering whether the assessment agreement is unfair or unjustly discriminatory

As I discuss later however I find that almost all of them have no validity

and that there is no legal impediment to a full consideration of the merits

of the complaints

In addition to three complainants Port Authority PRMSA and PRMMI

and the more than 100 respondents NYSA Inc and 102 or so member

companies including steamship carriers agents marine terminal operators

stevedores and others four parties have been granted permission to inter

vene in the proceedings These are the ILA the unincorporated labor

organization which is the collective bargaining representative for longshore

men and other dockworkers employed on the Atlantic and Gulf Coasts

and in Puerto Rico the Maryland Port Administration MPA a state gov

ernmental agency responsible for the development and promotion of mari

time commerce in Maryland principally in the Port of Baltimore the Massa

chusetts Port Authority Massport a state governmental agency responsible

for the development and promotion of the Port of Boston Sea Land Service

Inc Sea Land a respondent in No 846who wished to become an

intervenor in No 84 as a

carrier operating in the Puerto Rican trade

and the Bureau of Heazing Counsel who stated that the issues in the

case concerned possible unfairness among carriers shippers and ports all

of which issues are of general public interest and further stated that Hearing

Counsel sparticipation might reasonably be expected to assist in the devel

opment of a sound record

Because the complaints were led under governing provisions of the

MLAA which requires a decision of the Commission within one year

of the filing of a complaint and Commission Rule 75 46 CFR 502 75

the corresponding regulation implementing the statute which requires an

Initial Decision in eight months it was necessary to establish a schedule

27FMC
CgO FEDERAL MARITIME COMMISSION

which would enable all the parties to conduct necessary prehearing inspec

tion and discovery develop and present their evidence and cases allow

sufficient time to file post hearing briefs and to allow the presiding judge

to issue a comprehensive Initial Decision To achieve these objectives

the parties established appropriate schedules which Iapproved and conducted

extensive discovery depositions interrogatories documents production re

quests for admissions from the inception of the proceedings to shortly

before the filing of written testimony which tesdmony was led in four

stages complainants opening testimony respondents opening testimony

complainants rebuttal testimony and responder tssurrebuttal tesdmony

All of these matters were accomplished between late February when the

complaints were led through August 14 1984 when the nal sumebuttal

tesdmony was filed by respondents To facilitate ths completion of discovery

and the filing of the written cases furthermore 10 informal telephonic

conferences were conducted together with two formalonthe recordprehear

ing conferences Oral hearings were held commencing on August 16 for

seven days during which 14 witnesses were cross examined in accordance

with speci cdesignadons for cross examinadon by the various parties The

hearings were concluded on August 29 1984 At the conclusion of the

hearings the evidendary record consisted of some 50 volumes of written

testimony and supporting documentary materiats as well as the oral testi

mony of the 14 witnesses Because of the size of the record and the

complexity and geat importance of the case the parties were granted

permission to file opening briefs on September 28 and reply briefs on

October 12 1984 2This schedule would thereafter permit me only 15

calendar days to prepaze and issue my Initial Decision which as provided

by Rule 75 would have been due on October 27 1984 eight months

after the ling of the second complaint Relief was obviously warranted

and in response to my request to the Commission for a waiver of Rule

75 the Commission granted me an additionat 13 calendar days beyond

October 27 ie undl November 9 1984 to issue my Initial Decision

See Enlargement of Time to Issue Inidal Decision September 11 1984

my memorandum to the Commission September 4 1984

RULINGS AS TO RESPONDENTS AFFIRMATIVE DEPENSES

As seen from the complaints the ultimate issue raised by both of them

is whether the subject assessment formula embodied in the current collective

bargaining agreement between the NYSA and ILA is unfair or unjustly

discriminatory among shippers cazriers or ports and if so whether the

formula should be modified to etiminate the unfairness artd unjust discrimi

nation and whether the cazrier PRMSA should receive compensation in

the form of assessment adjustments or otherwise However before I can

27his schedule was later modifled to pettnit opening end reply brlefs to be filed on October 3 and I5

respectively

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 681

NEW YORK SHIPPING ASSOCIATION ET AL

decide these ultimate issues I must first determine whether any of respond

ents affirmative defenses aze valid because if they are the Commission

cannot or should not even consider whether the formula is harmful and

ought to be modified

Respondents Affirmarive Defenses

As mentioned briefly earlier NYSA and its members raised a number

of affirmative defenses in their answers to the complaints There were

eleven of them The first four had to do with the Commission s

previous

approval of the subject formula in 1974 and the involvement of PRMSA

or its predecessor or subsidiary carrier in the proceedings leading to the

1974 settlement which the Commission approved It was contended by

NYSA that the Commission sorder of approval of the 1974 settlement

has resolved the issues now before the Commission in these proceedings

and furthermore because of the participation of PRMSA spredecessor

or subsidiary carrier in the settlement proceeding PRMSA is not barred

from challenging the formula under the doctrines of res judicata estoppel

and waiver

NYSA snext three affirmative defenses concerned the alleged untimeli

ness of the complaints NYSA contended that the assessment formula under

attack in these proceedings was first led with the Commission in 1974

as Agreement NoT3007 and was last filed on September 30 1980

as Agreement No LM66 Therefore the two complaints which were

not filed until more than three years after the filing of LM66are time

barred by the two year statute of limitations set forth in the MLAA section

15 fifth paragraph of the 1916 Act section 5dof the 1984 Act Further

more because the formula under challenge now was approved as of

September 30 1974 the complaints have been filed over nine years later

and should be dismissed under the doctrine of laches

NYSA snext two affirmative defenses stated that the PRMSAMI

complaint should be dismissed because complainants utilized azbitration

procedures provided by the labor contract and because complainants failed

to resign from the NYSA before the filing of the subject Agreement LM

86 NYSA contended that under labor law the policies favoring arbitration

of disputes arising out of labor contracts and policies favoring the results

of collective bazgaining PRMSA and PRMMI cannot now challenge the

assessment formula incorporated into the labor contract Also complainants

utilization of the arbitration procedures before filing their complaint and

their failure to withdraw from the bargaining unit may have constituted

a voluntary and knowing waiver of their rights under federal shipping

laws

Finally NYSA raised affirmative defenses alleging that the relief re

quested by complainants would itself be unjustly discriminatory and unfair

that complainants are not entitled to reparations for any period prior to

27FMC
6HZ FEDERAL MARITIME COMMISSION

the filing of the complaints and that sections 16 17 1aand 22 of

the 1916 Act do not apply under the MLAA

I find that none of the affirmative defenses except those conceming

the limitation on reparaUOns and exclwsion of sections oEher than section

15 of the 1916 Act have merit Accordingly there is no legal obstacle

preventing the Commission from deciding the merits of the complaints

In their post hearing brief respondents NYSA joined by the ILA again

raise these af rmative defenses under five categories 1 that the complaints

aze dme barred 2 that PRMSA and PRMMI cannot now withdraw from

the collective bargaining agreement under principles of labor law which

must also be considered under shipping law 3 that the formula under

attack has been found to be lawful by the Cornmission in 1974 which

nding binds PRMSA and PRMMI under the principle of res judicata

4 that FRMSA has invoked the labor contract sgrievance and arbiEration

machinery and cannot now seek relief before agencies or courts and 5

that PRMSA spredecessor carrier TTT entered into a settiement agreement

in 1974 promising not to challenge the subjeet assessmgat formula in

the future which agreement is also binding on PRMSA under the principle

of estoppel

I find that these defenses have no more validity now that the record

has been more completely developed than they did when I indicated at

an eaztier stage of the proceeding on the limited record befare me at

the time that they did not appear to have merit 3

Respondents arguments that the complaints are time barred and should

be dismissed because of the two year period of limitations in the MLAA

or because of laches aze unsound because as both the Port Authority

and PRMSAMI have noted respondents areasking the Commission

to find contrary to fact that complainants are not challengfng Agreement

LM86which was filed on February 15 1984 but are aetually ehallenging

a formula first incorporated into Agreement NoT3007 and filed in 1974

Furthermore respondents wish the Commission to nd that the ling of

On May 29 1984 PRMSA and PRMM filed a motion asking me W strike nine of rospondent saffuma

tive defenses including all of theae discuased above Complainanp hargued pereuasively in the motion

that seven of the gounda for afficmative defensea rsgardiny the qusstion of the timing of the filing of the

complaints mistakenly assumal that complainants were chapenging Agreement NoT3007 which first incar

porated the subj ctasseasment formula and was efftctive from 19T4 to 1977 Camplainants contended that

they wero challeeging the curcent agrament LM86 which was frled and damed appmved under aw on

February 1984 Complainants also contended that they could not be barred from filing complaints under ship

ping law becaase of arbitration principles and denied that they had invoked arbitration procedures under the

Iabor contract or that they had waived their rights to file complainta under the MLAA Although I indicated

that I

was not impressed by the affianative defenses nd recognized that motions to strike invalid defenses

could save time later I refrained from issuing a final ruling because of the incomplete state of the factual

record the complexity of the legal issues raised and he need for more developed arguments Courts often

rofrain from deciding juriadiMionat typeissues on a summary beals until the record becomes clearer See

eg

EEOC vFord Motor Co 529 F Supp 643 D Col 1982 Unired States v72973 Acres of Land

531 F Supp 967 971 DHaw 1982 The record is now clear enough to decide that che defenses inquestion

lack merit

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 683

NEW YORK SHIPPING ASSOCIATION ET AL

Agreement No LM86 was only a

technicality and did not trigger any

rights regarding the filing of complaints challenging its lawfulness

The fact however is that Agreement No LM86 was filed and as

the MLAA provides was deemed approved by the Commission on Feb

ruary 15 1984 Although NYSA and the ILA had adopted essentially

the same tonnage formula as of October 1 1974 which was designated

as Agreement NoT3007 and which was approved as part of a settlement

of three pending proceedings the settlement agreement approved by the

Commission being Agreement NoT3017 there were subsequent filings

of agreements inasmuch as the labor contracts at New York run for only

three yeazs apiece Thus it was necessary to file the assessment agreement

to cover each new contract year period Agreement No LM66including

the assessment formula was filed on September 30 1980 and extensions

of that agreement were filed as Agreement Nos LM83and LM86The

MLAA grants carriers shippers or ports the right to challenge the lawful

ness of assessment agreements and to obtain relief provided that the com

plaint is filed within 2 years of the date of filing of the agreement

MLAA sec 4 section 15 fth pazagraph 1916 Act 46 USC

sec 814 4Furthermore since the MLAA removed from the Commission

its previous authority under section 15 of the 1916 Act to investigate

assessment agreements on the Commission sown motion the interests ad

versely affected by assessment agreements and given the right to file com

plaints would have no other remedy under shipping law if they cannot

now challenge LM86This means that although NYSA and the ILA agree

on three year labor contracts and file something with the Commission every

three years extending their agreements as far as the assessment formulae

are concerned complaining parties would be required to file complaints

within two yeazs of the original formula first effective in 1974 There

is no basis in logic the language or legislative history of the MLAA

to impose such a

requirement on complaining parties

The MLAA as I discuss later was a compromise between industry

interests who desired removal of the Commission from jurisdiction over

collective bargaining agreements including those portions of the agreements

concerning assessments used to fund fringe benefits and other interests

who were fearful that total removal of the Commission would leave affected

persons with no protection against possible abuses more specifically the

possibility that affected parties would not be paying a fair share of fringe

benefit obligations See Sen Rep No 9C854 96th Cong 2d Sess 1980

The MLAA was recodified as sections 5dand e of the Shipping Act of 1984 46 USCapp

1704 deThere were essentially no changes from the 1916 Act except that assessment agreements be

come effective on filing complaints must be filed within 2 yeazs after the date of the agreement the

detriment to the commerce of the United States standards was removed and the language of section 45

of the 1916 Act regarding applicability of the 1916 and 1933 Acts to taziff practices as opposed to assessment

agreements was rewritten I agree with complainant Port Authority opening brief p 4 that the 1984 Act

made no significant changes to the 1916 Act as faz as this case is concemed Therefore my findings apply

under section IS of the 1916 Act or section 5dof the 1984 Act

27FMC
4 FEDERAL MARITIME COMMISSION

at 1214 As even respondents concede the MLAA was enacted against

the backdrop of more than ten years of decisianal law NYSA op br

123 The backdrop consisted of a number of Commission proceedings

determining whether assessment agreements violated the standards set forth

in section 15 of the 1916 Act and other sections of that Act incorporated

by then secdon 15 and implementing certain tests such as the bene ts

burdens test which was first enunciated by the Supreme Court in

Volkswagenwerk Aktiengesellschaft vFMC390 US261 1968 Since

Congress was aware of the ten yeaz history of Commission proceedings

it presumably was awaze of long established Commission decisions holding

that extensions of agreements were considered to be the same as new

agreements as far as approval was coneerned and that such extensions

had to be filed and processed notwithstanding apgroval of the basic agree

ments previousiy See egAgreement Nos 8200 8200 18200 2etc

21 FMC 959 962 1979 each extension of an agreement must stand

alone and be judged in light of present circumstances Investigation of

Passenger Steamship Conferences Regarding Travel Agents 10FMC 27

34 n 61966 aff dsub nom FMC v Svenska 390 US238 1968

prior approval of an agreement under secdon 15 may not be converted

into a vested right of continued approva simply because the pazties to

the agreement desire continued approv l

cf New York Shipping Associa

tiore VYSAILA Man Hour Tonnage Method of Assessment 16 FMC 381

31Cr397 1973 aff dsub nom New York Shipping Association vFMC

495 F 2d 1215 2d Cir 1974 determination of lawfulness of current

formula depends upon current circumstances and conditions not upon pre

vious circumstances and conditions which warranted ndings against a pre

vious agreement

In the light of this backdrop it makes no sense to contend that Congress

gave affected persons the right to file complaints wit in two years of

the ling of agreements with the Commission but this right did not apply

to extensions of assessment agreements which are led every three yeazs

and as the above discussion illustratas were a type traditionally treated

as new agreements requiring independent processing under secdon 15 of

the 1916 Act If NYSA really wants immunity from the filing of complaints

for ten years or more it can obtain it within the mechanism of the MLAA

merely by entering into labor contracts which do not expire for ten years

and require only one filing of the assessment portion of the labor agreement

every ten years If however NYSA and the ILA believe that circumstances

and conditions change in three years and herefore wish to devise new

labor contracts every three years they should nctobject to the fact that

some persons claiming to suffer adverse effects from assessment agreements

might wish to claim that changes in circumstances and conditions in the

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 685

NEW YORK SHIPPING ASSOCIATION ET AL

last few yeazs necessitate their seeking relief from an assessment formula

which keeps getting renewed and reled every three years 5

The second category of affirmative defense set forth in NYSA s

opening

brief is the azgument that PRMSA and PRMMI cannot withdraw from

the collective bargaining agreement at this time because they failed to

observe requirements imposed by federal labor law concerning notice union

consent bargaining impasse unusual circumstances good faith etc Many

cases aze cited for the proposition that federal labor law prohibits an em

ployer who has failed to withdraw or disassociate itself from the bazgaining

unit from later disavowing the labor accord See NYSA sop brief at

98101 NYSA contends that PRMSA has been a member of the multi

employer bargaining unit the NYSA that labor policy embodied in the

case law cited must form a part of shipping law analysis and that PRMSA

by being bound to the labor contract has waived its rights under the

MLAA Icannot agree

As faz as I am aware PRMSA and PRMMI are living up to the terms

of the collective bargaining agreement and aze paying assessments under

that agreement Furthermore I am not aware that PRMMI has withdrawn

its membership in the NYSA 6What is happening is that although comply

ing with the terms of the agreement with respect to paying the assessments

PRMSA and PRMMI are challenging the lawfulness of the assessment

agreement not under labor law but under shipping law which has applica

bility limited though that may be by the MLAA NYSA would have

the Commission refuse even to consider whether their assessment agreement

is unjustly discriminatory or unfair as to PRMSA a carrier paying under

the agreement notwithstanding the clear right given to carriers under the

MLAA to seek relief from the Commission Indeed as the Senate Report

to the MLAA stated the Act retained Commission jurisdiction to assure

equal treatment of shippers cargo and localities and to prevent abuses

made possible by concerted activity of ocean carriers and others and

to ensure that all affected parties pay only their fair share of fringe

benefit obligations S Rep No 96854 cited above at 10 14 If a

carrier paying assessments under the agreements cannot even seek relief

under the MLAA when the MLAA expressly refers to carriers shippers

or ports as parties to be protected one might ask who then can seek

relief only non affected carriers who do not pay assessments or carriers

5NYSA sreliance on Commission cases arising under tsriff over chazge claims illustrazes the weakness

of their contentions NYSA attempt to liken the right to file a complaint within two years after the filing

of an assessment agreement or its extension as discussed with the right to seek recovery of taziff over

charges within two yeazs after the shipper paid the freight and suffered pecuniary injury See eg

Aleutian

Homes Inc v Coashvise Lines 5 FMB602 611 1959 Shippers are held to that standard because section

22 of the 1916 Act required their complaints to be filed within two years afrer the cause of action accrued

Under the MLAA it is not accrual of the cause of action or suffering of pecuniary injury which triggers

the running of the twayeaz period but simply the filing of the assessment agreement

6ihe record shows as PRMSA advises that PRMII stated its reservations to the assessment fonnula con

tained in the collective bargaining agreements and expressly dissented from the agreement as regazds that

formula even though otherwise signing the collective bazgaining agreement PRMSA r br at 74

27FMC
FEDERAL MARITIME COMMISSION

who pay but who were not part of collective bargaining units that negotiated

the contract If Congress was aware of Commission involvement with

previous assessment agreements it was presumably also aware that members

of the NYSA have in the past challenged the very agreemerjts which

their associadon devised notwithstandi g

NYSA b1aws which purported

to bind the carrier members to the will of the other members See New

York Shipping Associadon v Federal Maritime Commission 571 F 2d

1231 1239 n 18 DC Cir 1978 Agreement NoT2336 77T et al

v NYSA Inc 15 FMC 259 1972 affirmed TTT vFMC492 F

2d 617 DCCir 1974 Puerto Rican carrier members of NYSA challeng

ing lawfulness of NYSA agreement voted by majority of inembers of

NYSA There is no indication that Congress in allowing the Commission

to retain limited jurisdiction over colleative bargai ingagreements intended

to bar affected carriers from ehallenging Ehe unfairness of assessment agree

ments merely because the affected carriers had been represented at the

bargaining table by an association 1vloreover since the MLAA dces not

authorize the Commission to invesrigate such agreements on its own motion

barring affected carriers could also insulate a possibly unfair agreement

from any scrutiny under the MLAA if carriers were adversely affected

What all of this defense really seems to be saying is that the righfs

of PRMSA and PRMMI aze govemed by labor law not shipping law

and that having consented to be represented by the NSA in collective

bazgaining with the ILA PRMSA and PRMMI must shut up as far as

the MLAA and Commission aze concerned no matter how harmful or

unfair they believe the assessment agreement to be and must con netheir

efforts to seek relief to appeals to the very people who negotiated the

agreement in the rst place I know of no doctrine of law that holds

that an acdvity can never be subject to two bodies of law ar in this

context holding that because the NYSA and ILA reached agreement and

complied with labor law shipping law has been totally ousted On the

contrary from the very beginning of the many shipping labor cases before

the Commission and the courts it has been seen that shipping law can

and dces apply and it seems clear that the MLAA codi ethe principle

that under certain circumstances shippang act standazds can apply notwith

standing the genesis of an agreement or practiee in collective bargaining

Thus from the very first of these combined labor shipping cases VolkswagenwekaktiengesellschqJt v

FMCcited above 390 US 261 it was recognized tlat an agreement among carrier and other employers

of bngshone labor could raise problems of concern to tha National Laboe Relations Board and of concem

to the Federal Maritime Commission 390 USat 291 n7 From thls beginning the Commiasion has bcen

involved continually in dete mining the lawfulness under Shipping Act atandarda of arrangements devised to

fund fringe bemfit obligations which aRangements were contained in various collective bargaining agree

menta Many of these cases are discuesed inPI MSARMMI sopening brief at 495See also New York

Shlpping Assocratton vFMC495 F 2d 1215 2nd cir cetdenied 419 US964 p474 affirming Com

mission jurisdiction over the 19714 coUective 6argaining agrament inaofar aa the assesament fomiula

embodied theroin was concemed notwithstanding the pcaenee of the ILA and ita concem that the assessment

formula be workable and reliable Probably the high weter mark of Commission jurisdiction over collective

bargaining agreementa prior to the enaament of the MLAA wasFMCvPacj ic Maritime Association 435

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V EH7

NEW YORK SHIPPING ASSOCIATION ET AL

Nor dces NYSA scitation of Council of North Atlanric Shipping Assocations

vFMC672 F 2d 171 DCCir cert denied 459 US830 1982

persuade me that the Commission cannot consider PRMSA scomplaint

on the merits All that that decision seems to say insofar as relevant

here is that the Commission is supposed to consider and weigh labor

factors when deciding whether certain practices affecting certain shippers

of containerized cargo are undue or unreasonable in violation of sections

16 or 17 of the 1916 Act in accordance with another section of the

MLAA section 5 codified in section 45 1916 Act 46 USCsec 841c

No one is questioning in this proceeding that the NYSA has to fund

the fringe benefit obligations fully and that the ILA has a

legitimate concern

that these obligations are fulfilled The court in NTSA vFMC cited

above 495 F 2d at 1215 recognized that the ILA had a concern that

the fringe benefit payments be made but no proper concern over who

makes the payments as long as they are forthcoming and that the union s

concern was also primarily with enforcement of the agreement rather than

the allocation formula The court further advised the Commission to weigh

the Shipping Act and labor interests and move with caution in areas

of greater collective bargaining concern It appears from the present record

that the ILA as well as NYSA are concerned that assessment rates may

on some occasion lead to loss of cargo and further decline of work at

the Port of New York However the real question in this case is not

whether the funding will be accomplished but rather whether each carrier

or other party paying assessments is paying its fair share and whether

the method of allocation burdens carriers unduly so that they are motivated

to leave the Port of New York

As I mentioned below finally NYSA s

argument that PRMSA has

waived its rights to complain about the assessment agreement requires

a firm factual basis showing the existence of a voluntary intentional relin

quishment of a known right by express statement or clear conduct The

fact that PRMSA or PRMMI was nominally part of the NYSA bargaining

unit and that labor law requires employers to adhere to labor contracts

or remain in bargaining units absent special circumstances does not dem

onstrate the existence of a waiver of rights granted under shipping law

The third category of affirmative defense raised by NYSA is that the

Commission approved the formula which is now under attack in this pro

ceeding in 1974 and that PRMSA is bound by the Commission sdecision

under the principle of res judicata NYSA azgues that the formula was

the subject of three prior Commission proceedings Docket Nos 6957

US 40 1978 holding such agreements subject to the filing requirements of section IS of the 1916 Act

notwithstanding possible disruption of collective bazgaining The MLAA was enacred partially in response

to the PMA decision retaining limited Commission jurisdiction over collective bazgaining agreements and

establishing special procedures and standards to determine the lawfulness of portions of such agreements de

voted to assessments Commission jurisdiction overother portions of collective bazgaining agreements relating

to fumishing of containers has been upheld under another section of the MLAA in Council of North Adantic

Shipprng Associations vFMC672 F 2d 171 DCCir cert denied 459 US830 1982
EHH FEDERAL MARITIME COMMISSION

7334and 7449 and that PRMSA sprincipal the Commoawealth of

Puerto Rico was a party to the rst two proceedings while PRMSA was

a party to the third NYSA fiuther argues that the rst two of these

proceedings were settled with the filing of Agreement No T3017 which

the Commission approved and the last of them was concluded when the

Commission issued an order approving the assessment farmula Agreement

NoT3007 on June 16 1975 NYSA contends that PRMSA had an

adequate opportunity to tidgate the legality of the assessment formulx in

these three proceedings and ought therefore to be barred from relitigating

the lawfulness of the same formula

As NYSA correctly argues the doctrine of res judicata holds that when

a court has entered a final judgment on the merits of a cause of action

the parties to the suit and their privies are thereafter bound as to every

matter which was offered and feceived to sustain or defeat the claim

and as to any other admissible matter which might have been offered

for that purpose Commissioner v Sunnen 333 US591 597 981948

Montana v United States 440 US147 1979 As the cases cited by

NYSA show the doctrine is based upon policy considerations of jndicial

economy the establishment of certainty in legal relations and applies to

administrative agencies as well as to the courts St Louis Typographical

Union v Herald Co 402 F 2d 553 556 8th Cir 1968 United States

v Utah Construction and Mining Co 384 US394 1966 However

the doctrine applies only when the agency acts in a judicial capacity

and resolves disputed issues of fact properly before it which the parties

have had an adequate opportunity to litigate United States v Utah Con

struction and Mining Co cited above 384 USat 4212 Furthermore

it applies only when the same issue has been adjudicated in the prior

proceeding Cargill vFMC530 F 2d 1062 10678 DCCir

cert denied 429 US868 1976 Marine Terminal v Rederi Transatlantic

400US62 7121970

In short NYSA is arguing that the Commission issued anal judgment

in a judiciat capacity as to the merits of the formula embodied in the

19747 labor contract which is essentially the same tonnage formula

with exceptions as exists today and is under attack in this proceeding

However all that seems to have occurred is that the various parties involved

in the three proceedings ieNYSA ILA Puerto Rican cazriers automobile

and newsprint interests entered into settlement agreements in an effort

to bring an end to three proceedings involving assessment agreements for

the contract yeazs 19714 19747 and assist in ending litigation

which ensued as a result of the Commission sorders modifying the labor

agreement of 196971 Despite NYSA scontention that the Commission

expressly approved the present assessment formula in Agreement No T

3007 applicable to the contract yeaz 19747 it dces not appeaz that

what the Commission did constitutes a final judgment on the merits so

as to invoke the doctrine of res judecata First I would have to assume
TIIEPORT AUTHORITY OF NEW YORK AND NEW JERSEY V 689

NEW YORK SHIPPING ASSOCIATION ET AL

that the Commission s

approval of Agreement NoT3007 which expired

in 1977 is the same thing as approval of LM86which runs from 1983

1986 and as discussed above is the precise agreement under attack in

this proceeding Next I would have to find that the Commission issued

a final judgment on the merits of the agreement formula and resolved

factual disputes and matters which were brought before it or could have

been brought before it during the course of the litigation However there

was no litigation The eazlier cases terminated in settlements and the Com

mission built no record on which findings could be made as to whether

the assessment agreements in issue met the standards set forth in section

15 of the 1916 Act regazding unfairness and unjust discrimination among

carriers using the bene tsurdens test The Commission itself indicated

quite cleazly that its approval of the assessment formulas for the 1971

1974 and 19747 period was an approval of settlement agreements

not determinations under section 15 of the merits of the agreement formulas

Thus in its decision in Agreement NoT233F NYShipping Assn 19

FMC 248 1976 aff dsub nom NYSA vFMC571 F 2d 1231

DCCir 1978 in which the Commission ordered certain claims of carriers

who had overpaid under the 196971 assessment agreement to be hon

ored the Commission commented on its socalled approval of the assess

ment formulas as regazds Puerto Rican cargo which approval NYSA now

claims to have binding effect as a final judgment as follows

The context in which the assessment formulas for Puerto Rican

cazgo for the 19714 and 19747 periods were approved

was one of settlement As stated in our order of conditional ap

proval of the agreement between NYSA the ILA and the Puerto

Rican carriers for assessments for those periods we approved

that agreement because the parties approach to settlement of

the rights and obligations between and among themselves does

not appear to be improper Considerations underlying settle

ments do not necessarily coincide with the process of making

findings on a record in a litigated proceeding Citation omitted

19FMCat 256 Emphasis added

The Commission proceeded to distinguish between full litigation and

approval of a settlement agreement in the footnote to the above quotation

stating

Nothing we say herein is to be construed as casting doubt upon

the validity of the Puerto Rican carrier or other approved settle

ment agreements as between the pazties thereto By virtue of

those agreements the parties have resolved their differences in

a manner which we have found to be proper Regardless of how

the issues with regard to the assessments for the 19714 and

19747 periods may have been resolved if they had been

fully litigated the parties to the settlement agreements exercised

good faith in attempting to predict rights and liabilities and cannot

27FMC
690 FEDERAL MARITIME COMMISSION

be faulted in desiring that as between thmselves assessment

litigation should cease Id n 8Emphasis added

As if these statements were not enough to make the point the Commis

sion stated also

We take no position as to what Puerto Rican assessment formula

would have been approved for the 19714 and 19747

periods if these matters had been litigated We wish only to

highlight the highly speculative nature of predictions in this regazd

Id n 10

Moreover even if the Commission had issued a final judgment on the

merits of the assessment formula applicabte to the years 19747 in

Agreement NoT3007 it is doubtful if the Commission would refuse

to heaz any challenge to such forme labased on changed cir umstances

and conditions which would raise different issues even if te MLAA

did not give carriers the right to fie complaints within two years after

each agreement was filed with the Commission The Cornmission was caze

ful to point out that even when it decided the merits of a previous formula

such decision rested upon the facts circumstances and labor contract exist

ing at tbe time of the decision and the decision has signi cance

only to the extent that the facts and circumstances are the same in the

future ie 19714 147497 as they were in 1969 I971 Id

But as the Commission stated

We cannot assume absent findings on a record that conditions

are the same now as they were wifh respect

T

to Agreement No

2390 Id footnote citation showing that this quot tion

came from the Order of Investigation in Dock tNo 7449Agree

ment No T3007 covering thc 19747 assessment period

omitted Id

In the court proceeding reviewing the Commission sorder in Agreement

NoT2336 cited above NYSA vFMCcited above 571 F 2d at

1239 the court commented on the Commission srepresentation that its

approval of the settlements did not rest upon findings under the bene

fits burdens test established in Votkswagenwerk aktiengesellschaft cited

above but rather on the finding that each party to the settlement agreements

had received vatuable compensation from the compromises The court

did not dispute the Commission s

representations as to the standazd it

used in approving the settlements although not specifically endorsing the

standard 571 F 2d at 123924Q n 20

B

In the footnote citation the court further emphatiud that in approving the agreementa to settle the Com

mission had not made findings as to at least one s3gnificant group of carriers ander the benefits burdens

test namely the twelve brcakbulk oarriers known as the Statea Marlne 3roup Sec foanote 20 last para

graph P I240

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 691

NEW YORK SHIPPING ASSOCIATION ET AL

The fourth category of affirmative defense raised by NYSA in its brief

is that PRMSA has on several occasions sought relief from the assessment

formula under the labor contract s

grievance and arbitration machinery and

should have pursued the matter further with the NYSA ILA Contract Boazd

or in negotiations with the ILA before filing its complaint with the Commis

sion NYSA cites case authority holding that parties to contracts must

pursue contractual grievance procedures and restricting the role of courts

in hearing disputes arising under contracts See eg

General Drivers Local

89 v Riss Co 372 US 517 1963 Vaca v Sipes 386 US 171

184 1967 United Steelworkers v American Manufacturing Co 363 US

546 569 1960

The record shows that PRMSA sought relief in the form of reduced

assessments on at least three occasions under the contractual machinery

in 1979 1982 and 1983 9 In 1979 and 1982 a special committee designated

to hear the requests recommended that the PRMSA reyuests be turned

down In 1983 the Assessment Committee because of pending labor nego

tiations recommended that PRMSA bargain directly with the ILA for its

reyuested relief The 1979 Assessment Committee report indicates that it

was worried that a significant change in assessment for PRMSA could

have serious disruptive effects and thatunder these circumstances a

request for reduced assessments for a major trade route will only be granted

upon the most compelling evidentiary showing PRMMI and PRMSA have

not met this heavy burden of proof Ex 30 Att ICommittee Report

of 1979 p 3 The case presented to the Committee was based lazgely

upon PRMSA s

alleged financial losses and projected diversion to Southern

ports because of a

competing barge service operating down there The

Committee was not persuaded although stating that we aze sympathetic

to the serious financial dif cultes currently afflicting PRMSA Report

cited above p 4

In the 1982 Assessment Committee Report the Committee again consid

ered PRMSA scase which again was lazgely based upon financial losses

but also upon alleged nearby diversion by a non ILA competing carrier

as well as low revenue compared to longer distance foreign trades The

Committee considered these factors but found them unpersuasive for a

number of reasons It again expressed concern that changing the assessment

for PRMSA or the Puerto Rican trade would seriously interfere with the

ability to fund obligations and require increasing the tonnage assessment

It states that the Puerto Rican matter was taken up in negotiations preced

ing the 1980 NYSA ILA Collective Bargaining Agreement and that the

end result was the determination to continue the Puerto Rican Trade under

the same assessment arrangements as are applicable to all other trades

This Committee feels that in the light of such history it should not rec

9The record also shows that PRMSA or PRMMI had brought up the Puerto Rican problem on earlier occa

sions at least as early as 1976 See Ex l

testimony of Allan J Lonschein pp 289and minutes of NYSA

ILAContract Board December 16 1976 Ex 8Att L

27FMC
692 FEDERAL MARITIME COMMISSION

ommend a change from the position taken by the parties to the Collective

Bargaining Agreement except under the strongest change in circumstances

Such a change has not been shown to exist Signi cantly however the

Assessment Committee cidng the portion of the Tonnage Assessment

Agreement which authorized a Contract Board to hear grievances and to

modify tonnage denitions so as to lower costs of the assessments on

petitioning parties doubted that the Contract Board could give relief to

the Puerto Rican trade without amending the labor contract Thus the

Committee stated

The above cleaz language ieregarding authority of the Contract

Boazd to modify tonnage definitions conditions the authority of

the Contract Board to modify the tonnage denition It is appazent

that the above requirement dces not refer to an exemption to

be given to an entire trade The Committee doubts that it has

the power absent contractual amendment to recommend a trade

wide form of relief Ex 30 Att I 1982 Committee Report

PP 56

io

The most recent efforts of PRMSA to obtain relief from the tonnage

assessment began on August 30 1983 when Mr Roberto LugoDAcosta

PRMSA sExecutive Director and PRMMI sChief Executive Of cer wrote

to Messrs Dickman and Gleason cohairmen of the NYSA ILAContract

Board advising that the Governor of the Commonwealth had directed

PRMSA to seek parity of treatment with other domestic trades and asked

for a meeting llAt the meeting held on the following day PRMSAMI

were advised that NYSA was then engaged in negotiations with the ILA

for a contract covering the period October l 1983 through September

30 1986 that the request would be referred to the Assessment Committee

and then to the Contract Boazd for consideration and that to dispel azgu

ments that PRMSAMI had waived their rights to object to the tonnage

agreement for 19836PRMSAMI should request a view by NYSA

and following that review commencement of speci cnegotiations with

the ILA As advised Mr Lago DAcosta wrote a letter to NYSA President

Dickman requesting the appointment of a subcommittee to consider the

report to NYSA sNegotiating Committee on PRMSAMI s

proposals

On October 26 1983 Mr Dickman appointed a three man subcommittee

which was suppose to report to NYSA sNegotiating Committee Mr Lugo

1Olnterostingly at a mating of the NYSA ILAContract Board luld on December 16 1976 at which

meeting the Puerto Rican problem was discussed which Mr Dickman of NYSA stated had been dis

cussed by his Board on at least four separate occasions counset for NYSA advised that the Contract Board

had the right to increase or decrease certain assessment rates without filing with theFMC

However

should one carrier or shipper file acomplaint withthe FMC that body may decide to hold heazings It shouid

be reme beredthat we are still involved in 1969 litigations Ex 8 Att LNYSA ILAContract Board

minutes

The following detailed fiings of fact rolateng to these most recent effarts by PRMSNPRMMI are

based upon the testimony of Mr Lugo DAcosta and suppoKing documents and the testimony of Mr

Whitehouse Exs 42 and 30 Att I

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 693

NEW YORK SHIPPING ASSOCIATION ET AL

DAcosta wrote the subcommission on November 10 1983 requesting that

they establish a schedule and report to the NYSA Negotiating Committee

by December 15 1983 and requesting that representatives of PRMSA

PRMMI be permitted to appear before the subcommittee However the

subcommittee never met through the completion of NYSA ILAnegotiations

on January 25 1984 and through the followup actions taken to secure

rati cation of the labor contracts by ILA members and subscription by

the employer members of NYSA which continued through February and

Mazch of 1984 The subcommittee s

assignment ended when PRMSA

PRMMI filed their complaint with the Commission on February 27 1985

It was suggested however that PRMSAMMI seek relief by going to

the bazgaining table and presenting their proposal directly to the ILA on

a one tobasis The suggestion was not considerd feasible or practical

by PRMSAMMI because of the nature of multi employer negotiations

in the industry and the lack of sponsorship of their proposals by NYSA

and PRMSAMMIdid not therefore act upon it Instead PRMSAMMI

felt it necessary to seek relief before the Commission

In view of this factual history of PRMSAMMI scontinued futile

efforts to obtain relief within the mechanisms of the labor contract or

from the NYSA ILA Contract Boazd NYSA s

arguments that PRMSA

PRMMI s

complaint before the Commission brought under the MLAA

should be thrown out without considering the merits are singularly

unimpressive and audacious It may be we that under labor law parties

to labor contracts ought to resort to arbitration and grievance machinery

to obtain relief under the terms of the contracts and should not seek

the same relief from courts or agencies before exhausting their remedies

under the contract However not only did PRMSAMI continually

seek relief under the contracts without success but even the NYSA sAssess

ment Committee did not believe that it or the Contract Boazd could grant

the type of relief which PRMSA was requesting ie trade wide reduction

of assessments and believed that such relief would require a totally new

assessment agreement Moreover as discussed above when PRMSA

PRMMI tried for the last time to obtain relief through the contract mecha

nism they were told to negotiate with the ILA themselves Why then

should PRMSAMI have continued their futile efforts to obtain relief

under the labor contract machinery and why can they not seek relief which

is provided under an overriding federal statute the MLAA

It has often been held by the courts that the rights granted under federal

law cannot be supplanted by arbitration procedures contained in contracts

because those procedures concern relief within the terms of the contract

and are not capable of affording relief under the supervening statutory

standards Furthermore even if a party has lost in an arbitration proceeding

that party still has the right to bring suit in court under the supervening

statute For example in Alexander v Gardner Denv Co 415 US 36

1974 the plaintiff after losing before an azbitrator under the provisions

27FMC
694 FEDERAL MARITIME COMMISSION

of a collective bazgaining agreement who found that he had been dischazged

from employment for cause brought suit in federal court under Title VII

of the Civil Rights Act of 1964 The Supreme Court held that he had

the right to bring suit notwithstanding the decision in the arbitration proceed

ing The Court made cleaz that a person srights under a separate federal

law are not supplanted by azbitration procedures under a contract and

that an arbitrator is limited in the scope of his suthor ryand by the proce

dures he follows which are not comparable to judicial proceedings brought

under the federal law Furthermore an azbitrator is connedto interpreting

rights under a contract not rights under the federal law Thus the Court

stated

As the proctor of the bazgain the arbitrator stask is to effectuate

the intent of the pazties His source of authority is the collective

bargaining agreement and he must interpret and apply that agree

ment in accordance with the industrial common law of the shop

and the vazious needs and desires of the parties The arbitrator

however has no general authority to invoke public laws that

conflict with the bargain between the parties An arbitrator

is confined to interpretation and application of the collective bar

gaining agreement 415 USat 53

Arbitral procedures while well suited to the resolution of contrac

tual disputes make azbitration a comparatively inappropriate forum

for the nal resolution of rights created by Title VII This conclu

sion rests first on the special role of the azbitrator whose task

is to effectuate the intent of the parties rather than the requirements

of enacted legislation Where the collective bargaining agreement

conflicts with Title VII the arbitration must follow the agreement

To be sure the tension between contractual and statutory objec

tives may be mitigated where a collective bargaining agreement

contains provisions facially similaz to those of Title VII But

other facts may still render arbitral processes comparatively inferior

to judicial processes in the protection of Title VII rights Among

these is the fact that the specialized competence of azbitrators

pertains primarily to the law of the shop not the law of the

land The resolution of statutory or constit tional issues

is a primary responsibility of courts and judicial construction

has proved especially necessary with respect to Title VII whose

broad language frequently can be given meaning only by reference

to public law concepts Moreover the fact nding process in azbi

tration usually is not equivalent to judicial factfinding The record

of the azbitration proceedings is not as complete the usual rules

of evidence do not apply and rights and procedures common

to civil trials such as discovery compulsory process cross exam

ination and testimony under oath aze often severely limited or

unavailable 415 USat 568

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 69S

NEW YORK SHIPPING ASSOCIATION ET AL

Courts have rendered similar decisions holding that persons cannot be

barred from seeking relief under federal laws merely because of arbitration

procedures established in contracts See egBreyer v First Nat Monetary

Corp 548 F Supp 955 D NJ 1982 arbitral forum not adequate to

effectuate the policies of the Commodity Exchange Act McDonald v

City of West Branch Michigan et al US 80 L Ed 2d

302 30910 1984 arbitration award against employee not given res

judicata effect in his suit in court under the federal civil rights law giving

preclusive effect to arbitration awards would severely undermine the protec

tion of federal rights that the statute is designed to provide Applied

Digital Tech Inc v Continental Cas Co 576 F 2d 116 7th Cir 1978

arbitration proceedings enjoined to allow suit to proceed in court under

antitrust laws which are more appropriately enforced in courts than in

arbitration

In a case involving the Commission sown authority under the Shipping

Act to determine the validity of a dual rate contract notwithstanding a

decision by an arbitrator and to award reparation Swift Co vFMC

306 F 2d 272 DCCir 1962 the court held that the Commission

was not precluded from exercising its jurisdiction under the Shipping Act

because of the arbitration decision The court held for the Commission

stating 306 F 2d at 282

No private arbitration could negate the Boazd s

statutory power

to determine the validity of the dual rate agreement The more

serious issue is whether the Board is precluded by the arbitration

from awazding Swift reparations We think not for the arbitration

opinion decided only the meaning of the Freighting Agreement

as garnered from the intent of the parties and the sunounding

circumstances That may have been appropriate for the arbitration

but as we have pointed out the Board sfunction is to interpret

the rule on the egality of the agreement slanguage and effect

in the light of the public interest

The fifth category of affirmative defense raised by NYSA in its brief

is that PRMSA or its subsidiaries or principal were parties to settlement

agreements which terminated three previous proceedings and by which

PRMSA or its subsidiary agreed not to challenge the assessment formula

embodied in the 19747 assessment agreement essentially the tonnage

formula now contained in LM86In its third and fourth af rmative de

fenses to PRMSAMI samended complaint contained in NYSA san

swer to that complaint served May 17 1984 NYSA provides more details

According to NYSA the Commission approved the settlement agreements

as Agreement NoT3017 in 1974 and no Puerto Rican carrier or interest

raised any objection to such approval Furthermore according to NYSA

NYSA carried out the terms of the settlements by paying substantial sums

of money to other carriers not engaged in the Puerto Rican trade Therefore

according to NYSA PRMSA and PRMMI are estopped and precluded

27FMC
696 FEDERAL MARITIIvIE COMMISSION

from challenging the assessment formula in this proceedingFrthermore

because TIT a wholly owned suhsidiary of PRMSA in 1974 accepted

the settlement this action constitates a waiver binding upon PRMSA and

PRMMI of the right to challenge the assessment formula in this proceeding

I have found above that the socalled approval of the tonnage formula

contained in Agreement NoT3007 which agreement was effective for

the contract yeazs 19Z477 was in reality only an approval of a settlement

without lidgation or a full record and without ndings under the standards

set forth in section 15 of the 1916 Act Indeed as Inoted the Commission

specifieally commented that it had taken no pasition as to what Puerto

Rican assessment formula would have been approved for the 19714

and 19747 periods if these matters had been litigated and further

remazked on the highly speculative nature of predictions in this regard

Agreement NoT2336 cited above 19 FMCat 256 n 10 NY3A now

relies on the setf lement agreement and on a written statement of the Presi

dent of TIT a subsidiary of PRM SA at the time ttiat TTT accepts

the full tonnage formula set forth in the 19747 NYSA ILAcollective

bazgaining agreement as it relates to the New York Pueto Rico trade

and that it dces not intend to initiate FMC or other proceedings contrary

thereto Ex 34 Att F last page

If TTT made the above representation and was a party to the settlement

and these appeaz to be the facts and if PRMSA was its ovner at the

dme as also appears to be the fact PRMSA might be found to have

waived its rights to file the prese tcomplaint against greement LM

86 if it could be found that there was a volantary intentional relinquishment

of a known right or privilege manifested either by express statement or

by conduct which can only reasonably be considered consistent with such

relinquishment See Buffum v Chase Nat Bank 192 F 2d 58 601

7th Cir 1951 cert denied 342 US944 1952 Williams v State of

Alabama 341 F 2d 777 7801 Sth Cir 1965 If PRMSA is to be

estopped from filing the present complaint I must also find misleading

conduct on PRMSA sbehalf reliance on such conduct by NYSA and

deviment to NYSA as a result of such reliance See eg

Matsuo Yoshida

v Liberry Mutual Ins Go 240 F 2d 824 82930 9th Cir 1957

Upper Golumbia River Towing Co v Muryland Ca ualry Co 313 F

2d 702 7067 9th Cir 1963 District of Columbia v Chevrah Tefereth

Israel 280 F 2d 61 DCCir 196b I have no basis in fact to make

such findings

Nothing in the Commission orders of approval either that of January

16 1975 approving Agreement NoT3017 or that of June 16 1975

approving Agreement NoT3007 indicates that any assessment agreement

extending beyond contract yars 19747 was approved On the con

trary both orders of the Commission specify no period beyond 1971

1974 and 197977 Agreement NoT3017 Approvai with Condition

January 16 1975 p 3 or the three year period beginning October 1

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 697

NEW YORK SHIPPING ASSOCIATION ET AL

1974 Agreement NoT3007 Order of Approval June 16 1975 p

1 Ex 34 Atts F I

The text of Agreement NoT3017 which embodies

the Puerto Rican settlement states that thePR Carriers hereby withdraw

from the proceedings in Docket No 7334 and hereby waive any and

all rights to any recovery from NYSA ILA or any NYSA ILA fringe

benefit funds pursuant to the issues involved in said Docket and agree

that they shall not seek any such recoveries without regard to ihe ultimate

disposition of said proceeding by the Federal Maritime Commission Ex

34 Att F Agreement NoT3017 pazagraph 3 The letter of ITI s

President quoted above stated that TTT accepted the full tonnage assess

ment formula set forth in the 19747 collective bazgaining agreement

Agreement NoT3007 and that TTT dces not intend to initiate FMC

or other proceedings contrary thereto

The history of the various settlements among the members of the NYSA

is rather complicated They were the result of the efforts of NYSA members

to adjust their rights and liabilities under two subsequent and successive

collective bargaining agreements fixing the level of benefits that they would

have to fund for the 19714 and 19747 periods respectively

NYSA vFMC cited above 571 F 2d at 12356 As far as the

Puerto Rican carriers were concerned they had been found to have under

paid for the 196971 period but claimed to have overpaid during the

19714 period However rather than litigate the merits of the Puerto

Rican claims under the 19714 formula period NYSA agreed to give

up its right to recover payments due from the Puerto Rican carriers because

of their underpayments during the 196971 period and to offset Puerto

Rican claims under the second period in return for the Puerto Rican carriers

agreement not to contest the formula contained in the 19714 period

or apparently the 19747 period as well See NYSA vFMC cited

above 571 F2d at 12357 letter of ITT s President October 31

1974 Ex 34 Att F Apparently the Puerto Rican carriers or their succes

sors paid the NYSA sassessment formula during the 19714 and 1974

1977 periods and for every period thereafter

From all of the above NYSA now contends that PRMSA has waived

its right to file the present complaint or should be estopped I can find

no intentional relinquishment of a

right granted to PRMSAMMIunder

the MLAA to file a complaint in 1984 either expressly or by clear conduct

At most I see a letter from TTT s President agreeing to pay under the

19747 agreement without bringing any proceedings against that agree

ment and as far as I am aware Puerto Rican carriers have paid under

every agreement sformula from 19714 to the present and did not

sue NYSA under the 19747 agreement Customarily a plaintiff wishing

to release a defendant from suit by means of a settlement and for consider

ation makes clear in a release that the plaintiff is indeed relinquishing

all rights and claims arising out of the dispute in unequivocal terms It

is furthermore unusual for a person to relinquish all future rights in

27FMC
698 FEDERAL MARITIME COMMISSION

perpetuity but even if a person did wish to take such an extreme step

one would expect to nd cleaz language which courts could enforce There

is no such language here I cannot therefore find that PRMSA as successor

to TTT surrendered its rights under the MLAA to file a complaint in

1984 almost ten years after the settlements and the TTT letter

Nor can Ind the essential elements of equitable estoppel to exist

so as to bar PRMSA As discussed at most it appeazs that the Puerto

Rican carriers and ITT agreed not to sue under the 19747 agreement

There is therefore no basis for NYSA to rely on TTs

representations

by converting its statements regazding the 19747 agreement into a

promise never to sue under any subsequent agreement Furthermore NYSA

has long since made adjustments to carriers such as the States Marine

Group and cannot reasonably azgue now that its ability to make such

payments or give credits was adversely affected by the complaint filed

by PRMSA years later in 1984 Finally in view of the continued lack

of success which PRMSA has experienced in its continual efforts to obtain

relief from the assessment agreements from at least 1976 to the present

time through the agreement grievance mechanisms it would be rather per

verse to invoke the doctrine of estoppel which is rooted in equity against

PRMSA which has felt compelled to seek relief outside of those contractual

mechanisms by presenting evidence of unfaimess and unjust discrimination

under the stan@ards established by federal law pursuant to independent

rights granted to it under that law

I

conclude therefore that none of the above rmative defenses is

valid and that the Commission can proceed to determine the merits of

the complaint 12

DISCUSSION OF APPLICABLE LAW

Contentions of the Parties

The Port Authority contends that the tonnage assessment formula is inher

ently unfair and unjustly discriminatory because it puts an undue burden

on highly productive carriers who pay assessments in inverse proportion

to the amount of Iabor they use and in some instances some carriers

pay nothing towazd fringe benefit obligations for non cargo handling func

tions such as movement of empty containers or for maintenance which

functions also require ILA labor The result of this unfair assessment for

mula is to cause containerized carriers to avoid using the Port of New

York when possible because the comparable tonnage assessment per con

tainer at competing ports such as Baltimore is so much less The formula

therefore hurts the Port of New York competitively The Port Authority

acknowledges that it has the burden of proof in this case but claims that

Two defenses raised by NYSA conceming the limitation on complainants rights to reparations and non

applicability of sections of the 1916 Act other than sedion 15 I find to be correct as matters of law and

will discuas them later

F nrr
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 699

NEW YORK SHIPPING ASSOCIATION ET AL

it has met that burden by meeting certain tests as to competitive relationships

among ports proximate causation of injury to the Port and unreasonable

discrimination established by the Commission under sections 16 and 17

of the 1916 Act 13 It points to evidence that top executives of eleven

major carriers have admitted to the Port Authority sDeputy Director that

they avoid the Port of New YorWNew Jersey particularly for Midwest

cazgo because of the tonnage assessment at New York that the Port

has suffered a loss in its market share on container traffic in the North

Atlantic and to expert testimony showing that the present assessment for

mula is inherently unfair and dces not relate payments to labor utilization

in a fair manner The Port Authority offers alternative formulas which

would in its opinion allow carriers to pay only their fair share in the

correct proportion to the labor used and to their responsibility for labor

displacement while ending special unjustified privileges of carriers that

pay little or nothing for certain activities

PRMSAMMI contend that their interests as well as those of the

Port Authority and the NYSA are actually the same ieto fund the

commitment to labor in such a way as does minimum damage to the

competitive position of the Port of New York and the competitive position

of every member of the NYSA To achieve that purpose it is in the

interests of all of these parties to find a method to apportion the 200

million or so in fringe bene t

obligations under the labor contract in

a way that is economically sound fair and justifiable Instead of utilizing

an assessment formula that would achieve these objectives PRMSAMMI

azgue that NYSA has dug in its heels and adheres rigidly to a 10

year old assessment formula which is unjust discriminatory and economi

cally counterproductive riddled with unjusti edfavoritisms for special car

riers categories of cazgo and labor activities PRMSAMMI op br

at 4 PRMSA argues further that it has asked NYSA for years to change

its formula as regards the Puerto Rico trade without success contending

that it has lost cazgo to carriers not serving the Port of New York However

PRMSA argues that while diversion of traffic from New York is one

of a number of factors that must be weighed by the Commission when

determining whether the subject assessment formula is fair reasonable

and non discriminatory the evidence which PRMSA has developed and

presented shows that the tonnage assessment formula cunently in use lumps

all fringe benefits into one category to be funded by tonnage assessments

regardless of the type of benefit and of the amount of labor which a

paying carrier uses Therefore certain carriers are picking up the share

of costs that other carriers should be paying and the problem is aggravated

13The PoR Authority cites such cases as Outbound Rates Affecting Export High Pressure Boilers 9FMC

441 1966 a

case azising under sections l7 and 18b5of the 1916 Act Boston Shipping Association

Inc vFMC706 F 2d 1231 Ist Cir 1983 affirming Bosron Shipping Associarion vNYSAet al

21 SRR 955 1982 azising under sections 15 16 17 and 18 of the 1916 Act NCState Ports et al v

Dart Containerline 21 FMC1125 1979 aff dsub nomDart Containerline Co Ltd vFMC639 F2d

809DCCir 1981 azising under sections 16 and 17 of the 1916 Act

27FMC
UO FEDERAL MARITIME COMMISSION

by the fact that certain carriers and acdvities pay lower excepted rates

or even nothing at all For example transshipped rehandled and domestic

cargces constituting 129

percent of total loaded containers moving through

the Port of New York in contract year 19823 paid less than 016

percent of the total assessment a special privilege enjoyed by only two

carriers Sea Land and United States Lines PRM3A argues further that

the reasons for these special privileges ie the alleged fear of diversion

if such cargces pay regular rates do not stand up and moreover there

is strong evidence of actual diversion of Puerto Rican cargces from New

York which NYSA fails to acknowledge and instead continues to require

PRMSA a carrier serving an economically disadvantaged trade to subsidize

other cazriers like Sea Land and United States Lines and those carriers

not paying their fair share because of the inherently unfair tonnage formula

PRMSA offers an alternative formula supported by its expert witness

Dr Silberman which would in its opinion discontinue the unfairness which

comes from levying a straight tonnage assessment regardless of type of

fringe benefit and would instead restore a proper balance and require carriers

to pay their fair shares by correlating certain costs mainly GAI to past

dislocation of work caused by containerization and other costs pensions

clinic etc to cusent type costs not related to past dislocation and by

funding these two costs on the basis of tons and man hours respectively

Furthermore all unjustified special privileges on domestic cazgoes empty

containers transshipped and rehandled cargces etc would be terminated

Finally in consideradon of the depressed economic situation in Puerto

Rico PRMSA urges that the Puerto Rican trade be given a 25 percent

discount from the tonnage assessment under its proposed alternadve formula

Respondents NYSA and 89 of its members represented by the same

rm raise a number of affirmative defenses concerning the two year statute

of limitadons estoppel waiver res judicata failure of PRMSA to withdraw

from the bargaining unit etc which I have discussed above and have

found to be without merit However NYSA also azgues that complainants

have the burden of proof which is aheavy burden of proof which must

be met by cleaz and convincing substantial proof supported by specific

evidence NYSA op br at 93 This allocation of burden furthermore

is con rmed by the legislative history to the MLAA which set up the

special complaint procedure by which the Commission can heaz such a

case as the present NYSA azgues that the gort Authority has not produced

evidence adequate to support its legal theories as to detriment to commerce

and unjust discrimination NYSA contends that the Port Authority has not

identified the particulaz ports with which the Port of NY competes nor

shown that the assessment formula is the proximate casue of any alleged

diversion which may be harming the Port of NY that the real problem

is the rising costs of fringe benefits at New York not the formula which

raises money to pay them that respondents cannot be found guilty of

discriminating against the Port of New York because they do not control

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V IOI

NEW YORK SHIPPING ASSOCIATION ET AL

the

Director

assessment

Port Department

formulas devised

conceded

at

that

other

neither

ports

NYSA

that the

nor

Port

the ILA

Authority s

adopted

the challenged formula for the purpose of placing other ports in a better

competitive position than New York and that the Port Authority scase

rests upon supposition argument and unsubstantiated conclusions More

specifically NYSA contends that the Port Authority has not shown any

cognizable diversion of cargo from New York to other ports that the

Port Authority is erroneously claiming inland territories as being naturally

tributary to New York that shippers aze controlling most routing not

carriers that tonnages are holding up in New York and other Ports are

increasing volumes handled relative to New York because the other ports

are now experiencing increasing containerization NYSA contends nally

that the Port Authority salternative formulas aze flawed and would cause

problems worse than the alleged disease and that in any event the present

formula has not been shown to be unlawful

As to PRMSAMMI NYSA contends that first of all their remedies

if any are limited to section 15 of the 1916 Act fifth paragraph and

do not extend to sections 16 First 17 18aor 22 of that Act which

no longer apply in assessment agreement cases Furthermore as to remedies

the MLAA authorizes the Commission to make adjustments for the time

period after the filing of the complaint and does not authorize reparations

prior to that time NYSA does not agree that the socalled benefits

burdens test iethat assessment formulas should fairly impose a charge

or burden that is reasonable related to the labor contract benefits received

by the persons against whom the assessment is levied still applies to

assessment formula cases because of the removal of sections 16 and 17

of the 1916 Act from assessment cases by the MLAA However NYSA

azgues that it is unnecessary to decide whether that test still applies because

the NYSA formula satisfies that test NYSA op br at 127 NYSA con

tends that PRMSA scase is faulty and legally unsound First according

to NYSA PRMSA is seeking to have the formula protect PRMSA against

loss of business to competitors ie the non ILA carrier who allegedly

is pulling business away from New York and from PRMSA in the Puerto

Rican trade But it is not a violation of federal shipping law if the subject

agreement formula dces not grant affirmative protection against the vicissi

tudes of competition NYSA op br at 128 NYSA cannot be expected

to adjust the formula every time a carrier faced competitive problems

If so thepotential for claims by dissatisfied carriers would be staggering

because every time the formula was adjusted to meet the needs of one

others would be affected NYSA op br at 128 Moreover the facts

do not show that the formula is causing any diversion of cargo from

PRMSA to the non ILA carrier which is not serving New York

As to the alternative formula proposed by PRMSA NYSA argues that

it extends the benefits burdens test beyond its intended limits because

according to NYSA PRMSA is trying to break down bene tsand burdens

27FMC
U2 FEDERAL MARITIME COMMISSION

within the same group of carriers iecontainerized carriers and is claiming

that certain of these carriers are receiving different bene tsthan other

carriers within the group and therefore seeking speeial treatment for one

of the containerized carriers PRMSA which is highly productive and ud

lizes relatively few hours of labor All highly praiuctive carriers like

PRMSA enjoy full benefits of containerization and are responsible for labor

dislocation more or less equally according to NYSA Therefore one such

carrier should receive no special reduced assessment rate at the expense

of another within the group Also PR1vISA sattempts to have certain

operations such as transshipments pay regular rates is unsound even under

the benefits burdens test because those operations provide increased hours

of employment as byproducts of cantaineriz tianand are not responsible

for the dec ine in employment PRMSA srequest for a apecial 25 percent

reduction for the Puerto Rican trade has no legal justi cation according

to NYSA and is itself an admission that Dr Silberman salternative formula

is not even satisfactory to PRMSA Both the Port Authority s

and PRMSA s

suggested formulas would bring disastrous consequences to New York

and would drive cargo away from the Port of New York states NYSA

and there is no basis for tampering with th current formula which was

agreed upon by the parties whose interests are at stake and has functioned

for more than a decade

Sea Land Service Inc an intervenor in No 84 and respondent in

No 846fully suppoRs and defends the collecdve bazgaining agreement

entered into between it via the NYSA and th ILA However

Sea Land also believes that the record herein shows that special treatment

need be given to cargo moving via the Port of New York in the Puerto

Rican trade Sea Land op br at 2 3 Sea Land st tes that the parties

to the collective bazgaining agreement and not the Commission or the

courts are best suited to make whatever adjustments are required Having

stated these beliefs Sea land argues that complainants have not met their

burdens of proving that LM86violates the Shigping Act Instead according

to Sea Land comp ainants have offered alternative assessment formulas

which in the case of PRMSA merely seeks to accomplish narrow paro

chial interests of that Complainant without regard to the interests of the

shipping public the carriers as a group or the workers Sea Land

op br at 3 Even if the alternative formulas proposed are more reasonable

or fairer however Sea Land azgues that the we test is whether the present

formula in LM86is unlawful which Sea Land contends has not been

shown On lega points Sea Land argues that the 1984 Act and the 1916

Act are essendally the same as far as assessment agreement cses are

concerned and that the 1984 Act makes clear that seetions 16 17 18

and 22 of the 1916 Act were not intended to apply to such cases the

exclusive standards and remedies being contai red in section 15 fth paza

graph of the 1916 Act and section 5dof the 1984 Act These limited

standards refer to whether an assessment agreement is unjustly discrimina

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7O3

I1EW YORK SHIPPING ASSOCIATION ET AL

tory or unfair as between carriers shippers or ports and the limited

remedy consists of disapproval cancellation or modification of such agree

ments and assessment adjustments for the period of time between filing

of the complaint and final Commission decision reparation allowed

only if a complainant has ceased activities subject to assessments

Sea Land submits that although the MLAA dces not define the anti

discriminatory standards it is proper for the Commission to consult previous

case law under the 1916 Act to give meaning to similar language in the

new law Under previous case law for example the Commission has usually

required a showing of disparity of treatment among similarly situated entities

that results in injury not justified by valid transportation factors See eg

North Atlantic Mediterranean Freight Conference 11 FMC202 1967

rev don other grounds sub nom American Export Isbrandtsen Lines v

FMC409 F 2d 1258 DCCir 1967 For preference or prejudice

to be proven again similarly situated entities must be shown and usually

the existence of a competitive relationship between the entities 14However

as Sea land seems to concede absence of competition is not fatal to proof

of a violation of the 1916 anti discrimination standards It can be sup

planted by ashowing of cleaz comparative disadvantage causing special

injury Sea Land cites Internationall Trade Development Inc v Senti

ne Line and Anchor Shipping Corp 22 FMC231 232 1979 Sea

Land op br at 13 Therefore Sea Land contends that complainants must

either show that they have been prejudiced with respect to competitors

or they have been subjected to a compazative disadvantage causing special

injury Sea land argues that complainants have failed to make the requisite

showings Thus it is azgued the higher per tonassessment at New York

than exists at other ports under their man hour formulas is totally immate

rial in the context of this proceeding Sea Land op br at 16 Assessments

at New York are higher simply because costs at New York are higher

Also since LM86applies only at New York as a matter of law respond

ents have not discriminated against the Port of New York because respond

ents have not treated similarly situated ports differently But even if alleged

harm to the Port of New York can constitute a valid cause of action

under law because cargo may be diverted from New York to other ports

because of the higher tonnage assessments at New York under the current

formula the Port Authority has not proven that any specific cazgo has

been diverted solely because of the higher assessments at New York Sea

Land lauds the efforts of the Port Authority to devise some means

to help the Port of New York attract intermodal containerized cargces

moving to and from the Midwest for which cazgoes New York competes

with other ports such as Baltimore However the Port Authority ssuggested

means an alternative assessment formula which would lower the tonnage

14Sea Land cites such case authority as CONASA vAmerican Mail Lines 21 FMC91 14a141 1978

Fw East Conference Inchon Arbirrary 21 FMC522 524 1978 Pacific Westbound Conference 21

FMC834 838 1979

27FMC
7O4 FEDERAL MARITIME COMMISSION

assessment rates is something that in Sea Land sopinion is best left

for commercial negotiations and is insufficient to watrant intervention

in the assessment process by the FMC Sea land op br at 19 ls

As for PRIVISA Sea Land azgues that PRMSA makes no showing that

the present NYSA formula is unlawful and merely proposes a formula

which it azgues to be better or fairer Sea Land attacks the proposed formula

presented by PRMSA switness Dr Silberman as a proposal which is

cleazly intended to bene t

only its proponent and is not intended to be

fair and equitable to all concerned being especially unfair to Sea Land

and United States Lines Sea Land op br at 19 Sea Land expresses

regret that the PRMSA formula would affect Sea Land adversely in certain

respects because Sea Land itself appears to agree with PRMSA that the

Puerto Rico trade should be treated just as other domestic trades aze treated

rather than the foreign trades with which it is presently placed by the

NYSA assessment formula Sea Land op br at 196 In this regard

furthermore Sea Land agrees with PRMSA that the Puerto Rican trade

is unlike foreign trades requiring American flagvessels using ILA labor

at both ends subject to public utility type rate regulation etc Sea Land

states that if PRMSA had merely confined itself to seeking pazity between

the Puerto Rican and other domestic trades ie by assessing them all

under the excepted man hour rates it would have perhaps cosigned

PRMSA sbrief However Sea Land opposes FRMSA scontentions that

the entire formula should be revarnped contending that PRMSA sproposed

alternative formula is blatantly biased and would endanger domestic

transshipped and other cargces by terminating their special assessment rates

thereby harming all parties at New York by driving away sach business

Sea Land concludes by azguing that the Commission has no authority to

modify the current assessment formula and that the parties should nego

tiate a solution i

s

In its reply brief the Port Authotity suggests that the Commission might issue an order indicating that

it would modify the prosent assesament forn ulato eliminate its unfair and discriminatory effects unless

the parties in this proceeding can come to an agreemert on a new formula Port Authority r br at 32

Although it is not certain perhaps this suggestion by the Port Authority picks up on the posaible suggestion

by Sea Land that the return to a

pertial man hour fmmula as proposed by expeR witneases Donovan and

Silberman makes some sense and could form the basis for asetdement among the perties Even NYSA dces

not appear to reject the idea of Type IType II costs and aman houdtonnage formula in pdnciple at least

in its opening brie Thus at page 132 of that brief NYSA states Whi1e the Type IType II analysis is

appropriate for allocation between sectors Doea this mean that the Port Authoriry believes that NYSA

may be willing to consider modifying che present formula at least to this limited extent and wishes to rngo

tiate and sak posaible settlement

16It is interesting to obaewe that Sea Land castigatea PRMSA for advocating a formula which will benefit

PRMSA and other containeriud lines as well due to the man hour portion of the proposed formula but

would upset Seaand sspeciai treatment paying nothing on its rolay containers However Sea Land while

not filing ita own complaint joins with PRMSA in urging something in its own self introst namely that

its domestk service be treated just as other domestic trades are treated

The MLAA codified in section 15 fifrh paragraph of the 1916 Act and section 5dof the 1984 Act

exprossly states that the Commission shall disapprove cancel omodify any such agreement if

it finds Notwithatanding the presence of the wotd modify in the statute Sea Land argues that all

the Commission can really do is approve an agroement on condition that the parties accept certain changes

to it Therefore Sea Land argues that only the parties have the power to modify their agreement Sea Land

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7OS

NEW YORK SHIPPING ASSOCIATION ET AL

The three remaining intervenors Maryland Port Administration MPA

Massachusetts Port Authority Massport and Hearing Counsel have limited

interests MPA readily acknowledges its participation to protect the competi

tive interests of Baltimore argues that the Port Authority has not carried

its burden of proof questions its standing to seek relief contends that

it has not shown that the Port Authority is losing cargo to Baltimore

because of the current assessment formula that there is no basis to change

the current New York formula to offset New York s

competitive disadvan

tages if such exist and that the Commission ought not to do anything

that

a

would adversely affect Baltimore such as for instance by establishing

superfund which would spread New York slabor costs to other ports 18

Massport does not want any modification of the New York assessment

formula to jeopazdize the bazge service which carries Boston cargo via

New York If anything jeopazdizes this barge service through New York

Massport states that the Port of Boston will immediately lose 50 of

the containerized cargo it is presently handling Massport op br at

3 This would cause loss of work on barges at Boston and force ILA

members in Boston onto GAI rolls Massport also fears establishment of

a socalled superfund Hearing Counsel ask that nothing be done to

the current assessment formula by the Commission Heazing Counsel appear

to acknowledge that complainants may have shown that the assessment

formula contains some problem azeas but recommend that these problems

be left to the parties to negotiate when it is time to draft a new agree

ment Hearing Counsel state that the assessment agreement is not violative

of the 1916 Act and that it is not the purpose of this proceeding to

decide whether the current formula is the best formula possible HC

op br at 33 Hearing Counsel further argue that neither complainant

has carried its burden of proof For example the Port Authority has not

shown that the assessment formula has caused diversion of cargo from

New York to other ports under the standazds of law enunciated in cargo

diversion cases previously before the Commission PRMSA according to

Hearing Counsel incorrectly uses the benefits burdens test its formula

would hann domestic and other cargces enjoying special treatment it has

not shown that the current formula causes PRMSA to lose cargoes to

op br az 11 n8 fail to see any practical difference between conditional approval and modification

since no one can force parties into an agreement they do not want Although the Commission may have

followed the conditional approval approach it has also clearly enunciated its authority to modify agree

ments and has ordered modifications under section 15 of the 1916 Act See Imposirion of Surcharge by the

Far East Conference 9FMC129 136 1965 and Rares on US Government Cargoes I1 FMC263

287 1967 CAgreement No 5796 l9FMC291 305 1976 and nrer American Freight Conference

14 FMC58 62 1970

BThis socalled superfund idea is in my opinion a total red herring It was also a concem of Massport

Although I tried to put the matter to rest by indicating that the matter ofasuperfund was not in this

case and was probably beyond the power of the Commission to establish certainly in a case of this type

concentrating on New York under principles of due process the matter has been mentioned on brie Since

it is not an issue in this case I will not discuss it further and hope that MPA and Massport can finally

resteasy

27FMC
PEDERAL MARITIME COMMISSION

a non ILAcarrier operating in the Philadelphia area and there is no basis

to give the Puerto Rican trade a 25 percent dis ount or any reduction

to help the Puerto Rican economy because it is not shown how such

a reducdon would help that economy or how PRM3A is bur ened any

more than any ather container carrier by paying the regular tonnage assess

ment

Applicable Standard of Iaw Regarding Burden of Proof

In view of several arguments by the parties regacding burden of proof

and compl inant s

failure to sustain that burd nI

first must establish tie

prevailing standard of proof in adminis ativecas sThat standard is not

cleaz

a

and convincing or beyoud a reasonable doubt but raher erely

prepondetance of the evidence Steadman vSEC450 US91

1981 reh denied 451 US933 1981 Sanrio Co Ltd v Maersk Line

23 FMC 154 1602 IDadopted by tkie CommissiQn 23 FMC

150 1980

The preponderance of the evidence standard is not a quantitative

standard but a qualitadve one That is to say the trier of fact dces not

merely weigh the evidence on a scale or count the number of witnesses

on one side or the other 1fie standard means that the evidence makes

the existence of a fact more probable than not ee discussion in McCor

mack on Evidence 3rd Ed 1984 sec 339 pp 9567

There is absolutely no quesdon but that complainants have the burden

ofproof in this case as well as in any other case under prevailing principles

of administrative law as NYSA argues so virgorously citing numerous

autliorities See NYSA op br at 903cidng mong other things the

APA 5 USCsec 556 d

Rule 155 46 GFR sec 502155 Boston

Shipping Ass nvFMC706 F2d 1231 1239 lst Cir 1983 Ship s

Overseas Service Inc vFMC670 F2d 30 307 n 7DCCir 1981

Steadman vSECcited above 450 US at I5 However contrary to

NYSA sarguments the NII AAdces not impose something called aheavy

burden which must be mtby clear and convincing substan ial proof

sugported by specific evidence NYSA op br at 93 This clear

and convincing standard is not only not the standard governing administra

dve and most civil cases but it appears to have been proposed before

by the NYSA to Congress which failed to adopt it when enacting the

MLAA 19

Complainants must produce apreponderanc of reliable and probative

evidence under the usual standard However this dces not mean tha com

plainants must produce asmoking gun when seking to show diversiQn

harm loss oftraf cburdens etc Ithas been recognized by the Commission

and the courts that the Commission may draw inferences from certain

19See Senate Hearing luu4 1980 96th Congr 2d Sess on HR 6613 at 43 and 44 In commeneing

on an apparent NYSA proposal to mandaze the clear and convincing stanElard in the MLAA astevedoring

association specifically criticiud such standard which Congreas did not enact

27FMG
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7O7

NEW YORK SHIPPING ASSOCIATION ET AL

facts

particular

when

knowledge

direct evidence

and expertise

is not available

and even on

because

the

of

basis

the Commission s

of inferences

that any reasonable person would draw from the facts See egFMC

v Svenska 390 US 238 249 1968 Having correctly noted that positive

proof was simply not available one way or the other the Commission

was fully entitled to draw inferences on these points from the incomplete

evidence that was available Conjecture of this kind when based on

inferences that aze reasonable in light of human experience generally or

when based on the Commission s

special familiarity with the shipping

industry is fully within the competence of the administrative agency and

should be respected by the reviewing courts US vFMC15 SRR

927 9345DC

Cir 1980 hearsay and indirect evidence used to support

finding of rebating there being no direct evidence so that inferences were

required to be drawn Agreement No 5796 19FMC291 303 1976

The MLAA and the Benefzts Burdens Test

Earlier in this decision I

referred to the MLAA and its genesis as a

compromise between industry interests who wished to be free of Commis

sion jurisdiction in collective bazgaining matters and other interests who

feared that total ouster of the Commission from such matters would leave

them vulnerable to abuse and without adequate protection The result was

that the Commission was given limited jurisdiction under section 15 of

the 1916 Act later section 5dof the 1984 Act over assessment agree

ments contained in collective bazgaining agreements The history of the

enactment of this compromise as the MLAA is summarized rather well

in CONASA vFMCcited above 672 at 1812 as follows footnote

citations omitted

The Maritime Labor Agreements Act of 1980 was the product

of a

legislative attempt to clazify jurisdictional boundaries in the

area where labor law and shipping law intersect thprovisions

of maritime collective bargaining agreements Historically the FMC

had taken the position that none of these agreements were subject

to the provisions of Section 15 of the Shipping Act which reyuires

a wide range of maritime agreements be filed with and approved

by the Commission before they may enter into effect However

beginning in 1968 judicial decisions had held that Section 15

covered certain collective bazgaining agreements and multi em

ployer agreements to implement promises made in collective bar

gaining In 1980 the House citing the national policy of free

collective bazgaining without a

requirement of prior government

approval adopted a bill which completely exempted collective

bazgaining agreements from FMC regulations The House bill re

moved FMC jurisdiction to review maritime labor agreements

before or after implementation or to determine their legality under

the substantive provisions of the shipping laws This blanket labor

exemption aroused strong opposition

27FMC
7U FEDERAL MARITIME COMMISSION

At hearings held by the Senate committee shippers consolidators

and other witnesses objected that the bill stripped the FMC

of jurisdicdon to assure equal treattnent ofsl ippers cargo and

localides and to prevent abuses macle possi6le by one concerted

acdvity of carriers and others In respQnse the Senate committee

drafted a revised bill to assure that the Federal MatiUme Com

mission jurisdiction is preserved to the extent necessary to assure

equal treatment and to prevent abuses The bill was adopted by

the Senate without deb tand passed ttte House again without

debate

As the parties acknowledge on hrief the NII AArestored FMC jurisdiction

over assessment agreements after an early attempt to oust FMC urisdiction

had azoused opposition from shippers and other witnessesFrthermore

the Commission was given jurisdiction to ensure equal treat nn of ship

pers cargo and localities and to prevent abuses made possible by concerted

activity of ocean carriers and others Sen Rep No 96854 cited above

at 2 10 This jurisdicdon however did not exte dto assessment agreements

based on uniform man hour rates which were th usual type of industries

but only to those agreements based upon something other than uniform

man hours Sen Report cited above at 11 13 The Commission was

sugposed to determine upon complaint whether under such agreements

all affected parties pay only their fair share of fringe benefit obligations

S Rep cited above at 14

While all pazties discussing this matter agree on the above general param

eters there is some dispute as to what standards are to be employed

when determining whether the agreements are anjustly discri inatory or

unfair as between carriers shippers or ports which if so found would

warrant disapproval or other remedial acdon by the Commission whether

other sections of the 1916 Act apply beidsseetion 15 fth pazagraph

and whether relief can be gractted beyond assessment adjwstments to com

pensate for over ayments under a forrnula stazting from the date of the

ling of the complaint as provided by sectian 4 of ttse 1VILAA section

15 fifth paragraph 1916 Act section 5d 1984 Act As discussed NYSA

dces not agree that the benefits burdens test still applies when determin

ing unfairness or unjust discrirnination and FRMSA dces not agree that

its only relief lies under section 15 fth paragraph of the 1916 Act

or section 5d of the 1984 Act or that it can ot obtain full repazadons

in the form of money damages plus tnterest retrospectively ie back to

October 1 1983 the beginning of the curenttabor contract yeaz

There is little doubt in datermining what is unfair or unjustly discrimina

tory among carriers under assessment agreements tlat the bene tsur

dens test which was first enunciated in the VQlks wagenwerk decision

in 1968 and applied in numerous other cases involving such agreements

under section 15 as well as 16 and 17 of the 1916 Act is a proper

test to apply Even NYSA on brief acknowledges the numerous cases

27FMC
THE PORT AUTHORITY OF IVEW YORK AND NEW JERSEY V 7O9

NEW YORK SHIPPING ASSOCIATION ET AL

which utilized that test and cites them 20 NYSA op br at 12Cr127

PRMSA furnishes a detailed history of these numerous cases staring with

Volkswagenwerk in 1968 and proceeding beyond enactment of the MLAA

PRMSA op br at 4958These cases show that perfect correlation be

tween benefits and burdens is not possible nor expected but only a reason

able correlation orabroadly equitable arrangement NYSA v FMC

628 F2d at 257 571 F 2d at 1238 cf also Volkswagenwerk cited

above 390 US at 293 Hazlan J

concurring must leave room for

the implementation of some uniform practical general rule of assessment

even though it have some features that are less desirable than some alter

native imperfect rule Wolfsburger vFMC562 F 2d 827 829 DC

Cir 1977 the question is whether the Agreement is the fairest

that could be devised and whether the charge levied is reasonably related

to the benefits received by automobile shippers

As I mentioned earlier in this decision NYSA acknowledges that the

MLAA was enacted against the backdrop of more than ten years of

decisional law NYSA op br at 123 If Congress did not intend to

continue to allow the Commission and courts to continue using the bene

tsburdens test when it restored jurisdiction to the FMC to prevent

abuses and ensure equal treatment among those paying under such agree

ment formulas in response to pleas from shippers what on earth test did

the Congress intend I doubt whether NYSA would prefer a simple diction

ary definition of fair which would be so broad as to forbid favoritism

or less than evenhanded treatment under even a broader standard than

the benefits burdens test in view of the record in this case which

shows favoritisms and special privileges aplenty 21 NYSA however rests

its argument on the ground that Congress enacted a special limited procedure

for assessment agreements excluding section 22 of the 1916 Act and all

other provisions of that Act I agree that Congress did this However

the argument overlooks the fact that some of the cases cited relied on

section 15 not merely 16 or 17 where NYSA states the benefitsburdens

test to have arisen in the Volkswagen decision See egAgreement No

T2336 cited above 15 FMC259 Furthermore the unjustly discrimina

tory and unfair language appears not only in section 15 fifth pazagraph

as provided by the MLAA but the same language always appeared in

the original section 15 of the 1916 Act as the very first standard authorizing

disapproval of agreements In view of this case history the retention of

the same language of the first standard in section 15 and the express

statement of the Senate Report that the bill retains the existing protections

20Among them are Wolfsburger vFMC562 F 2d 827 DCCir 1977 NYSA vFMC571 F 2d

t231 1239 n20 DCCir 1978 Transamerican Trailer Transport lnc vFMC492 F 2d 617 DC

Cir 1974 affirming Agreement NoT2336 15FMC259 1972

21Thus Webster sThird New Intemational Dictionary 1967 p 815 defines fair as follows 7a

characterized by honesty and justice free from fraud injustice prejudice or favoritism Fair the most

general of the terms implies a disposition to achieve a

fitting and right balance of claims or considerations

that is free from undue favoritism

27FMC
1 U FEDERAL MARITIME COMMISSION

of the Shipping Act for shippers carriers and localities which may be

adversely affected by shipping practices whieh may arise out of mazitime

labor agreements Sen Rep at 13 NYSA sargt men that the exclusion

of secdons 16 17 18 22 from secdon 15 fifth paragraph in assessment

agreement cases means that the benefits burdens test has been eliminated

is not tenable

The MLAA sLimitations on Standards and Remedies

Where I do agree with NYSA is in ttie matter of the sgecial remedy

and procedure which the MLAA established for the protection of persons

complaining about the harmful effects of assessment agree ents NYSA

explains NYSA op br at 1216 that section 4 of the MLAA amended

section 15 of the 1916 Act by inserting a fifth paragraph to section 15

By this law Congress permitted persons to file a complaint within two

years after the ling of an assessment agreement and to ask the Commission

to disapprove cancel or modify that agreement if the Commission finds

the agreement to be unjustly discriminatory or unfair as between carriers

shippers or ports or to operate to the detriinent of the cornmerce of the

United States If the Commission so finds the Commission is rquired

to remedy fhe unjust discrimination or unf irness for the period of

time between the filing of the cotnplaint and the nal decision by means

of assessment adjustments Ttiese adjus nent aze supposed to be imple

mented by prospective credits or debits to future assessments or charges

except if the complainant has ceased activities subject to assessments in

whieh case such person is entitled to repazadon Section 4 MLAA

The above language says nothing about the oher standards of section

15 namely contrary to the public interest or to be in violation of

this Act which incorporated sections 16 i7 t8 and other substantive

provisions of the 1916 Act nor of section 22 of that Act which authorized

normal private complaints and Commission instituted investigations Thus

not only did Congress limit the standards to agply to assessment agreements

to only two it also limited the remedy both in terms of time and in

terms of form ie between ling of the complaint and decision as to

time and future credits or debits rather than money reparation for persons

still operaring subject to assessment agreements To ensure that the other

provisions of the 1916 or 1933 Acts did not apply to this special proeedure

Congress enacted the socalled preemption clause which is the last sen

tence to section 4 of the MLAA and the last sentence of tefifth paragraph

of secdon 15 1916 Act now section 5d of the 1984 Act This clause

states

To the extent that any provision of thispragraph conflicts wit

the language of section 22 or any other section of this Act

or of the Intercoastal Shipping Act 1933 the provisions of this

paragra hshall control in any matter involving assessment agree

ments described herein Emphasis added

27FMC
THE PORT AUTHORITY OFNEW YORK AND NEW JERSEY V 711

NEW YORK SHIPPING ASSOCIATION ET AL

Although the language of the preemption clause would appeaz to

close debate PRMSA argues that the other sections of the 1916 Act are

still applicable as is section 22 of the 1916 Act and that accordingly

PRMSA should be permitted to show undue prejudice under section 16

and unreasonable practices under section 17 of the 1916 Act and can

ask for section 22type reparation with interest PRMSA cites a recent

court decision California Carthage Co v United States 721 F 2d 1199

9th Cir 1983 cert denied 53 LW 3230 Oct 2 1984 which in

turn refers to the Senate Committee Report to the MLAA According to

PRMSA s

azgument the court decision means that section 22 as well as

the other sections of the 1916 Act cited are still alive and well and can

be applied to this case and that PRMSA can seek money damages repara

tion under section 22 retrospectively with interest even in an assessment

agreement case I disagree

First the California Cartage decision only held that an off pier

consolidator had standing to sue under the MLAA under the detriment

to commerce standard which was then contained in the fth paragraph

of section 15 of the 1916 Act but has been deleted from the 1984 Act

In so holding the court was impressed by the language of the Senate

Committee Report which explained that this preemption clause

is intended to give the Commission broad discretion unfettered

by the constraints of sections 18 22 and other provisions of

the Shipping Act to fashion appropriate remedies for unfair or

discriminatory assessments Sen Rep cited above at 14 cited

at 721 F2dat 1205

PRMSA also cites court language holding that repeals by implication

are not favored and that there is no apparent conflict between the fth

pazagraph of section 15 and section 22 of the original 1916 Act as far

as standing is concerned PRMSA op br at 59 Be that as it may

the fact remains that the court sholding gces to the question of standing

not remedies and that the only standard which the court considered as

giving standing to the off pier consolidator was detriment to the commerce

of the United States a standard now deleted from the conesponding

portion of the 1984 Act as I have mentioned Maybe to repeal the

consolidator s

standing previously granted by section 22 of the 1916 Act

by implication is disfavored but there is no repeal of section 22 or the

other provisions of the 1916 or 1933 Act by implication in the preemption

clause It is express The MLAA did not delete the substantive standards

of the original section 15 by implication It specifically cut out all of

them except unjustly discriminatory or unfair as between carriers shippers

or ports and detriment to the commerce of the United States Further

more it established a remedy in the form of prospective credits or debits

for persons still operating under such agreements and limited the time

period for which that remedy would be applicable ie from filing of

27FMC
12 FEDERAL MARITIME COMMISSION

the complaint to date of judgment Such remedy is quite different from

the normal section 22 remedy of reparation ie money damages running

from the date the cause of action accrued

Nor dces the language of the Senate Committee Report quoted above

demonstrate that Congress intended that section 22 and all the other provi

sions of the 1916 and 1933 Acts apply to assessment agreement cases

in the face of what appears to be clear statutory language excluding those

other provisions of law That Committee slanguage can be understood

in the context of the history of assessment cases before the Commission

especially Dacket No 6957 Agreement NoT2336 cited Above 15

FMC 259 and the several cases following that one concerning adjust

ments and credits In that case as Congress was presumably aware the

Commission had to fashion a unique remedy to make adjustments after

a lengthy proceeding so that underpaying and overpaying carriers would

be made whole The Commission did so by ordering prospective credits

for carriers still operadng and cash for those not operating although section

22 of the Act made no provision for such adjustments The MLAA in

effect not only codified the remedy employed by the Commission in Docket

No 6957but clari edthe Commission s

authority to devise such remedies

unfettered by the constraints of section 22 Thus seen in this

light Congress wanted the Commission to heaz complaints against assess

ment agreemtnts under limited standards but wished Eo give the Commission

broad discretion to devise appropriate remedies ieto fashion adjust

ments in the form of credits or debits if necessary in whatever manner

necessary to remedy unfaimess or unjust discriminadon as was done in

the long aftermath of Docket No 6957 This dces not mean however

that the Commission can go outside the clear time limits or the credit

debit limitations such as by ordering payment of moncy damages with

interest retrospeetively as PRMSA azgues under sections 16 17 and 22

Qf the 1916 Act

As if it were not cleaz enough that Congress intended that the standazds

and remedies applicable to assess entagreement cases be limited to the

fth paragragh of section 15 of the 1916 Act the legislative history to

the 1984 Act would seem to put the nail in the coffin to PRMSA s

arguments In reenacting the fifth paragraph of section 15 of the 1916

Act as section 5dof the 1984 Act with only one major change namely

the deledon of the detriment to commerce standard the Joint Conference

explained

The House and Senate bills both adopt provisions of Section

15 of the Shipping Act 1916 app2icable to assessment agreements

Under exisdng law and under both bills the remedies and regu

latory standards applicable to assessment agreements are intended

to be exclusive In rnaking this explicit the conferees have rec

onciled the two versions to preclude any infetence that the many

new and restated provisions in the bill respecting rate conference

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 713

NEW YORK SHIPPING ASSOCIATION ET AL

and terminal regulation are also to be applied to assessment agree

ments Joint Explanatory Statement of the Committee of Con

ference Report 98600 98th Cong 2d Sess 30 1984 Emphasis

added

To illustrate further that the MLAA set up a restricted procedure apart

from other provisions of the 1916 and 1933 Acts than section 15 one

need only compare the other application of the MLAA to carrier rates

charges regulations or practices which are required to be set forth in

a tariff whether or not such things arise out of collective bargaining agree

ments Commission jurisdiction over such practices was confirmed by sec

tion 5 of the MLAA and codified in section 45 of the 1916 Act later

section 5e of the 1984 Act Unlike the preemption clause discussed

above which was intended to confine the Commission to a

special procedure

under limited standards and remedies as regards assessment agreements

section 5 of the MLAA made clear that all of the relevant sections of

the 1916 and 1933 Act still applied to catrier practices though they stemmed

from labor agreements Thus after referring to the limited grant of jurisdic

tion to the Commission over assessment agreements section 5 of the MLAA

conferred this broad grant of authority over carrier practices required to

be set forth in their tariff as follows

Notwithstanding the preceding sentence nothing in this section

shall be construed as providing an exemption from the provisions

of this Act ie the 1916 Act or of the Intercostal Shipping

Act 1933 for any rates charges regulations or practices of

a common carrier by water which are required to be set

forth in a tariff whether or not such rates arise out of

or are otherwise related to a maritime labor agreement

The legislative history confirms the congressional intention not to limit

the Commission s

authority over such practices See Sen Rep cited above

at 14

Finally in addition to the above a good argument can be made that

as to assessment agreements Congress did not intend the savings clause

to apply and that consequently only the 1984 Act can apply to this

case That is because the last sentence of section 5dof the 1984 Act

governing assessment agreements states that eJxcept for this subsection

and section 7a of this Act this Act the Shipping Act 1916 and the

Intercostal Shipping Act 1933 do not apply to assessment agreements

This language would exclude section 20eof the 1984 Act the savings

clause from application to assessment agreement cases and leave such

cases exclusively under the provisions of section 5d of the 1984 Act

and section 7a of the 1984 Act regarding antitrust immunity The omis

sion of reference to section 20e must be construed to mean an intended

exclusion of that section in a comprehensive statutory enactment See 2A

27FMC
714 FBDERAL MARITIME COMMISSION

Sutherland Statutory Construction sec 4723 4th ed 1473 Feldmand

v Philadelphia National Bank 408 F Supp 24 34 ED Pa 1976

The MLAA sStandard Applicable to the Port Authoriry sCase

The above discussion emphasizes utilization of the benefits burdens

test which lies at the heart of PRMSA scase The Port Authority scase

on the other hand although also cridcizing the present assessment formula

for not changing to a partial man hours basis to bring ut tlization of labor

more in line with the burdens imposed on parties paying under the agree

ment rests more heavily on the unfair or unjustly discriminatory impact

which the Fort believes the formula to have on the Port and which adversely

affects the Port in its efforts to secure cargo in competition with other

ports The Port bases its case in other words on standards of unjust

discrimination and unfairness which it believes are sepazate from the more

narrow standards of port diversion cases which utiiize sach concepts

asnaturally vibutary cargo absorptions and other artificial induce

ments utilized by carriers to divert cargo from one port to another

The Port Authority is content to rely upon the principles enunciated in

Boston Shipping Associatian vFMCcited above 706 F 2d 1240 which

in turn relied upon the same standards employed by the Commission in

Port Authority of New York v AB Svenska et al 4FMB202 1953

The Port Authority accepts the burden of proving the criteria set forth

in those cases as follows

1 The complaining port and the preferred port aze in compeddon

2 The discrimination complained of is the proximate cause of injury

to the complaining port

3 The discrimination is unreasonable

NYSA and other parties opposing the Port Authority as noted eazlier

answer the Port Authority by arguing that it has not carried its burden

of proof In so arguing respondents and others contend that the Port Author

ity has not shown diversion of cazgo from New York that is proximately

caused by the assessment formula nor that whatever cargo the Port Authority

believes may have been diverted from New York to sy altimore

was cargo natu ally tributary to New York NYSA itself cites the three

standards set forth in Boston Shipping Association as controlling NYSA

op br at 7 and the Port Authority despite citing some cases more

relevant to impediment of movement under detriment to commerce stand

ards specifically asks that Iapply the 1984 Act which deleted the det

riment to the commerce of the United States standard Consequently

I agree that the basic test for the Port Authority scase is that set forth

in Boston Shipping However although the parties cite numerous cases

arising under the cazgo diversion and naturally tributary doctrines

that does not mean that unless a complaining port shows absorptions

naturally tributary cazgo etc that the port cannot make out a case

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 71S

NEW YORK SHIPPING ASSOCIATION ET AL

under the Boston Shipping standazds 22The court in Boston Shipping noted

that the section 15 standard retained by the MLAA ieunjustly discrimi

natory or unfair as between carriers shippers or ports is sepazate from

the section 16 standazd of undue or unreasonable preference or advantage

to any locality Boston Shipping Association vFMC706 F 2d

at 1237 The court also went on to say that Commission cases concerning

allegedly unfair discrimination against ports breathes life into these provi

sions Id Thus consideration of port diversion cases may serve some

purpose However the court discussed both the diversion naturally

tributary absorption type cases and the plain port disadvantage type

case such as Port of New York Authority v AB Svenska et al cited

above 4 FMB202 706 F 2d at 1238 1240 Consequently I believe

it is proper to apply the standards of Boston Shipping Association giving

consideration to cargo diversion cases to the extent they may be useful

in determining whether the evidence adduced by the Port Authority meets

the standard of unfair or unjustly discriminatory retained by the MLAA

from the original language of section 15 of the 1916 Act 23 Furthermore

when determining whether the NYSA s assessment formula discriminates

against New York and causes harm I see no reason why the Commission

is precluded from considering the less rigid intangible limitation of the

ZZNYSA also azgues that the Port Authority cannot prevail because prevailing law in discrimination rype

cases requires a showing that NYSA members controlled assessments at both New York and at the other

ports

a

which the Port Authority claims to have a competitive advantage or a showing of collusive or other

rmative conduct among NYSA members to discriminate against New York in favor of some other port

NYSA op br at 1134 The Port Authority replies thaz a great number of important carrier members

of the NYSA serve all or many of the ports up and down the coast and that the Port Authority was precluded

from obtaining detailed information about their roles in negotiating assessment formulas az other ports by

NYSA smembers recalcitrance ro answer questions in preheazing discovery Port Authority r br at 10

footnote The record shows that these carriers do serve the other pocts and accordingly have something

to do with negotiations of fortnulas at the other ports However it is not necessary to show that the same

carrier serves both ports to prove discrimination at one port The law has long since changed in this regazd

at least since 1947 when the Supreme Court decided New York v United States 331 US 284 1947 The

Commission has specifically followed this case and refused to adhere o the requirement that acarrier must

serve both ports in order to be found guilty of discriminating against one of the ports See Reduced Rates

on Machinery and Tractors to Puerm Rico 9FMC465 479 Q966 In this regard the Commission stated

Some cases of our predecessors suggest thatunude prejudice under section 16 is not shown when

the carriers serving the alleged preferred point do not serve orparticipate inroutes from the alleged

prejudiced point for the movement of the traffic involved This suggestions is contrary to the New

York case and we will not follow it

See also Imposition of Surcharge by the Far East Conference 9FMC129 139 1965 same holding

regazding discrimination under section 17 of the 1916 Act As the Port Authority states futthermore the

applicable standazd is not limited to unjust discrimination The MLAA also refers to the word unfair in

the disjunctive a

broaderstandard Port Authority r br at 10 footnoteJ

23As I have mentioned eazlier the MLAA retained the first standazd of the original section 15 of the 1916

Act ieunjusdy discriminarory or unfair as between carriers shippers or ports However original

section 15 also incorporated the standazds of other provisions of the Act in the fourth standazd for dis

approval orto be in violation of this act The first original standazd which applies in this case

must therefore mean something more than undue or unreasonably prejudice or disadvantage in section 16

which was the usual standazd applied in the port diversion cases or even the unjusdy discriminatory

rates and charges standazd of section 17 of the 1916 Act If not then Congress used surplus language in

the original section 15 something which one cannot presume in construing statutes or if the first original

standard is the exact same thing as the standazds of section 16 or 17 then Congress did not really confine

the MLAA to the first standard at all although that is what Congress expressly intended to do

27FMC
1 FEDERAL MARITIME COMMISSiON

ability to pazticipate profitahly in a market standard or clear probability

of sabstantial harm standard previously utilized in discrimin tionand di

version cases such as Outbound Rates Affecting Export High Pressure

Boilers 9 RMC 442 456 1966 and NC State Ports et al v Dart

Containerline 21 FMC 1125 113Q 1930 af rmed sub nom Dart

Containerline Co Ltd vFMC639 F 2nd 809 DCCir 1981 Utiliza

don of less rigid standazds would appeaz to be more consistent with the

broad standazd of unfairness retained in the MLAA for the protection

of parties adversely affected by assessment agreements whose pleas for

protection were answered by the Congress

Applicability of the 1916 and 1984 Acts

A spin off issue appears to have arisen out of the above arguments

namely whether the 1916 or 1984 Act applies to this proceeding NYSA

PRMSA and He cing Counsel appear to believe tatthe 1916 Act applies

The Port Authority believes that the 1984 Act made no substantial changes

to the 1916 Act applicable to this proceeding and asks that I apply the

1984 Ac Port Authority op br at 4 footnote Sea Land also argues

that the 1984 Act should apply and that Ishould so rule under the Commis

sion notice authorizing presiding judges to determine the applicability

of the 1984 Act on a case by basis using court developed criteria

which would allow application of the 1984 Act unless manifest injusdce

would result See Notice 49 Fed Reg 21798 May 23 1984 Sea

Land op br at 46

In my opinion this case can be decided under the MLAA which is

essentially the same in both the 1916 and 1984 Acts with th slight excep

dons noted above As PRMSA notes both section 15 fifth paragraph

of the 1916 Act and section 5dof the 1984 Atauthoriue the Commission

to disapprove cancel or modify an assessment agreement which is found

to be unjustly discriminatory or unfair as betwgen cartiers shipgers or

ports PRN SArbr at 60 As discussed abav fuFihermore in both

Acts the procedure is timited to the filing of eomglaints within a two

year period and the remedies aze limited to grospective credits to compensate

for the time period between ling of the complaint and date of judgment

The only change that might have been significant is the deletion of the

detriment to commerce standard in the 1984 Act However PRMSA s

case is built upon evidence showing unfairness ar unjust discrimina ion

as is that of the Port Authority which has not asked that the detriment

to commerce standard be applied Therefore I see no di ference whether

I

apply the 19I6 or 1984 Acts since the evidence preser ted would show

violadons under the same standards set forth in both and the remedies

would likewise be the same under either AEt24

uPRMSA pr sents an intensting argument that the Commission sNotice which would wt rotain applica

blliry of the t916 Act to this procading undar the sacalled savings provision of the 1984 Act sec

20eis wrong PRMSA believes that the 1916 Act granted complainanta the right to seek retrospective

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 717

NEW YORK SHIPPING ASSOCIATION ET AL

Findings as to the Port Authority sCase

In the following section I

case and make findings of facts

provide

relevant

an overview

to that case

of the

As

Port

mentioned

Authority s

the

substantive standards are those of the Boston Shipping Association case

namely a showing of competition among ports proximate cause of injury

and unreasonable discrimination However in adducing proof the standard

is not beyond a reasonable doubt or cleaz and convincing

a

but merely

preponderance of the evidence ie that the existence of the fact

is shown to be more probable than its non existence Direct evidence is

not always available In other words complainants cannot always produce

the smoking gun For that reason the Commission and courts have

recognized that inferences may be drawn from a set of facts which infer

ences an expert agency or even a reasonable human being can be expected

to draw

NYSA sSea Land sMPA s and Hearing Counsel sanswer to the Port

Authority scase is that the Port Authority has not carried its burden of

proof However NYSA the main opponent to the Port Authority argues

that the burden of proof is so strict that virhzally no port could make

out a case and obtain the protection which Congress intended to give

to parties adversely affected by assessment agreements whose parties pleas

to Congress that the Commission retain some jurisdiction over such agree

ments to prevent abuses were answered affirmatively Thus NYSA

as I mentioned eazlier argues that the Port Authority hasaheavy burden

which must be met by clear and convincing substantial proof supported

by specific evidence NYSA op br at 93 But as I further mentioned

Congress refused to give the NYSA this clear and convincing standard

when enacting the MLAA Having lost before the Congress apparently

the NYSA is trying to persuade the Commission to utilize such a standard

which is contrary to all relevant principles of administrative law

In addition to the above azguments NYSA and others argue that narrow

concepts like naturally tributary cargo areas and technical definitions

of cargo diversions apply and that the Port Authority has not satisfied

those tests 25Again imposing such narrow technical standards and hanging

them around the neck of the Port Authority like the proverbial albatross

reparation whereas the 1984 Act dces not grant such a right PRMSA r br az 61 As I have discussed

I believe that neither Aa gave PRMSA such a right However if PRMSA is correct and the 1916 Act did

give the right I would have had to decide whether removal of the 1916 Act would result in manifest injus

tice under the Commission sNotice ot May 23 1984 cited above I do not need to decide that question

for the reasons given above However PRMSA argues that the Commissiods interpretation of the savings

provision in the 1984 Act ielimiting applicabiliry of the 1916 Act to judicial prceeedings rather than

ro administrative prceeedings is inconect and unsupported by the legislative history to the 1984 Act

PRMSA r br at 63 PRMSA cites the House Committee Report indicating an intent to save all remedies

not just judicial remedies and shows how the Commission sinterpretation could lead to absurd results

PRMSA r br at 645

25Interestingly as the Port Authoriry notes rbr at 7 foomote NYSA itself seems to

worry

about di

version of cargces and uses the term to justify its special reduced assessment man hours on transshipped

and rehandled cazgoes because these cazgces are highly divertible to other ports NYSA op br at 25

No one claims that NYSA must show that these cargces are namrally tributary ro the New York

27FMC
1 FEDERAL MARITIME COMMISSION

in my opinion would be an unreasonable interference with the protective

and remedial provisions of the NII AA Throughout the answering case

of respondents there runs the theme of rigid resistance of not retreating

an inch and of raising every technical azgument on evidence burden of

proof etc rather than considering whether the proposals put forth by

the PoR Authority or PRMSA have any merit and can lead to negotia

tions 26Under the standazds discussed and as explained below I therefore

find that the Port Authority has carried its burden of proof and has shown

that the current assessment formula has injured and continues to injure

the Port Authority by placing it at a competitive disadvantage especially

with regard to Midwest containerized cazgo such disadvantage resulting

from a2003differential on containerized cargo which could be elimi

nated if NYSA would modify its tonnage formula as suggested by the

two expert witnesses Furthermore the facts are that the Port of New

YorWNew Jersey competes with other ports especially with Baltimore

that the differential handicaps the Port in its efforts to attract carriers

to serve New York rather than Baltimore for example and that the differen

tial is unnecessary being the product of ac unreasonable and unfair formula

which taxes caniers in inverse proportion to the amount of labor used

for all costs

Findings of Facts Relevant to the Port Authority s

Case

The voluminous briefs of the parties contain over 400 numbered proposed

findings of fact Most of these are contained in the briefs of the two

complainants and respondents NYSA et al They reflect much effort and

also demonstrate the bulky size of the evidentiary record There is consider

able overlapping of certain basic background type facts and many other

instances in which these three pazties aze proposing essentially the same

findings of fact In order to keep this decision from becoming gazgantuan

I have generally attempted to confine the factinding in this discussion

to material areas and have not attempted to make rulings on every proposed

finding of fact Such conservadon of energy is especially warranted in

consideradon of the time constraints imposed by the governing statute and

regulation However under applicable principles of administrative law a

26Sea Land and Hearing Counsel recommend negotiations to settle he problems Tlus indicates that chey

mognize that problems exist which should be addressed by the parties through negotia ions It might have

been helpful if Hearing Counsel inatead of inerely arguing that complainenta did not cazry their burden of

proof advised everyone exactly what were the possible inequities which Heazing Counsel state that the

Poct Authoriry has shown HCr br at 9 and what aro the problem areas which Hearing Counsel say

that complainants may have shown HC op br at 33 However if I were PRMSA I would not be

encouraged by Hearing Counsel sorSea Land sadvice to resolve these problems through negotiations with

the NYSA and IIAafter the long history of PRMSA scontinuel failures to obtain some relief from the

NYSA IAPerhaps the NYSA spubliciud plan to reduce assesaments early next year which

PRMSA cites in its reply brief at 2is an answer although PRMSA schief executive who is also aDirector

of the NYSA knows nothing about the plan If it offers a

solution this proceeding dces not stend in

the way contrary to NYSA sreprosentation PRMSA r br at 3 Why does not PRMSA present the plan

now to the parties and see if the parties can present a settlement to the Commission well in advance of

the February 27 1985 due date for the Commission sdecision

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 719

NEW YORK SHIPPING ASSOCIATION ET AL

presiding judge need not rewrite every proposed finding or argument or

even make findings on every proposal presented Adel International Devel

opment Inc v PRMSA 20 SRR 687 690 1980 Mediterranean Pools

Investigation 9FMC264 267 1966 Moreover even summary findings

of fact and conclusions may suffice if the path being followed can be

discerned and the findings are not vague or obscure Colorado Interstate

Gas Co vFPC324 US 581 1945 Minneapolis St Louis Ry

Co v United States 361 US 173 1959

Although the largest portion of the record consists of written testimony

depositions and supporting documentary evidence there was also consider

able oral testimony and cross examination of 14 witnesses Thus my find

ings of fact and conclusions especially when they resolve material disputes

of fact are not merely confined to written materials but aze based to

the extent applicable on observation and my conclusions as to credibility

of the witnesses As the presiding judge and finder of fact it is of course

my responsibility to evaluate the credibility of witnesses and the weight

to be given to their testimony See eg

NLRBv Anthony Co 557

F 2d 692 9th Cir 1977 Furthermore not all of my findings aze based

on mere analysis of facts and reasonable inferences to be drawn therefrom

but rest upon credibility determinations based upon observations and de

meanor See Ewing vNLRB732 F 2d 1117 1122 2d Cir 1984

must not disregazd ALJ srecitation that his findings were based on observa

tion and demeanor of witnesses

I therefore find the following facts to be supported by a preponderance

of credible evidence as regards the Port Authority scase

l

Complainant The Port Authority of New York and New Jersey The

Port Authority is abody corporate and politic created in 1921 by

compact between the States of New York and New Jersey with approval

of the Congress of the Untied States The two states established the Port

Authority as the joint agency for the purpose of unifying promoting and

developing the New YorkNew Jersey

principal office is located at One World

Port

Trade

District

Center

The

New

Port

York

Authority s

New

York 10048 The Port Authority compact requires that it protect and

promote the commerce of the port

2 Respondent New York Shipping Association NYSA is a corporation

organized under the laws of the State of New York having its principal

place of business at 80 Broad Street New York New York 10004 NYSA

is a multi employer bargaining association consisting of 102 companies

and is the employer or management negotiating representative for all collec

tively bargained longshore labor management agreements affecting the Port

of New YorkNew Jersey and is the administrator of all fringe benefit

funds collected pursuant to such agreements

3 The respondent members of NYSA aze steamship lines terminal opera

tors carrier agents maintenance firms contracting stevedores carpentry

companies and other employers of waterfront labor operating in the Port

27FMC
72U FEDERAL MARITIME COMMISSION

of New YorkNew Jersey Many or most of these members are also mem

bers of one or more employers collective largaining units representing

employers at other ports competing wifh the Port of New YorkNew Jersey

4 Intervenor nternadonal Longsltoretnen sAssaciation AFL IOILA

is an unineorporated association and a labor organization within the pttrview

of the Labor Management Reladons Act with its grincipal office located

at 17 Battery Place in the City of New York The ILA represents longshore

men and other waterfront workers in the 36 Atlantic and Gulf Coast ports

5 Intervenor Maryland Port Adrninistration MPA is a State agency

charged with the responsibility for developing fscilities for the mavement

of export and import traffic through the Port of Baltimore and elsewhere

witt in the Stat of Maryland In carrying out its responsibilities MPA

owns or leases ve of the ten major international cargo terminals in the

Baltimore Harbor

6 Intervenor Massachusetts Port Authority Massport is a body politic

and corporate organized by virtue of the laws of the Commanwealth of

Massachusetts with principal of ces located at 99 High Street Boston

MA Massport is responsible among other thiags for promoting developing

and protecting the waterbome commerce of the Port of Bosto In carrying

out these responsibilities Massport owns leases and or operates a number

ofpublic mazine ternunals located within the boundaries of Boston Harbor

7 The Bureau of Hearing Counsel consists af attomeys emplayed by

the Commission who from time to time intervene in complsint cases

in the public interest and to helg develop Ehe record

8 The longshore labor negotiations on the East and Gulf Coasts are

two fold The IIA negodates a master contract with 36 ports vhich sets

the hourly wage for longshoremen and pension and welfare bene tswhich

are the same in all porEs In addition payments of the container royalty

fund and job security program are negotiated The Master Contract is nego

tiated by NYSA Council of North Atlantic Shipping Associatioas

CONASA West Gulf Maritime AssQCiation WGMA New Qrleans

Steamship Association Inc NOSSA Mobile Steamship Association

MSSA Southeast Florida Employers Ass6ciatiQnFEA and South Atlan

tic Employers Negotiadng Committee SAENC

9 Local conditions in each port including pension welfare medical

and clinical services vacation and guaranteed annual income GAI are

negodated port by port

10 Thirty sx af the thirtyeight ocan carri rmembers of NYSA that

answered the Fort Authority sinterrogatories call or are affiliated with

carriers tttat call at a wide variety of porEs ranging from Hal fax Nova

Scotia to ports in Alaska on the NorthAnerican continenE Ihus Sea

Land Service calls at such ports as Boston Mass Baltimore Md Porfs

mouth Va Wilr ington NCand ports on the Gtlf and Paci cCoasts

plus ports in Alaska and Halifax No aSeotia Grancolumbiana Inc calls

at such ports as Philadelphia Pa Baltimore Md Charleston SC and

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 721

NEW YORK SHIPPING ASSOCIATION ET AL

Gulf and West Coast ports The overwhelming majority of all of these

lines call at Baltimore and usually Philadelphia as well

I1 Eight of the fifteen stevedore or terminal operator members of NYSA

that answered interrogatories operate or are affiliated with companies that

operate at a similar wide variety of ports ranging from Halifax to ports

in Alaska and virtually all operate at Baltimore Examples are Sea Land

Service Inc Maersk Container Service Co Maher Terminals Inc and

International Terminal Operating Co Inc

12 Twenty one of the 54 NYSA members that answered interrogatories

aze members of associations at other reports which are the management

collective bargaining representatives negotiating with the ILA

13 The current NYSA ILAcollective bazgaining agreement covers the

period October 1 1983 through September 30 1986 This agreement incor

porates by reference existing contractual provisions including the tonnage

assessment agreement Attachment B to the local contract negotiated for

the three year period ending September 30 1983

14 In the Port of New YorkNew Jersey fringe benefits and accessorial

expenses such as the NYSA administrative cost requirements are collected

through a tonnage assessment paid directly by the steamship lines The

tonnage assessment is currently 890per assessment ton weight or meas

urement ton whichever is greater Cazgces excepted from the tonnage

assessment currently pay a man hour rate of50 per man hour These

include plywood in lots of5000 tons or more wastepaper and cazdboazd

in lots of 1000 tons or more moving breakbulk linerboazd for export

which originates more than 500 miles outside the Port in lots of 500

tons or more steel steel products and raw metals partial and full loads

minimum of 1000 tons per ship non liners lumber shiploads at any

port or terminal in the Port newsprint not containerized domestic cargo

bulk cargo sugar in bulk scrap transshipped cargo and foreign sea

to foreign sea cargo There aze also certain special status cargces with

special rates of payment or special status with regazd to measurement

These include bananas 5 cents per box measuring 18 cu ft or less

inside measurement refined sugar 20 cents per box in bags of 50 kilos

bagged in the Port of New YorkNew Jersey for export breakbulk on

which the applicable assessment was paid on import before bagging perish

able fruit including potatces and dried dates assessed at 40 of the tonnage

assessment rate effective with a maximum of 200 per assessment ton

if not carried in containers bagged coffee and cocoa assessed at 40

cu ft to a 2240 pound per ton unboxed autos trucks and buses assessed

on a wright basis 2240 pounds per ton and yachts pleasure boats of

15 and over assessed at the tonnage rate per lineal foot

15 Prior to 1974 the assessment formula at the Port of New York

New Jersey was a combination man hour and tonnage formula but was

converted to a straight tonnage formula with exceptions effective October

1 1974

27FMC
22 FEDERAL MARITIME COMMISSION

16 The tonnage assessment and excepted man hour assessment rates

in the Port of New YorkNew Jersey from 1974 to present are as follows

Tonnage Excepted

Effecdve date man hour

rate

1074 400 352

715 500

11577 685

176 828

4176 685

17 585

41 78 387

10i 80 429

7182 750 50

483 890

The passenger rate has remained at 250 per man hour since October

1 1974

17 The amount of fringe bene tsrequired to be raised by the assessment

has increased steadily According to audited records of the NYSA ILA

these amounts including Waterfront Commission levies and ancillary or

administradve costs less container royalties increased from the 19745

fiscal year to the 19823 fiscal year as follows 19745 129 7

million 19756 132 2 million 19767 136 8 million 1977

1978 139 4million 19781979 147 4 million 19791980 153 mil

lion 19801 166 4 million 19812 193 7 million 19823

2194684 It is estimated that this amount will decline to some extent

in fiscal yeazs 198M1985 and 19856

18 The total number of active longshoremen in the Port of New York

New Jersey during the last ten years as of the end of each scal year

is as follows

September 30 1974 14252

September 30 1975 130088

September 30 1976 12393

September 30 1977 11827

September 30 1978 11035

September 30 1979 11016

September 30 1980 10568

September 30 1981 900

September 30 1982 9410

September 30 1983 9101

19 Under the tonnage assessment system fringe bene ts aze raised by

assessing each weight or measurement ton of nonexcepted cargo handled

by longshore labor and the amount of assessment collected does not relate

to the number ofman hours utilized in handling such cargo The assessment

collected on a tonnage basis is paid directly by the steamship lines

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7Z3

NEW YORK SHIPPING ASSOCIATION ET AL

20 In most other Atlantic and Gulf Coast ports fringe bene tsincluding

pension welfare clinics vacations holidays GAIand security funding

are collected primarily on a man hour basis and are paid by the direct

employer of longshore labor The current man hour assessment at Baltimore

is 1049 at Philadelphia is 1228 and at Hampton Roads is 1287

for breakbulk and 1327 for containers due to higher GAI assessments

on containers

21 Since empty containers by definition do not contain any assessable

tons no fringe benefits are collected from the handling or movement of

empty containers through the Port of New YorkNew Jersey By contrast

empty containers moving through ports using a man hour assessment pay

fringe benefits according to the number of man hours required to handle

the container For example an empty container at Baltimore typically utiliz

ing 2 man hours of labor to handle would pay a total of 2098 1049

man hour rate x 2 man hours in fringe benefits

22 The total number of empty containers handled in the Port of New

York has more than doubled over the last 10 yeazs while the tonnage

assessment has been in effect Thus for the fiscal yeaz ending September

30 1974 a total of 11775 empty containers moved through New York

while in the fiscal year ending September 30 1983 total empties were

28347 For a more detailed breakdown by year and by direction see

table in NYSA op br at 31 By contrast the total number of loaded

containers handled at the Port increased only 7 percent from 836207 in

fiscal 1974 to 898179 in fiscal 1983

23 While the number of full containers handled at the Port of New

York has grown only 3 between 1980 and 1983 during that time period

there has been a fortyive percent increase in the number of empty contain

ers handled at the Port so that empties have increased from 22 to 32

of all containers In the Far East trade the percentage of empties increased

from 10in 1980 to 29in 1982

24 In the Port of New YorkNew Jersey there is no assessment levied

on stuffing and stripping containers Therefore containers that are stuffed

and stripped pay fringe benefit costs on the same basis as throughput

containers even though the handling of a stuffed and stripped container

requires significantly more man hours For example at the Port of New

YorkNew Jersey a stuffed and stripped container containing 25 assessment

tons and typically requiring 12 man hours to handle would pay 222 50

in assessment costs exacly the same amount as a 25 assessment ton

throughput container typically requiring only 4 man hours to handle By

contrast a container requiring 12 man hours at Baltimore would pay 125 88

while a container utilizing 4 man hours of labor would pay 4196one

third of that amount in direct proportion to the number of man hours

used in handling the container

25 The use of labor for purposes other than handling cazgo dces not

result in the collection of fringe benefit costs at the Port of New York

27FMC
24 FEDERAL MARITIME COMMISSION

New Jersey For example a steamship line may utilize longshore labor

for purposes such as maintenance without making any contribution to fringe

benefits

26 During 1983 a major carrier employed over a million man hours

Of these man hours between 25 and 30 percent were used for non cazgo

handling funcdons maintenance and other activities

27 A tonnage assessment assesses labor costs in inverse proportion to

the use of labor It therefore shifts costs from low productivity operators

to high productivity operators because low productivity operators do not

pay labor costs in proportion to their use of labor

28 When the tonnage assessment method was adopted in 1974 there

was considerably more low productivity breakbulk cargo in the Port of

New YorkNew Jersey because there were still major trade routes that

had not been containerized Today the vast majority of cargo through the

Port of New YorWNew Jersey moves in containers and all of the major

trade routes in the world except for parts of Africa and Latin America

aze containerized

29 The Port of New YorkNew Jersey competes to some extent with

virtually every USand Canadian port However the most competitive

cargo is containers to and from the Midwest particulazly the states of

Ohio Indiana Illinois Kentucky western Pennsylvania Wisconsin and

Michigan which can move through any number of ports In addition to

compedng for Midwest traffic the Port of New YorWNew Jersey competes

for local traf cwith minibridge movements containers dischazged on West

Coast ports and shipped east by rail

30 At the Port of New YorkNew Jersey the tonnage assessment is

a direct cost paid by the steamship lines At ports using a man hour

formula the man hour assessment is paid directly by the employer

31 A loaded container moving in the European trade contains an average

of 23 assessable tons while a container in the Faz East trade contains

an average of 40 assessable tons

32 An empty throughput container requires 23man hours to handle

a loaded throughput container requires 24man hours to handle and a

stuffed and stripped container requires 102man hours to handle

33 Labor productivity is compazable at New YorkNew Jersey and other

North Atlandc ports

34 An average loaded container from Europe containing 23 assessable

tons and requiring 24man hours to handle would pay 204 70in assess

ment costs at the Port of New YorkNew Jersey 23 assessable tons x

890 2098to 4196at Baltimore 24man hours x1049 and 2456

to 4912 at Philadelphia 24

man hours x1228 An average loaded

container from the Faz East containing 40 assessable tons would pay 356 00

27 The identity of this carrier and the exact figures have been requested to be treated as confidential The

contidential infocmation is kept in the confidential portion of the ncord

27 FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7ZS

NEW YORK SHIPPING ASSOCIATION ET AL

at New YorkNew Jersey while still paying 2098 to 4196at Baltimore

and 2456to 4912at Philadelphia

35 Several cost studies performed by carriers serving New York and

other ports illustrate that fringe benefit costs per container are substantially

higher at New York by various measures per container as percentage

of revenue per container and as percentage of total cost of moving the

container The identity of the carriers and many of the precise gures

aze considered sensitive by the carriers and aze being treated as confidential

The confidential information however is on file in the confidential portion

of the record Thus one carrier scost study performed in 1984 shows

that at New York average assessment per 40foot container is 391 which

is 188

percent of the average revenue earned on that container All other

ports were much lower At Baltimore the comparable assessment was only

6974 or only 35

percent of revenue per container and at Norfolk

the figures were 601and 31

percent respectively

36 Another carrier scost study performed in late 1983 showed that

its assessment cost per 40foot container at New York was 265 compared

to the total cost of handling the container which was 351 At Baltimore

the assessment cost was only 8 Total cost of handling the average con

tainer there was 166 80The complete study is seen in the confidential

portion of the NYSA op br at 37

37 A carrier official testified in deposition that he took assessment

costs into account in making routing decisions for this line and that the

assessment discrepancy as indicated by his operations people was 61

at Baltimore and 220 in New York for a 178 assessment ton container

under the previously existing 750 per assessment ton rate The current

assessment differential between Baltimore and New YorkNew Jersey for

Far East cargo is now over 200

38 Cost studies by another carrier in early 1983 indicated that at that

time the NYSA assessment cost at the then existing rate of750 per

assessment ton was 68 of the total cost of moving a container with

35 assessment tons through New York The study also bears the notation

1fie killer is NYSA assessment of750ton compared to Baltimore 810

Manhour Portsmouth 1055Manhour

39 Cost studies submitted by two other carriers show that for one

carrier the tonnage assessment at New York raises the cost of moving

a container through New York to 400 11for a container with 25 assessable

tons whereas the total cost of moving a container including assessment

costs is only 262 43at Baltimore 254 54at Philadelphia and 122 41

through Charleston Another carrier scost studies show that the stevedoring

cost including assessment cost per revenue ton at the Port of New York

is higher than at any other US

port For example the study shows stevedor

ing costs in early 1983 per revenue ton of 265at Newark compared

to 175 at Baltimore 124 at Norfolk and 1983 at Los Angeles

27FMC
72E FEDERAL MARITIME COMMISSION

The current tonnage assessment rate of890 is 335percent of the total

stevedoring cost for this carrier

40 Evidence given by carrier and other witnesses is that the assessment

cost of moving a container through the Port of New York is significantly

higher than to move it through other North Atlantic ports

41 On average a loaded container handled at the Port of New York

New Jersey costs from 2003 more in assessments than a similar

container handled at other US

ports 28

42 If other North Atlantic ports used the NYSA tonnage assessment

system for funding fringe benefit requirements the assessment differential

between New YorkNew Jersey and these ports would be an average of

90 per container

43 If the Port of New YorkNew Jersey were to use aman hour assess

ment method to collect fringe benefit obligations the assessment differential

between New YorkNew Jersey and other North Atlantic ports would aver

age less than 50 per container The man hour rates at New YorkNew

Jersey would have been 1773 based on 1983 collection requirements

44 The fact that fringe benefit packages at Baltimore Hampton Roads

and Philadelphia aze considerably less costly than at New York does not

account for the magnitude of the assessment differential per container at

New York as seen from the preceding comparisons

45 Since the steamship lines pay the tonnage assessment at the Port

of New York to the extent that they can route cazgo to a less expensive

port the cost savings directly benefit the lines

46 The Port Authority of New YorkNew Jersey sprimary competitor

for Midwest containers is the Port of Baltimore The record contains consid

erable detail about competitive advantages or disadvantages as between

New York and Baltimore with respect to inland cazriers rates and services

distances drayage costs backhaul opportunities for New York which New

York offers to motor carriers Some factors seem to favor Baltimore and

others favor New York so that one cannot find with any degree of assurance

that New York is at a competidve disadvantage to Baltimore generally

as regards Midwest container cazgo See NYSA op br at 436 Neverthe

less despite the lack of any clear competitive disadvantage overall in inland

transportation the Port of Baltimore has succeeded in attracting Midwest

cargo away from the Port of New York Indeed the MPA sPort Adminis

28Although NYSA denies thata2003differential between New York and Baltimore exists placing

it ata150 level and of course contending that it is the underlying costs of labor fringe benefits that leads

to any differontiaq it beers noting es the Port Authority has done that the differcntial inthe 23a250 range

was admitted even by NYSA wiMess Costello at hearings held before New York State Assemblyman Koppell

in 1983 Mr Costello who now says that he only agreed with the mathematics presented by Mr Goldmark

the Port sExecutive Director at the Koppell hearings agreed with Mr Goldmark sfrgures even to a250

differential NYSA op br at 79 citing Ex 11 NYSA made a fuss about admitting Exhibit 11 but there

was adequate evidence of its authenticity and reliability as to the testimony of NYSA personnel made at

the Koppell hearings and the exhibit was admitted to show any previous inconsistent statements by such

personnel

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 727

NEW YORK SHIPPING ASSOCIATION ET AL

trator acknowledging Baltimore ssuccess commented that New York is

now a neighborhood port 29

47 The Port of New YorkNew Jersey faces competition from West

Coast ports on locally destined Far East minibridge cargo which may be

discharged on the West Coast and shipped to the New York area by

rail In some cases the same ship travels through the Panama Canal and

calls at the Port of New YorkNew Jersey where it picks up the very

same container now empty and not subject to the tonnage assessment

48 The Shipping Act of 1984 specifically authorizes and encourages

intermodal ratemaking by ocean carriers

49 Sea Land sintermodal service is of sufficient significance to have

been described in great detail in RJ Reynolds May 10 1984 information

statement

50 Under intermodal ratemaking the steamship line which pays the

tonnage assessment at New YorWNew Jersey arranges the inland transpor

tation and can control the routing of cargo Intermodal ratemaking is the

wave of the future and steamship lines are and have been aggressively

seeking to control the routing of cargo

51 Gregory Halpin Administrator of the Maryland Port Administration

testified in deposition that because of the intermodal trend MPA has shift

ed the emphasis in our sales solicitation to the steamship lines

52 In addition to establishing point tointermodal rates steamship

lines have controlled routing of cargo in other ways including influencing

shippers to choose certain ports route code systems port trates quoted

with the understanding that they would not be used through New York

New Jersey surchazges only on cargo moving through New YorkNew

Jersey and outright denial of the use of a particulaz port

53 Robert Steiner Deputy Director of the Port Department of the Port

Authority was recently told by a major importer of Perrier water that

the importer can no longer use the Port of New York because whenever

he asks for spots from Europe to New York the steamship lines consistently

tell him that there is no space available to New York but that they

would be glad to handle his cazgo through Baltimore or Norfolk Perrier

water is a lowrated commodity that would have approximately 40 revenue

tons per container The importer whose principal storage facilities aze in

Connecticut also told Mr Steiner that the inland costs from Baltimore

and Norfolk are onerous and that the company has been compelled to

consider using Canadian ports

54 In determining how to route cargo steamship lines take assessment

costs into account and it is their policy to route cargo in the cheapest

29TIus nding is not meant to call into question the success that Baltimore may be having in free and

open competition with New York nor is it the purpose of this proceeding to place New York in an advan

tageous position over Baltimore The purpose is to determine if the current assessment forn ulaat New York

is unfair or unjustly discriminatory as to New York by imposing unjustified handicaps such asa20300

container tax differential that Baltimore orother ports do not have to beaz and if so whether the formula

at New York should be modified ro eliminate orameliorare such handicaps

27FMC
7Z FEDERAL MARITIME COMMtSSION

manner possible For example Hapag Lloyd s

Vice President of Intermodal

Services testified in deposition that a128 assessment differential would

make a difference in how the steamship line would route cargo

55 NYSA ILAContract Board Members have frequently expressed con

cern that too high an assessment will divert cargo away from New York

The record shows numerous examples of this concern For example when

in eazly 1976 the Board reduced ttie tonnage assessment from 828 to

685 Mr James Dickman NYSA President states at that time that he

hoped the reduction would enable New York to recapture cargo it had

lost when the assessment had reached 828 Thomas W Gleason ILA

President tesdfied in deposition that if the tonnage assessment was increased

beyond 890 it would probably drive the freight away John J Farrell

Jr President of ITO Terminal Co stated in New York State legislative

hearings that the present rate of 890 was taking business away from

New York

56 Michael Maher Chairman of the Board of Maher Terminals testified

in deposition that he has been told that lines take cargo through other

ports to avoid paying the assessment

57 Gregory Halpin Administrator of MPA in discussing whether the

assessment costs at New YQrkJNew Jersey caused a diversion of cargo

to other ports testified in deposition that we have had lines and

others who have said to us we have to escape the costs in New York

and we would like to move more cargo through Baltimore

58 Robert Steiner Deputy Director of the Port Depaztment Port Author

ity of New York and New Jersey was told by Chairman Chang the top

executive of Evergreen Line and his senior executive staff in November

1982 and February 1984 that Evergreen handles their Midwest cazgo through

the Port of Baltimore because the tonnage assessment makes New York

noncompetitive for these cazgces They also indicated generally that the

tonnage assessment makes the Port of New YorkNew Jersey noncompetitive

for other than New York azea cargo Evergreen Line is a member of

NYSA and a

respondent

59 Mr Steiner was told by 7ohn Hsia Deputy Managing Director of

Orient Overseas Container Line OOCL in February 1984 that the tonnage

assessment is a major problem for OOCL in New YorkNew Jersey and

that they prefer to put their competitive cazgo ieMidwestern cargo

through other ports Orient Overseas Container Line is a member of NYSA

and a

respondent

60 Mr Steiner has been told by numerous USLines officials including

Mr Anthony Scioscia that the tonnage assessment has forced them to

route cazgo azound New YotkNew Jersey USLiens is a member of

NYSA and a

respondent and presented two wimesses including Mr

Scioscia at the hearing

61 Mr Steiner was told by Poul Rasmussen Executive Vice President

of Maersk Line in May 1983 that because of the tonnage assessment

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7Z9

NEW YORK SHIPPING ASSOCIATION ET AL

Maersk Line must favor ports to the south for non New York area origin

and destination cargo and that Maersk sees no other solution than to avoid

the Port of New YorkNew Jersey whenever possible He also indicated

an expectation that in the long run there would be an increase in both

minibridge and microbridge movements for Maersk sFar East cargo Maersk

Lines is a member of NYSA and a respondent

62 Mr Steiner was told by E Waage Nielson President of Bazber

Blue Sea in May 1983 that the tonnage assessment forces Barber Line

to direct tonnage to ports other than New York This had been confirmed

by other Barber officials in a meeting the year before Barber Blue Sea

is a member of NYSA and a

respondent

63 Mr Steiner was told by MY Stone Chairman of Dart Line in

May 1983 that Dart particularly on lower rated freight is forced whenever

possible to move cargo around the Port of New YorkNew Jersey due

strictly to the tonnage assessment Dart Line is a member of NYSA and

a respondent

64 Mr Steiner was told by R Heim Director of European Operations

for US Lines in May 1983 that the tonnage assessment made it so onerous

for US Liens to carry lower rated freight particularly during this time

of depressed freight rates that they did all they could to avoid New

YorkNew Jersey

65 Mr Steiner was told by H Bulch Director of American Australian

Services for Columbus Line in May 1983 that the tonnage assessment

is costly and that they preferred to handle their general cargo exports

through ports other than New YorkNew Jersey Columbus Line is a member

of NYSA and a

respondent

66 Mr Steiner was told by Mr J deJonge Manager North America

Services for Nedlloyd Line in May

exports can go through many ports they

1983

route

that

around New

since a lot of

York

Nedlloyd s

because

of the assessment formula Nedlloyd Line is a member of NYSA and

a

respondent

67 Mr Steiner was told by Mr M Sportorno Commercial Director

of Italian Line in May 1983 that although he believes that New York

New Jersey labor is better than at other North Atlantic ports they route

around New YorkNew Jersey whenever possible because of the tonnage

assessment He also indicated that if there were another increase in the

tonnage assessment it would be cheaper to put cargo into Savannah and

then truck it to New York Italian Line is a member of NYSA and a

respondent

68 Mr Steiner was told by Mr G Canera Director and MrP Hancock

president USA of Costa Line in May 1983 that the cargo they handle

in the Port of New YorkNew Jersey is strictiy local and that their competi

tive cazgo to and from the Midwest is handled in other ports because

of the tonnage assessment Costa Line is a member of NYSA and a respond

ent

27FMC
3O FEDERAL MARITIME COMMISSION

69 Mr Steiner was told by Captain Parada Mediterranean Sales Manager

for Sea Land and his staff in May 1983 that even though the service

at New YorWNew Jersey is far superior principally for Midwest cargo

they are forced to use Portsmouth VA for low rated commodities in

order to have a revenue return on those boxes They also indicated that

Sea Land could not afford to pay assessment eosts at New YorkNew

Jersey in the 3005 range with an average revenue requirement per

box of only 2300 Mr Steiner has also been told on other occasions

by Sea Land officials that as long as New York has a tonnage assessment

Sea Land will handle as many of their commodities as possible through

other ports Sea Land is a member of NYSA and a

respondent and presented

awitness at the hearing 30

70 Most of the major shippers who had used the Port of New York

New Jersey from Massachusetts Connecticut Fennsylvania Ohio Michigan

Indiana Illinois Wisconsin Minnesota and Missouri in 1980 diverted a

significant share of their cargo to other ports by 1983 while few have

increased usage The Port of New YorkNew Jersey has lost market share

in all of these ten states since 1980 and the major beneficiaries have

been other Atlantic and pacific Coast ports

71 The number of full container ship arrivals at the Port of New York

New Jersey has declined at a greater rate than at other North Atlantic

ports during the past three years

72 Cargo handling costs excluding assessment costs are lower at the

Port of New YorkNew Jersey than at other North Atlantic ports

73 Transshipped cargo that is cargo shipped to or from another US

port by water is excepted from the tonnage assessment and pays 50

per

man hour at the Port of New YorkNew Jersey

74 Sea Land has a feeder service for the ports of Baltimore and Boston

and its line haul vessels do make direct calls at New YorkNew Jersey

Import cargo arriving at New York and transshipped to Baltimore or Boston

before being transported to its destination pays the 50 excepted man

hour rate at New YorkNew Jersey If this import cargo were shipped

3ONYSA faced with the evidence of officials of its own member lines calls the evidence hearsay testi

mony of alleged statementa made by certain carrier officials NYSA op br at 59 Of course as the

Port Authority states these statements are not hearaay at all as ifthat made a difference inan adminiatrative

hesuing but arc admissions The statements are furthermore not alleged but proven by the testimony

of Mr Steiner who heard them But aside from that NYSA states as a fact that all but six of the thirteen

companies not 11 as the Pon indicated alleged ro have made the statements have actually increased their

non excepted container cargo movements through the Port during the past four complete contract yeurs

NYSA op br at 60 Another way of stating this fact is that nearly onehalf of the 13 decreased

their cargo movements NYSA further states that some of thedecreases were negligible and others explainable

by conditions pertaining to frozen meat facilitiea at Philadelphia Id at 601Whatever the aggregate ex

perience of these carriers may have been NYSA sstatements do not offset the fact that the carrier officials

showed thet they attempt to avoid New York when possible because of the assessment differential Aggregate

volumes of tonnages moving do not necessarily prove that there has been no impediment to 6usiness See

NAR vFMC658 F 2d 8l6 DC Cir 1980 where the court criticized the Commission and vacated

its decision which had found no violation of law and no hartn to waste paper exporters because overall vol

ume of movement of waste paper exports had increased overthe years

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 731

NEW YORK SHIPPING ASSOCIATION ET AL

inland directly from New York it would pay the 890tonnage assessment

Similazly export cargo shipped first to Baltimore or Boston and transshipped

to New York for loading on the line haul vessel pays the excepted 50

man hour rate but if the cargo moved directly to New YorkNew Jersey

for export it would pay the 890tonassessment

75 The policy at Sea Land is to route cargo in the cheapest manner

possible

76 One of the reasons that Sea Land uses New YorWNew Jersey as

a

relay port is that relayed cargoes pay the 50 excepted man hour

rate and are excepted from the tonnage assessment

77 Of all the containers handled in the Port of Boston in 1983 475

were transshipped through the Port of New YorkNew Jersey The Port

of Boston has encouraged steamship lines to transship by barge rather

than truck to and from New York because the NYSA assessment on barge

traffic is the excepted 50per man hour rate resulting in an assessment

cost more than 300 less than the tonnage assessment applied to movements

by truck

78 It would be less expensive to move cargo by truck between Boston

and New YorkNew Jersey but for the tonnage assessment

79 The NYSA ILA Contract Board is the body that implements the

tonnage assessment and is authorized to grant modifications and excepted

status to commodities In making such decisions the Contract Board is

required to consider the protection of the continued movement in the

Port of New York of marginal commodities

80 The Contract Board in determining whether to grant a

modification

or exception examines whether the change would retain cargo bring back

cazgo that once moved through the port or attract new cargo

81 Thomas W Gleason President of the ILA stated in his direct testi

mony that the Contract Board creates excepted and special status for cazgces

which would otherwise discontinue coming to the Port of New York

82 The record contains detailed instances of requests and actions by

the Contract Board which sometimes granted special treatment for certain

cargces

when carriers or terminal operators have presented such requests

The Contract Board has made decisions based upon the individual presen

tations and has shown a desire to protect low productivity breakbulk cargces

which maintain work opportunities at the Port However several of the

presentations made by carriers or terminal operators demonstrate that the

high tonnage assessment prevented cargo from moving through New York

or even caused cargo to leave New York in favor of other ports For

example AGEscalera the agent of the Spanish Line who had requested

excepted status for waste paper which was denied informed the Contract

Board that such denial had caused 25000 tons of waste paper 98 percent

of which had moved through New York to move via another carrier

through Boston Mr AB

Ruhly President of Maersk Line s

agent wrote

to the Contract Board on June 9 1982 indicating that the increase in

27FMC
73L FEDERAL MARITIME COMMISSION

the tonnage assessment rate to 750 would cause them to route Canadian

eargo thFOUgh Philadelphia rat ierthan New orC Maher Terminals had

requested an exempdon for Canadian cargo in SEptember 1981 in order

to obtain cazgo being routed through Halifax Maher had indicated that

the carrier involved preferred to use New York bat that the tonn geassess

ments in most cases would equal or exceed the costs of diverting the

vessel to Halifax Mr JEButcher Vice President of the agent for Hcegh

Ugland Auto Liners wrote to the Contraet Boazd on May 22 1984 request

ing that earth moving equipment be given a lovE er assessment He stated

that the current assessment representesi 25 gereent of the ocean freight

on this cargo and that if the assessment were not lowered the carrier s

European offices would book these cargoes for pcrts other than New York

whenever pqssible He also noted that automobile shigpers were moving

vast volumES through other ports because of the assessment at New York

Columbus Line asked for lower assessments on froaen meat in 1979 which

request was denied Thereafter Philadelphia beeame the line sfirst port

of call due to the large amount of ineat unloaded there

83 On other commodities the evidence that the assessment rates were

preventing the cargo from moving through New York persuaded the Board

to modify the assessment For example steel eor modities had apparently

been lost to Philadelphia and they were granted excepted cargo status

on February 10 1976 Tonnage assess ents on coff eand cocoa were

modified by the CQntract Boazd on the basis of evidence tiat movement

of those commodities through New York had ben hindered or prevented

by the assessments Favorable modi cations to the assessments were also

made with respeet tQ dried dates yachts and other commoditaes Refined

sugaz in bags for export was granted speeial status on September 26

1980 in order to encourage the movement of this labor intensive cargo

through New York

84 The amount of tonnage handled at the Port of New YorkNew dersey

has remained relatively stable New York being artever increasing consump

tion and production area Thus in contraet year 1495 there were 2268996

non excepted tons and in contract year 1983 there were 22 659540 non

excepted tons It is esdmated that the volume will inerease to 24 million

tons in cantract year 1984 awing to an increase in the first eight months

of that onbract year NYSA has derived figures indicating thatnon excepted

container tons has increased trough Nw York from 159million in 1975

to 201million in 1983 According to Maritime Administration rlata how

ever since the introduction of the tonnage assessment the Port of New

YorkNew Jersey has lost a substantial mazlcet share to other Noxtt Atlantic

ports as well as other port ranges in the United States Ex 2 pp 6

9 Thus New York sshare of liner cargo in ie North Atlantic decline

from 57 percent in 1974 to 55 percent in 1983 but the share for the

total US market declined from 23 percent to 16 percent Id at 7

More significantly New York sshare ofcotainerized cazgo moving in

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 733

NEW YORK SHIPPING ASSOCIATION ET AL

the North Atlantic has declined from 69 percent in 1972 to 56 percent

in 1982 Id at 8 This indicates that New York has been losing its

share to other North Atlantic ports in the container segment Ex 2 p

9 Data obtained from port authorities shows furthermore that from 1981

to 1983 container vessel calls at New York have declined by 14 percent

while such calls at Philadelphia Baltimore Hampton Roads declined

only 5 percent Id NYSA attributes the increase in container tons at

other ports to their later development of container facilities since 1972

NYSA op br at 59 citing Ex 33 p II7 However even in New

York a good deal of container facilities were not developed until 1975

or later completion of Sea Land Maersk Terminal Red Hook South

Brooklyn Marine Terminal etc Ex 31 pp Cr7 There was much devel

opment of container facilities at other North Atlantic ports by 1970 although

it continued to 1975 Also the same full container ships calling at New

York also called at Baltimore and Hampton Roads Id

85 The Contract Board has not seriously considered or evaluated in

depth alternative assessment forrnulas in recent years However there has

been concern over the raising of tonnage assessment rates and occasional

suggestions by interested parties as to possible changes to the formula

For example Joseph Barbera of Global Terminal Container Services

Inc wrote to NYSA on March 15 1974 suggesting changes in the formula

by decreasing the tonnage assessment on containers increasing it on LCL

cargces increasing the man hour assessment on excepted cazgoes and charg

ing aman hour assessment on empty containers As to the effects of raising

the tonnage assessment rate Robert B Murphy of US Lines testified

in deposition that choosing the 890 per ton level was like choosing

a sales price of899for psychological reasons David Richman of United

Terminals testified in deposition that deciding to what level to raise the

assessment was somewhat like playing God because at some level diversion

would occur

86 Various wimesses testi edin opposition to any change in the current

formula which would cause them to lose the special treatment accorded

them under the current formula or which would cause them to bear addi

tional costs For example banana shippers wish to have the current rate

at 5 cents per box remain untouched and if this is done they would

have no interest in this proceeding Witnesses for US Lines Sea Land

and McAllister Brothers Inc all testified in favor of preserving certain

favorable treatment accorded their interests Thus the USLines witness

opposes any change from the excepted man hour basis for his line sdomes

tic service Sea Land opposes any change from the excepted basis for

its transshipped cargces or any change from its total exemption from

any assessment for maintenance and other non cargo handling functions

and Mr Mullally of McAllister testified to the effect that he could not

afford to pay the regulaz tonnage rate and remain viable Mr James G

Costello of University Maritime Service Corp does not wish an increase

27FMC
734 FEDERAL MARITIME COMMISSION

in the man hour portion of assessment payments under an alternative for

mula Under any such increase terminal operators like Universal would

be affected because they aze responsible for paying assessments under the

man hour basis but not the tonnage basis Universal utilizes a substantial

number of man hours of employment and under the Port Authority sfirst

suggested alternative formula Universal would be paying quite a sizeable

amount of money The gures aze con dential but are available in the

confidential portion of the record Port Authority op br at 789

87 The Port Authority sexpert witness Mr Leo Donovan has presented

testimony criticizing the cunent tonnage assessment formula and proposing

alternative formulas based on a combined man hour tonnage basis broken

down by the type of fringe benefit cost being funded He distinguishes

between transition costs ie those that are attributable to the advent

of containerization GAI and all other costs and would fund the first

type on a per container basis and the latter on a man hour basis Ex

31 pp 2530 Mr Donovan is a Vice President within the Transportation

Division of Booz Allen Hamilton Inc the well known consulting firm

and in nearly 13 years has conducted or directed over 100 assignments

for maziUme clients Ex 2 last page A more complete discussion of

his alternative formulas will be given below and the reader is referred

to the table of comparisons of the NYSA Donovan and PRMSA formulas

in the appendix to this section for visual aid

88 Mr Donovan sproposed alternative formulas would fund all fringe

benefit costs be responsive to mazketing and competitive situations vis

avis other ports and would assign responsibility for transition costs

to the container sector which caused them IVIr Donovan presents three

forms of his alternative formula using 1983 figures The first would result

in a rate of 1164 per man hour and 64 per container The second

version of his formula would modify the man hour rate to retain presently

excepted cazgo and would result in the same 1164per man hour plus

a lower excepted man hour rate 50 per man hour in 1983 and retain

the per container rate of 64 The third version of his proposal would

consider price sensitivity of different types of containers and would assess

full containers at 77 per unit but empty and stuffed and stripped containers

a half rate of 38 per unit Ex 31 cited above Mr Donovan sformulas

are flexible and can be further changed according to him to accommodate

domestic rehandled or transshipped containers or breakbulk cargces that

might be diverted from the port or into containers Ex 31 p 29 He

states that breakbulk cazgces are extremely important to the port s

wel

fare Id at 30 and that care must be taken to assure that no assessment

formula change causes a substantial increase in breakbulk asssements

charges Id Moreover he advocates not changing who is responsible

for paying the assessments so as to minimize disruption Mr Donovan

concludes that the current system is no longer responsive to market condi

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 73S

NEW YORK SHIPPING ASSOCIATION ET AL

tions and shoutd be changed and states that his altematives are responsive

and result in a pricing structure that the market can accept Id

Conclusions as to the Port Authoriry s

Case

As I have indicated eazlier I conclude that the Port Authority has shown

by a preponderance of the evidence that the current assessment formula

is harming the Port competitively especially as regards Baltimore because

it maintainsa2003 assessment differential that only New York has

to bear and is not present in competing ports which use man hour formulas

to fund their labor fringe bene t

costs This showing is made not on the

basis of cargo diversion under the naturally tributary type cases which

NYSA Heazing Counsel and others seem to believe aze controlling The

Port Authority does not claim that it is fundamentally entitled to Midwest

container cargo or that such cargo is naturally tributary to New York

rather than to Baltimore or Philadelphia and the Port dces not claim

that NYSA is engaging in artificial monetary inducements like

absorptions or equalizations What the Port is claiming is that it

is being hurt in its attempt to attract carriers to route their services primazily

to and from the Midwest because of this unnecessary 20300differential

which the current formula at New York imposes on the Port The Port

Authority points to admissions of eleven carrier officials whose companies

are respondents in this case regarding their efforts to avoid New York

because of the assessment differential plus carriers own cost studies which

show the differential and indeed in one of which the carrier made the

notation The killer is NYSA assessment of750ton compared to Balti

more 810Manhour Portsmouth 1055Manhour Of course the current

rate at New York has since increased to 890per ton There is further

more evidence showing that the NYSA ILA Contract Board members are

always apprehensive when they have to raise the tonnage assessment rates

about possible loss of cargo to competing ports that they have tried

on occasion to lower the rates in hopes of attracting cargo that at least

one NYSA member Mr Barbera suggested that the formula needed revision

to pick up contributions from certain specially treated categories of cargo

and that NYSA hired an expert Mr Sclar whose task initially was to

look into the problems with the current formula Furthermore as seen

by previous actions of the NYSA ILA Contract Board the Board often

had to grant special reduced treatment to a number of commodities to

retain their movement through New York and in some cases especially

that of the Spanish Line and waste paper the assessment rate caused

a loss of that commodity to Boston

Data accumulated from the Maritime Administration and other sources

indicate that although New York maintains its volume of aggregate tons

it is stagnating and has declined in its share of containerized cargo in

the North Atlantic from 69 percent in 1972 to 56 percent in 1982 These

declines are not explainable simply in terms of other ports catching up

27FMC
736 FEDERAL MARITIME COMMISSION

to New York in containerizing their facilities notwithstanding NYSA s

contentions However it is not necessary to pait t

to specific items of

cargo that have moved via Baltimore rather than New York solely because

of the tonnage assessment at New York and hann can be shown under

law even if the aggregate volume of movement is holding its own or

even increasing That is the lesson of NARI vFMC6S8 F 2d 816

DCCir 1980 where the court chastised the Commission for nding

no illegality under various secdons of the 1116 Act merely because the

commodity continued to move in increased volumes It is also the lesson

of NC State Ports et al v Dart Containerline cited above 21 FMC

1125 af rmed sub nom Dart Containerline Co Ltd vFMC639 F

2d 809 DCCir 1981 In the Dart case there was no smoking gun

ieno specific ton of cazgo that moved ia Norfolk instead of Wilmington

NC that the evidence showed to move that way because of Dart sinland

absorptions Nevertheless the Commission found ompetitive harm to Wil

mington

With the above type of evidence including so many admissions and

the additional fact that the Port is not asking for nor is it entitled to

specific money damages one wonders what more the NYSA Hearing Coun

sel and other parties opposing the Port srequest for relief want the Port

to prove Nevertheless NYSA wants the Port to be held to aclear

and convincing evidentiary standard of proof which dces not exist in

these proceedings and was rejected by the Congress when NYSA first

proposed it prior to enactment of the MLAA Furthermore NYSA insists

on evidence of the smoking gun ieit wants specific tons of specific

cazgces to be shown to have moved through Baltimore or some other

competing port solely because of the assessment differential at New York

which NYSA also denies to exist in the magnitude of 20Q 300 per

container notwithstanding the admission of one of its members Mr Costello

before the New York State legisladve hearings and its own members car

riers cost studies Furthermore NYSA constantly attacks its members

own admissions as hearsay and as alleged statements made to Mr

Steiner the Port sDeputy Director This type of contention undermines

NYSA s

credibility since as NYSA counsel must well know statements

of parties out of court are not heazsay at all and even if they were

hearsay is admissible in administrative hearings and can constitute substan

tial evidence even without corroboration See Federal Rule 801 d2Rich

ardson v Perales 402 US389 1971 The Commission has often relied

upon hearsay even when finding malpractices and has been chastised

by the court when refusing to rely upon probative hearsay See US v

FMCcited above 15 SRR 927 and NARI vFMCcited above 658

F2d at 825 31 If NYSA had evidence that these eleven carrier officials

31The court afrer criticizing the Commission for disregarding hearsay evidence of impediment to move

ment of waste paper to the Far East stated

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 737

NEW YORK SHIPPING ASSOCIATION ET AL

never made any such admissions NYSA could have called them as wit

nesses since they are NYSA s own people Not having done so it ill

behooves NYSA to challenge their statements and the Commission is enti

tled to infer that their testimony would have been adverse to NYSA s

position had they been called See Interstate Circuit v United States 306

US208 226 1939

One of the defenses of NYSA furthermore is that if there is any assess

ment differential it is the fault of the underlying labor costs at New

York which admittedly are much higher than those at any other port

especially the GAI which reflects the great decline in work opportunities

caused by containerization However as Mr Donovan and other evidence 32

has shown it is not the underlying costs so much but rather the particulaz

type of tonnage formula which competitively disadvantages New York

Mr Donovan has prepared three alternative formulas which would fully

fund these huge underlying costs but without causing the 2003 per

container differential Mr Donovan sformulas would raise money from

activities such as handling empty containers stuffing and stripping and

maintenance at terminals which enjoy free rides under the current formula

and would increase rates on the presently excepted domestic and rehan

dled cargces His formulas are also flexible enough to adjust to accommo

date other special cases which may need protection and would make New

York more competitive as regazds Midwest throughput containers without

seriously disrupting domestic cargces according to Mr Donovan Port

Authority op br at 745 Mr Donovan sformulas are not perfect and

I believe in several respects Dr Silberman sformula is more refined

and is remedial for PRMSA as well as the Port since PRMSA unlike

the Port Authority is a direct payor under the current formula Nevertheless

I believe his formulas are certainly fairer than the current formula because

they would substantially ameliorate the competitive handicap which the

Port is facing on account of the current formula Furthermore as he notes

unlike the current formula they would bring the payments of those who

use labor in line with their responsibility for port labor dislocation and

in line with their current utilization of labor

But for the existence of Dr Silberman salternative formula which with

modifications to eliminate certain excessive features I would recommend

Mr Donovan sformula third alternative with some modifications Further

more in view of the Port Authority ssuggestion that instead of ordering

The Commission stubbomly insisted on weazing its blinders to judge the available evidence in this

case

The court commented on the use of hearsay evidence in administrative proceedings calling it not disposi

tive but suitable and appropriate for inclusion in the context of administrative proceedings and decision

making Id Later the court also criticized the Commission for refusing to consider heazsay documentary

evidence letters from shippers stating that he Commission displayed an unfortunate capricious reluc

tance ro assimilate the proffered evidence tending to show detrimental impact on the commerce in waste

paper 658 F2daz 825 n46

32See fmdings of fac snos424above

27FMC
73H FEDERAL MARITIME COMMISSION

modification of the cunent agreement the Commission could suspend such

an order for 60 days to allow the parties to settle on a new formula

I refrain from recommending implementation of Mr Donovan salternative

formula though recognizing its merits 33

Credibility of NYSA sWitnesses

In addition to my ndings and conclusions regarding the evidence pre

sented by the Port Authority and NYSA sdefenses I owe some explanadon

as to the reasons why

evidence more credible

I

and

find

persuasive

the Port

than

Authority s

NYSA s

and

Not

later

only

PRMSA s

do Ind

NYSA stechnical arguments attacking their own officials admissions as

hearsay and their impossibly difficult standazd of proof to which they

wish to hold the Port Authority untenable but Ind that with all due

regard to the eminent positions they hold in industry and in the consulting

firm world NYSA witnesses were unduly rigid in adhering to the defense

of their problematic formula both during cross examination and in their

written testimony Certainly no formula can be so wonderful that reasonable

concessions cannot be made on cross examination or when reasonable criti

cisms are made However these witnesses made grudgingly few concessions

Furthermore the witnesses defending the formula whose companies enjoy

special privileges like Sea Land with its relay service or United States

Lines with its domestic cazgces or McAllister with its excepted bazges

understandably steadfastly defended the status quo even

substantially at the expense of the other container lines for

though

these

they

privileges

bene t

I do not blame them of course for adhering to the best interests of their

companies but that dces not mean that I have to give as much weight

to their testimony as Ido to other evidence especially to parties evidence

against their own interests such as the admissions of the eleven carrier

af cials or the carriers cost studies Finally as to the NYSA s

expert

witness Mr Michael L Sclaz both the Port Authority and PRMSA through

cross examination and demonstration have shown that Mr Sclaz has offered

inconsistent testimony in a previous Commission proceeding involving an

assessment agreement on the West Coast in which he seemed to be attacking

the very concepts of the tonnage formula which he here defends I am

not seeking to attack the professional reputation of Mr Sclaz and recognize

33The Port Authoriry initially did not recommend any altemative focmula but rether suggested that the

parties carefully consider altematives admitting that there was no simple solution Port Authority r br at

31Sea Land had seemed to recogniu the existence of problems and suggested extensive negotiations Id

However NYSA took a

strong position of resistance and criticized the Port for not presenting an altemative

formula which accounts for Mr Donovan sproposals However the Port Authority is still apparendy holding

out the olive branch and seems willing to seek an accommodation with NYSA Why then do not the pacties

and NYSA which as I mentioned announced aplan in the Journal of Commerce talk to each other and

see if any settlement cen be reached well beforo the February 27 deadline imposed on the Commission Since

the one yeardeadline on the Commission seemsmandatory under the MLAA it dces not seem feasible for

the Commission to issue a decision on February 27 1985 which would postpone its decision for 60 days

See Sen Rep to the MLAA cited above at 11 requ uing strict adherence to the one yeardeadline for Com

mission decisions the time requirements for filing and decision shall be strictly adhered to

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 739

NEW YORK SHIPPING ASSOCIATION ET AL

that he has appeared as an expert witness in various proceedings not

without reason and is with a

reputable consulting firm Temple Bazker

and Sloane However both the Port Authority and PRMSA have in my

opinion utilized the adversary process to show that expert or no expert

this witness scredibility in this proceeding has been undermined to such

an extent that I can give very little weight to his opinions or conclusions

For a description of the many ways in which both the Port Authority

and PRMSA have demonstrated Mr Sclar sprevious inconsistent statements

his peculiar methodologies and curious reasonings constricted definitions

of cargo diversion etc see the discussion with record citations in the

briefs of the Port Authority and of PRMSA Port Authority op br at

817 r br at 192 PRMSA op br at 6571A detailed discussion

of every point would be unduly excessive and unnecessary However some

of the highlights are the following Mr Sclar signoring costs per unit

basis when comparing total costs at New York with other ports his exceed

ingly narrow definition of diversion to such an extent that only local

captive cargo in New York sbackyard would he ever consider as being

losable to any other port his projections as fact although he later testified

that the projections did not occur as anticipated his indication that data

were not available for years prior to 1972 but later statement that foreign

container cazgces increased from nothing in 1966 to 72 million tons in

1983 his change in mission from investigating whether the current formula

was appropriate compazed to other possible models to all out defender

of the status yuo the inscrutability of much of his reasoning which even

NYSA s

witness Scioscia admitted he couldn tunderstand even as to a

relatively simple portion his advocacy of increased assessments on any

employer who introduces efficient devices thereby penalizing any innovative

employer in areas not related to the institution of containerization

Certainly a factor which undermines Mr Sclar scredibility significantly

is the inconsistent testimony which he gave in a

previous Commission

proceeding involving an assessment formula on the West Coast Standard

Fruit and Steamship Co v PMA 20 SRR 909 ALJ 1981 settlement

providing for mixed man hour tonnage formula to be later replaced by

man hour system Both the Port Authority and PRMSA cite pazagraph

after paragraph of inconsistencies between Mr Sclar s testimony on the

West Coast and that given in this proceeding Whereas Mr Sclar testifying

for a client with man hour and mixed man hour tonnage assessments on

the West Coast advocated great reluctance in departing from a man hour

basis

a

to a tonnage basis during times of declining man hours because of

substantial overkill potential he fully supports the tonnage formula

in New York although these overkill potentials have been pointed out

by PRMSA in some detail Furthermore although now advocating a wholly

tonnage based formula in New York as one that fairly allocates fringe

benefit costs among high and lowproductivity carriers on the West Coast

Mr Sclar testified that a tonnage formula results in subsidization of low

27FMC
74O FEDERAL MARITIME COMMISSION

productivity operators because low productivity operators will not pay labor

costs in proportion to their use of the labor Ex 48 at 13 cited in

PRMSA op br at 71 Also Mr Sclar on the West Coast resisted the

idea of switching the formula out there from man hours to tonnage assess

ments stating that such a switch dces not modify the current man hour

assessments in a rational manner and further tesdfied on the West Coast

against such a switch to a tonnage basis because operators who were

employing lazge amounts of labor relative to their tonnage would be

relieved of this cost by higher producdvity operators who have reduced

costs and increased efficiency usually by large capital expenditures Ex

48 at 29 cited in PRMSA op br at 71 Mr Sclar on the West Coast

furthermore challenged the idea that employee benefits should be paid

according to revenues derived by tons stating that wecan find no

reasons why labor costs direct or indirect for an industry section should

be determined and paid on the basis of revenue earned by that sector

particularly since the determination of those costs in this fashion has no

reladonship to labor utilization within the sector and obviously subsidizes

the labor costs of some sectors Ex 48 App 6 pp IV8

through

IV9cited by Port Authority op br at 84

It is not necessary to go on with further examples which are provided

by complainants Even if there aze different conditions on the West Coast

and factual distinctions there aze so many statements expressing basic

principles opposing tonnage assessments in Mr Sclar sWest Coast testi

mony which are appazently overridden in Mr Sclaz stestimony in this

proceeding that at the very least one must scratch one shead when

considering whether to follow the advice of Mr Sclar on the East Coast

where he fully approves tonnage assessments

NYSA s Motion to Strike Exhibit 48

Respondents NYSA et al served a motion to strike Exhibit 48 or in

the alternative to reopen the hearing to afford Mr Sclar an opportunity

to explain or deny his prior statements contained in that exhibit This

motion was served on October 3 1984 which is 35 days after the close

ofthe hearing August 29 Respondents argue that the complainants offered

Mr Sclaz sprior testimony in another Commission proceeding which is

contained in Exhibit 48 without any attempt to establish its admissibility

and without any indicadon of the portions of the testimony ugon which

complainants intended to rely NYSA contends that Mr Sclar was therefore

denied his right to explain the eazlier testimony and NYSA cites much

case authority holding ihat the party attempting to use a prior statement

of a witness to impeach the witness must establish that the prior statement

is

a

in fact inconsistent with the witness s

present testimony must establish

foundation and must give the wimess an opportunity to explain or

deny the prior statement Finally NYSA complains that exhibit 48 is not

admissible because complainants had ample opportunity to extract pertinent

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 741

NEW YORK SHIPPING ASSOCIATION ET AL

portions of the lengthy testimony in advance of the hearing and criticize

it in their earlier written cases

Both complainants strongly oppose the motion They also furnish ample

case authority holding that they did nothing improper They contend that

the testimony in question Ex 48 was refened to in Mr Scalr swritten

opening testimony Ex 29 pp 12that he identified Exhibit 48 as his

testimony in the previous case and that he was afforded an opportunity

to explain or deny it as Federal Rule 613 requires but that his counsel

after specific advice from the presiding judge neither asked for a recess

to confer with Mr Sclar nor sought to conduct redirect examination despite

being offered a recess and having a four day interlude before the hearing

was to resume and despite being advised that filing a motion long after

the hearing seeking to reopen the hearing under a tight schedule while

the parties were writing post hearing briefs should not be attempted Fur

thermore the Port Authority argues it is enough if the prior testimony

taken as a whole shows inconsistency with the present testimony if the

prior testimony is to be admitted for purposes of impeachment and the

Port Authority contends that the prior testimony is as a whole inconsistent

with Mr Sclar spresent testimony

Complainant PRMSA opposes NYSA s motion on similar grounds

PRMSA contends that it cosponsored admission of Exhibit 48 for the

purpose of impeaching Mr Sclar s

credibility because Exhibit 48 consists

of prior inconsistent testimony that Mr Sclar referred to this previous

testimony several times even using it as a means to attack conclusions

reached by PRMSA s

expert witness that counsel for NYSA could have

requested time to prepare to conduct redirect examination but did not avail

himself of that opportunity even when invited to do so by the presiding

judge that the entire testimony was essentially inconsistent with Mr Sclaz s

present testimony not merely portions of it and that in the last analysis

counsel for NYSA should have been better prepazed but in fact admitted

that he had not even read the previous testimony of his expert witness

which that witness had referred to several times in his own written testimony

in this proceeding

The facts of the situation here in my opinion show that neither Federal

Rule 613 nor the spirit of that rule nor the principles regarding fair heazings

have been violated What happened in point of fact is that on Thursday

August 23 1984 in mid afternoon counsel for the Port authority finished

cross examining Mr Sclar At the conclusion of the cross examination

counsel for the Port Authority showed Mr Sclar a

copy of his testimony

in the previous Commission proceeding Mr Sclaz identified it Tr 595

596 Port Authority counsel joined by counsel for PRMSA moved its

admission into evidence without further questions Counsel for NYSA stated

that he had not had an opportunity to review the exhibit that he questioned

the relevance of it and might move to strike it Tr 597 I advised

counsel that if he wished to file such a motion he ought to do so timely

27FMC
742 FEDERAL MARITIME COMMISSION

because if it were denied it would be too late to return to a hearing

to allow further questioning of Mr Sclar in the idst of the hectic post

hearing brief writing period Tr 600 During subsequent discussion it

became clear that the exhibit was being offered not to prove any facts

stated therein but for the purpose of impeashing NIr Sclaz scredibility

Counsel for NYSA however stated that he had been surprised and didn t

know what the inconsistent statement in the exibit were supposed to

be and that the matter should have been presented by complainants earlier

so that he could have prepared for it and not by vay of cross examination

at the last minute I advised counsel that there have been cases in which

an expert witness has been shown previously inonsistent testimony by

counsel trying to impeach the witness s

credibility and the ust al result

is that the witness sown counsel try to rehabilitate the witness on redirect

examinadon Nevertheless the previous testimony is admissible or impeach

ment purposes Tr 6045 The conclusion to this scenario was that

NYSA scounsel deeided not to onduct redirect examination

All that the applicable rules and principles of fair hearing require is

a fair opportunity for a party to meet evidence adverse to the party s

interest in the most appropriate fashion See Imosition of Surcharge by

the Far East Conference 9FMC 129 140 1965 Adverse evidence

can be countered either by rebuttal evidence cross examination or redirect

examination or azgument In this case despite the fact that Mr Sclar

referred to his previous testimony in his own written testimony Ex 24

in support of his qualifications and even to attack PRMSA scase his

counsel appazently had not familiarized himself with that testimony to deter

mine if there could be anything damaging in it which opposing counsel

might try to use in cross examination Having been alerted to the fact

that opposing counsel were using it for imp ahment purposes NYSA s

counsel could have accepted the speci csuggestions made by myself and

counsel

counsel

for PRMSA that he conduct redirect examination and as PRMSA s

stated that if he needed time to prepare such examination he

should be gr nted it and if there is a necessity to do so then

we all have to come back here and do that Tr 599 As the Port

Authority notes however there was time for NYSA counsel to prepare

for redirect Cross examination of Mr Sclaz oncluded prior to 3 pm

on Thursday August 23 No hearing was schedsled for Friday and the

hearing did not resume until Tuesday of the foliowing week If NYSA

counsel was not familiaz with his witness sprevious testimony nor with

any inconsistencies in that testimony certainly cow elcould have conferred

with his witress during the four day interlude or even the same day and

thereupon recall him for redirect exar ination Experienced trial counsel

certainly must be awaze of the fact that as one authority states

The first and probably the most effective and most frequently

employed line of attack upon the credibility of a wimess is

an attack by proof that the witness on a previous occasion has

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 743

NEW YORK SHIPPING ASSOCIATION ET AL

made statements inconsistent with his present testimony McCor

mick on Evidence 3rd Ed 1984 sec 33 p 72

NYSA counsel sponsored this witness who stated that he had testi ed

previously in a Commission proceeding in his own written testimony Ex

29 Therefore it is not unreasonable to assume that opposing counsel

would seek to obtain a copy of that testimony to see if there were any

inconsistent statements and that the witness s own counsel would have

spoken with the witness to ascertain whether there was anything damaging

in that previous testimony so that if the blow fell counsel would be

prepared to conduct redirect examination for the purpose of rehabilitating

the witness As the above quoted authority also states

The reply on redirect may take the form of explanation avoidance

or quali cation of the new substantive facts or matters of impeach

ment elicited by the cross examiner McCormick cited above at

sec 32 p

70

However counsel for NYSA who conceded that he had never read

the testimony in question contends that opposing counsel should have

identi edportions of the testimony that they considered inconsistent so

that the witness would have had a fair opportunity to explain or deny

Complainants however state that they believe the entire testimony to be

riddled with inconsistencies and that accordingly it would serve no purpose

to go over every line and identify it as the portion they wished to use

to impeach Even if complainants counsel should have tried to specify

page after page of the 50page document this does not explain the witness s

counsel sunpreparedness nor would it deprive him of the opportunity of

conferring with the witness whose testimony it was to find out from

the witness what might be damaging in the testimony and how to explain

deny or qualify it Then NYSA counsel could have asked Mr Sclar

to return on the same day or on Friday or the following Monday or

Tuesday if NYSA counsel needed the time because of his own unfamiliarity

with the previous statements of Mr Sclar Indeed counsel for PRMSA

specifically agreed on the record to come back later if necessary to give

NYSA counsel time to prepaze Thus Mr Sclar scounsel was given the

opportunity to question his witness about the inconsistent statements which

Rule 613 and fair procedure require 3a

34According to the authorities the requ vements of Rule 613 aze met if the witness has an opportunity

to explain after the contents of the statement aze made known to the jury 3 Weinstein Berger

Weirestein sEvidence sec613 04pp 613 15and 613 16The rule dces not require the impeaching party

to afford the witness the opportunity to explain or deny The witness must only be given such an opportunity

and the impeaching pacty dces not usually recall the witness to nehabilitate the witness 3 Weinstein

Berger cited above at p

613 24Rule 613 dces not even require that the cross examiner display or disclose

the previous statement to the witness before questioning him about it only that he must show it to opposing

counsel on request 3 Louisell Mueller Federal Evidence sec357 p

558 Thus opposing counsel may

pursue the matter on redirect and so bring to light any innocent explanation which the witness may have

Continued

27FMC
7 FEDERAL MARITIME COMMIS3ION

What happened however was that NYSA and Mr Sclaz scounsel had

not read or apparently familiarized himself with the previous testimony

of Mr Sclaz although Mr Sclar had specifically referred to it as proof

of his expert quali cations True as NYSA counsel suggests complainants

could have attacked Mr Sclar sprevious tesdmony in complainants own

written rebuttal testimony and Mr Sclaz could have replied in his written

surrebuttal testimony under the established procedure If failure of eomplain

ants to follow that procedure meant that NSA counsel would never have

had an opportunity to seek to deny or explain the previous testimony

then NYSA counsel could rightfully complain that Mr Sclaz and NYSA

were unfairly treated and prejudiced However the parties were also allowed

to designate wimesses for cross examination and Mr Sclar was so des

ignated Therefore his counsel was awaze that he would have the oppor

tunity of redirect examination of Mr Sclar and since the purpose of cross

examinadon is to seek to undemune a witness credibility one would

think that at least by the time of the designation his counsel would have

thought it prudent to ask Mr Sclaz whether there was anything damaging

in the previous testimony which Mr Sclar himself cited and if so to

prepare for redirect examination at the conclusion of the cross examination

For some reason NYSA counsel did not do this Istead he claims surprise

and asks that the previous testimony be stricken or that at this impossibly

late date he now be allowed to conduct redirect examinadon

I conclude therefore that NYSA counsel was given a fair opportunity

to confer with his witness and conduct redirect examination well before

the hearings closed but expressly declined to avail himself of such oppor

tunity The problem here appeazs not to be surprise but lack of preparedness

and unwillingness to conduct redirect examination for which counsel cannot

blame complainants NYSA smotion is therefore denied 3s

Findings as to PRMS 4sCase

In the following secdons I find and conclude that PRMSA has shown

that the cunent tonnage assessment formula is unfair and unjustly discrimi

natory as between carriers and must be modi edas provided by applicable

law The bottom line to PRMSA scase is that all containerized carriers

benefited mare or less the same from the advent of containerization and

dIn one case impeaching counsel introduced over 60 apperontly multi page documents without

specifying the pertinent portions The couR ordered impeaching counsel to specify the portions and allowed

the witness scounsel 15 days to ask ro recall the wimeea for redirect examinazion The present procading

involves one document albeit SO pagea with a lengthy report that reapondenta wunsel not complainants

counsel fumished which dceument the witness had cited and obviously reroembered IEsvery difficult

to forget that dacket stated Mr Sciaz in identifying the prov3ous testimony Tr 595 The 60document

case was US v

BM 432 F Supp 138 SDNY197 and the ruling was made long before the trial

was to conclude

33 Of cowse enother way to rehabilitate a wimesa whose credibility Nes been demaged on cross examina

tion is by azgument leter on brief NYSA hes availed itself of that opportuniry azguing that Mr Sclaz sprior

testimony was rrot really inwnsistent and desit with different factual circumatances Ihat ls the rypa of reha

bilitation usually found on red uectezamination Sce NYSA rbr at611

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 74S

NEW YORK SHIPPING ASSOCIATION ET AL

paid compensation in the form of the GAI program and other ways to

the ILA because of the drastic curtailment of work opportunities stemming

from the decision to load and unload ships using containers However

not all containerized carriers are bearing an equal or fair burden and a

number of facts showing vast disparities in payments among certain contain

erized carriers illustrates this fact

The reasons for the unfairness of the formula and the consequent uneyual

allocation of burdens among the containerized carriers are several First

the flat tonnage type formula which assesses all types of fringe benefit

costs whether they are related to men currently employed or the other

type of costs which aze related to men displaced from work by

containerization is conceptually unsound and illogical since it makes carriers

pay more money to find fringe benefits even if they use less labor for

direct type costs akin to wages This blunderbuss tonnage formula not

used at any other port in the United States to fund all fringe benefits

not only imposes responsibility on carriers for direct current type fringe

costs where there is no logical nexus but it penalizes such carriers who

effectuate efficiencies in their non vessel loading unloading activities In

other words if a

carrier operates at a terminal which has reduced the

need for handling empty containers stuffing and stripping containers or

for maintenance by utilizing innovative cost saving techniques such carrier

gets no credit for such innovations because it must still pay under a tonnage

formula towazd the extra labor costs of another carrier who has not intro

duced innovations Thus a carrier who ultimately moves more tons per

hours of labor used because of internal terminal efficiencies pays more

in assessments even for the type of costs which are not the industry

wide responsibility such as GAI for which all containerized carriers properly

shaze responsibility Such a formula reduces any incentive to innovate in

non vessel loading unloading activities

A second problem with the current assessmen formula at New York

is that it shows great favoritism to a certain few carriers and activities

and because of such favoritism those carriers pay little or even nothing

towards iheir own costs or towards industry wide costs Such failure to

make a fair contribution by such carriers casts burdens on other carriers

especially those like PRMSA which has become veryef cient at its own

terminai and which serves an economically underdeveloped area The favor

itism which PRMSA shows exists for three carriers who operate in domestic

trades and rehandle or transship numerous containers These carriers are

excepted from paying under the tonnage formula ie they or their

terminal operator pay only through the much lower man hour portion of

the formula which does not even meet current direct type labor costs

This favored treatment to the favored few results in their not contributing

many millions of dollars to the fringe benefit package although two of

the favored three are substantial containerized carriers who benefited by

containerization as much as any other carrier The other favored treatment

27FMC
FEDERAL MARITIME COMMI3SION

under the formula goes to carriers engaging in moving empty containers

stuffing and stripping and in maintenance work These cazriers not only

do not pay under the tonnage formula They do not even pay under the

excepted man hour portion of the cusent formula I other words they

pay absolutely nothing toward fringe benefit costs Such total exemption

also results in considerable savings to the few caniers involved and throws

the cost burdens on other carriers who do not operate in the same way

or to the same degree with empty containers and stuffing and stripping

To remove these inequities and reallocate the cost burdens more evenly

PRMSA has presented an alternative formula supported by the testimony

of an impressive expert witness who relies upon much of NYSA sown

data With some exceptions I find the formula to be well justi ed and

strongly urge its adoption My discussion and findings and explanations

follow

Unfairness of the Current Tonnage Formula

In developing its case to prove these assertions by a preponderance

of credible evidence PRMSA has shown a number of amazing facts which

illustrate how unfair the current tonnage formula has been operating and

how burdensome it has become to containerized operators especially be

cause of the enormous special privileges shown to three carriers who operate

domestic and transshipment services It appeazs perhaps that until the record

became assembled in this proceeding no one was really in a position

to understand the magnitude of the special privileges nor the extent to

which they burden other carriers However now that the facts are in

PRMSA registers extreme indignation at the extent of the disparity between

what PRMSA has had to pay under the formula and what other preferred

cazriers have not had to pay especially when PRMSA serves a trade

which is admittedly economically underdev loped It is perhaps understand

able that PRMSA upon now learning that in 19823it paid an average

of 272 per container for fringe bene tsunder the tonnage formula whereas

another major carrier paid only 141 per contain rand another only 168

per container and these other two carriers were the prime bene ciaries

of the special exception for domestic and transshipped cargces is indignant

It is not my job however to determine cases on the basis of emotion

such as that shown by PRMSA which states that NYSA behaves as

a

super pow favoring some members and penalizing others carrying on

its work in secret PRMSA rbr at 3 I attribute this statement

to PRMSA semotional reaction to the evidence it has adduced It is my

job and that of the Commission as charged by the Congress in the MLAA

to find out whether the facts do indeed show that the allocation of cost

burdens among carriers at New York who derived more or less the same

bene t

from containerization initially is so egregiously out of line that

it is unfair and unjustly discriminatory among carriers I believe the evidence

shows that in fact the allocadon has failed to distribute the burdens fairly

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 747

NEW YORK SHIPPING ASSOCIATION ET AL

both because of the continued insistence on utilizing a flat tonnage formula

regardless of type of fringe cost and because of enormous special privileges

shown to a

few carriers and a few operations

Some of the eoncepts which PRMSA has shown by the evidence it

has adduced are perhaps not easy to comprehend on first reading but

some of the evidence it has also adduced from the records of NYSA

members regarding favoritism to certain carriers is rather striking In order

to present my findings and conclusions as to PRMSA scase in the clearest

and briefest manner possible I

present my findings and conclusions so

that the occasionally startling conclusions and the supporting findings of

fact can be found close to one another Regrettably although I would

have wished to avoid doing so I find that it is not possible to conceal

certain data about certain carriers which was obtained under confidential

terms I believe that even if I attempted to do so it would become so

obvious which carriers were involved that the concealment of names would

become meaningless Also unless these facts are made known one might

not be able to understand my basic conclusions namely that the current

formula is terribly unfair as it allocates burdens among the containerized

sector of the industry at New York 36

To make its point about this unfair distribution of burdens among the

containerized carriers under the current tonnage formula at New York

PRMSA points to five somewhat amazing facts that the evidence shows 37

1 that in contract year 19823 PRMSA paid 16 million under

the formula and moved 59142 containers an average of 272 per container

However another carrier moving a third more carriers than PRMSA paid

an average of only 14l per container and still a bigger carrier moving

more than twice the number of containers as PRMSA paid an average

of only 168 per container Significantly furthermore these are two of

the carriers enjoying excepted treatment for domestic and transshipped oper

ations 2 that PRMSA employed 25percent of the NYSA ILA man

hours in the Port but paid 85

percent of the total NYSA ILA tonnage

and man hour assessment even though PRMSA has reduced its non vessel

loading activities at its terminal through internal efficiencies or otherwise

which internal activities are not connected with its initial containerization

years ago 3

that the special treatment for domestic and transshipped

operations accorded to only three carriers resulted in their avoiding paying

i6Rule 167 46 CFR 502167specifically authorizes me or the Commission to use confidential information

ifthey deem it necessary to a corcect decision in this proceeding As explained I deem it necessary ro

use the evidence even if identities and data are revealed so ihat my decision can be properly understood

albeit I would have preferred not to hnve had to reveal pazticulaz carrier information which was furnished

in confidence do add however that I

am not finding that NYSA or the carriers involved have deliberately

intended to harm anyone

or that the carriers operated in any way other than what they thought was perfecdy

legal As I mention in my decision it appears hat all the facts have been assembled for the first time in

one place and the unfair effects of the current agreement can be quantified for the first time What would

be wrong in my opinion is to continue the present unfaimess now that all the parties can see the effects

in detail

PRMSA op br at57

27 FMC
74H FEDERAL MARITIME COMMISSION

some 20 million dollars that they would have paid under the normal

tonnage assessment applicable to virtually all other containerized carriers

4 that the current formula assesses certain activides like stuffing and

stripping and handling of empty containers absolutely nothing not even

the man hour assessment althaugh carriers employ ILA labor in such activi

ties the result being that carriers like PMRSA which have reduced such

acdvities must pay the costs of other carriers who have greater needs

for such labor activities under the tonnage formula and 5during contract

yeaz 19823 when comparing its total payments under the current for

mula to man hours used PRMSA shows that it paid an average of 5074

per man hour to fund fringe bene tswhereas the direct wage rate was

only 14 per man hour

The above salient facts illustrate PRMSA smain theme that burdens

among the containerized carriers aze not apportioned fairly in relation to

the benefits wltich they all received more or less equally from

containerizadon

They also illustrate rather dramatically as PRMSA azgues that the ton

nage formula throws undue burdens on some camers who must pick up

the fringe benefit costs of currently employed labor Type 1 costs and

further aggravates the situation by relieving a few carriers of any shaze

at all in the tonnage portion of the formula and certain other carriers

of any shaze at all under either the tonnage or the man hour portion

PRMSA scase as to the unfair effects of the current tonnage formula

with its built infavoritisms and special privileges rests lazgely on the evi

dence of Dr Silberman its expert wimess Exs 41 and 46 In turn

Dr Silberman utilized data obtained in lazge measure from NYSA and

its members Dr Silberman as is usually the case with expert witnesses

who testify before the Commission has an impressive background He

is a consulting economist with aBSin Accounting summa cum laude

from New York University and a PhD in Industrial Economics from

the Massachusetts Institute of Technology He has had extensive teaching

experience has published in the professional literature has testified before

this Commission and other agencies and has devoted his research efforts

in recent years to the study of transportation economics and nance Ex

41 at 12 The data which he was furnished seem virtually to offer

a prima facie case that the cunent tonnage formula is not operating fairly

as among the containerized carrier sector of the industry at New York

However his analyses recommendations and reasoning Indfor the

most part persuasive and certainly more than suf cient on which to base

my ultimate findings and conclusions on apreponderance of the evidence

standazd of proof and sometimes even if the standard were cleaz and

convincing evidence that respondents enoneously contend it to be

PRMSA scase then can be set forth in the following manner based

upon Dr Silberman stestimony reasoning and the underlying data which

he obtained The case is as follows

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 749

NEW YORK SHIPPING ASSOCIATION ET AL

The current formula unlike the usual formulas found in other industries

and indeed among virtually all other ports in the United States departs

from the principle that each employer should contribute so as to pay those

costs associated with its own direct employment of labor This conclusion

was shazed by the Port Authority sexpert witness Mr Donovan A com

bination man hour tonnage formula which Dr Silberman and with some

variation man hour container formula Mr Donovan also strongly rec

ommends on the other hand allocates to each employer those fringe benefit

costs attributable to the employer suse of labor and then splits the remaining

industry wide costs which Dr Silberman finds to be 67 percent of the

total among all carriers on the basis of tonnage Thus the more labor

that an employer hires the greater its responsibility for labor costs as

is clearly seen in the case of direct wages By relating direct hiring costs

to the hours of employment in contrast to the tonnage method under

the current formula each employer pays for what he hires and uses and

dces not expect another employer to pick up his share of direct costs

merely because the other employer handles more tons and consequently

earns more revenue

PRMSA sProposed Alternative Formula

PRMSA sproposed alternative formula therefore would fund certain

costs related more to wages and to fringe benefit costs of labor currently

employed by means of man hours The remaining costs which are by

far the larger portion of the total package relate to dislocation of labor

because of containerization ieto men who are not working and are

drawing GAI payments and related benefits These are industry wideobliga

tions which everyone acknowledges including PRMSA and the Commission

long ago found in Agreement No T2336 cited above 15 FMC259

1972 These are shared by containerized carriers who caused the problem

and derived the benefits of reducing the use of labor in loading and unload

ing vessels by the proportion of tons each such carrier moves through

New York

As shown by Dr Silberman the direct cunent labor costs known as

Type I costs are either substitutes for direct wages or are deferred com

pensation These types of costs are the costs of vacations holidays health

and welfare benefits for cunently employed men considered as substitutes

for direct wage compensation and pension benefits earned by active employ

ees which are forms of deferred compensation The second Type II costs

are the Guaranteed Annual Income GAI program

and the portion of

vacation holiday pension welfare and clinic attributable to the GAI pro

gram This then is the essential breakdown of the Silberman formula

However as will be seen he would give protection and different treatment

to breakbulk cargo as would Mr Donovan upon which he would place

a cap as to conuibutions would totally exempt maintenance activities

would continue existing excepted treatment on passenger vessels bulk cargo

27FMC
7S FEDERAL MARITIME COMMISSION

lumber and newsprint which were granted long ago see Agreement No

T2336 cited above would terminate all other special privileges which

are not justified domestic transshipped empty containers stuffing and

stripping activities and finally would grant the Puerto Rican trade a

25 percent discount from the normal tonnage rate of assessment In the

main Ifind his formula would eliminate the inequities and unfair allocations

shown to exist under the current tonnage formula and with certain exceptions

the 25 percent discount and the refusal to continue special treatment for

bazge service between New York and Boston Istrongly urge its adoption 38

By dividing types of costs between those associated with currently em

ployed men and those associated with men displaced by containerizadon

Dr Silberman sformula offsets the unfairness generally of shifting cost

burdens to containerized carriers regazdless of their responsibility for the

type of costs involved In addition it removes the penalty imposed on

carriers who create efficiencies in non vessel loading or unloading activities

at their terminals ie maintenance stuffing and stripping movement of

empty containers PRMSA which has lowered its handling of empty con

tainers to 35 percent of all its containers compared to 405

percent for

the Port as a whole has lowered its stuffing and stripping of containers

to 47

percent of its total containers compazed to 135percent for the

Port as a whole and who does not use ILA deep sea labor for maintenance

work at all employing ILA Metro labor under a different contract

enjoys no savings for all of this under the tonnage formula but must

pay a full tonnage shaze although these efficiencies at its terminal do

not relate to the institution of containerization years ago but to the way

PRMSA organizes its terminal non vessel loading unloading operations As

PRMSA argues why should any carrier attempt to improve its terminal

efficiencies if under the current tonnage formula such improvements are

taxed away in the form of tonnage assessments which help other carriers

who for some reason do not organize their terminal operations so efficiently

or who prefer to position vast numbers of empty containers coming via

minibridge from Far East countries for the carriers own convenience in

an unbalanced trade and who aze rewazded by paying absolutely nothing

under the cunent formula toward the ILA fringe bene tcosts even though

ILA men handle the empties

The Current Formula s

Tax on Efficiencies

The results of the tonnage formula as noted eazlier is that PRMSA

which handled 85 percent of the total volume subject to the tonnage

assessment used only 25percent of total deep sea man hours other than

38If it is not clear from Dr Silbecman stestimony as to the currendy granted special cases which I dis

cussed in the findings of fact in the Port Authority scase FF No 14 regazding special tonnage definitions

or other special treadnent for bananas coffee cocoa ateel refined bagged sugar perishable fruit etc I find

that such ueatment should be continued Cases for such treatment were made to the NYSA ILA Contract

Board and i have seen no evidence showing that any of these needy commodities should lose their protected

treatment

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7S 1

NEW YORK SHIPPING ASSOCIATION ET AL

those related to passenger vessels in the Port This comes to only 16

man hours per assessment ton for PRMSA compared to 54 man hours

per assessment ton for the Port as a whole See PRMSA op br at

412 165 Ex 41 PRMSA does not object to paying its fair share

under the tonnage portion of its proposed formula for the costs of GAI

related benefits stemming from the original institution of containerization

so many years ago for which ILA bargained for a compensating GAI

program It does object however to having to pay for someone else s

greater need for terminal type non vessel loading or unloading labor such

as handling empties or stuffing and stripping which pay absolutely nothing

under the current formula which PRMSA is perforce paying under the

current tonnage formula PRMSA and Dr Silberman readily acknowledge

that the industry wide GAI program is properly funded by tonnage assess

ments because such assessments properly attribute the greater responsibility

to those carriers who have benefited the most form the institution of

containerization However extending the tonnage assessment beyond Type

II industry wide costs to Type I direct costs resulting from currently em

ployed men penalizes more efficient carriers in areas in which the costs

are properly those of the hiring employer as much are those of wages

for example By taxing away any internal improvements in ef ciencies

in non vessel loading unloading activities PRMSA correctly argues in my

opinion that the tonnage tax discourages such improvements to the ultimare

detriment of the shipping public 39

The Argument That All Costs and Labor Are Industry Wide

At this point however it would be helpful to discuss an NYSA defense

which Hearing Counsel readily accepts but which I find unconvincing

namely that ILA men are industry employees and that all fringe benefits

should accordingly be funded by tons on an industry wide basis This

is another way of saying that costs of currently employed ILA men Type

I

are no different from costs of inen displaced by containerization Type

II or that once any carrier has containerized it is forever reasonable

for any change in its operations which reduces hours of labor employed

For example suppose a carrier operating its terminal discovered a

means

to protect containers or its facilities from wear and tear and consequently

used fewer hours of labor for maintenance Under the NYSA theory such

carrier should pay under a tonnage formula because it has reduced the

need for labor in the exact same way that it reduced its needs for labor

years ago by loading and unloading its vessels in containers for which

latter reduction in labor the containerized carrier has long ago agreed

to fund a GAI program

39As discussed earlier furthermore even Mr Sclaz NYSA sexpert witness when testifying on the West

Coast against shifting to atonnage assessment argued ihat such a shift resulted in potential overkill and

caused more productive operators to subsidize less productive operators See quotations from Ex 48 cited

in PRMSA op br at 7P1

27FMC
SZ FEDERAL MARITIME COMMISSION

According to NYSA srespected witness Mr ONeill however ILA

men should be considered to be industry men because they work for a

variety of employers and shift among industry members as needed Ex

30 at 39 Furthermore since ILA men accrue fringe benefits by working

700 hours or obtaining equivalent GAI credit hours they work for the

entire industry and all their fringe benefits aze industry wide benefits If

this were really the case then why doesn tthe industry pay each longshore

men s direct wages currently 15 per hour straight time on a tonnage

basis regardless of how few hours of labor any direct employer utilizes

No carrier has suggested such nonsense However the extension of direct

wages ie Type I costs which are either substitutes for wages vacations

holidays health welfaze or deferred compensation for current employees

pensions it is now argued by NYSA with the apparent agreement of

Heazing Counsel are industry wide obligations to be funded not by the

hours each man is employed but by tons carried by containerized carriers

regazdless of hours of work utilized by each carrier Furthermore as PRMSA

contends if a canier charters a ship on a short term basis or uses a

towing service dces the carrier using the short term ship or towing service

pay the ship or tug on the basis of the hiring carrier stons carried ie

is the chartered ship or towing service also to be considered as

ships for which everyone must contribute even if having little or

industry s

no use

for the chartered ship or towing service PRMSA op br at 64 Finally

as MrONeill points out the ILA man is an industry man because he

becomes eligible after working 700 hours for more than one employer

However because an employee qualifies under an accepted professional

rule why dces this mean that the entire profession must pool its revenue

or volume of sales to pay the professional regazdless of whom he works

for In other words if a college professor earns his degrees by studying

and teaching at various colleges when he nally lands at one university

do all the colleges and universities pool their eatnings and pay his fringe

benefits In short the rules for eligibility are not necessarily relevant to

the rules for determining how to apportion responsibility for labor costs

The Formula sFavoritism to Certain Carriers

As noted above PRMSA attacks the unfairness of the current tonnage

formula as it affects carriers within the containerized sector not merely

because the tonnage formula shifts costs unduly and penalized containerized

carriers who manage to effectuate internal non vessel loading unloading

economies More specifically PRMSA attacks two categories of special

privilege under the current formula The formula category relates to domestic

cargces rehandled and transshipped cazgces for which the current formula

grants excepted treatment ie they are excepted from any payment

under the tonnage formula but pay under a much lower man hour rate

cunently50per man hour

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7S3

NEW YORK SHIPPING ASSOCIATION ET AL

The second category of special privilege relates to handling of empty

containers stuffing and stripping and maintenance for which carriers pay

absolutely nothing toward fringe benefits not under the man hour basis

nor

evidence

under

shows

the tonnage

that the

formula

domestic

in other

and

words a total free ride PRMSA s

transshipped activity is substantial

and receives substantial monetary subsidies which are cast onto all other

containerized operators and to a lesser extent so do the carriers positioning

empty containers and engaging in stuf ng and stripping activities at their

terminals received subsidies The facts in support of these contentions are

rather amazing

Much as I would have preferred refraining from disclosing identities

and data pertaining to any individual carrier s

operations I find that the

following facts would obviously disclose the identity of the carriers involved

and furthermore since the number of carriers enjoying the enormous privi

leges aze only three as soon as I described the nature of their operations

anyone would quickly understand who they were I mention however

that these special privileges and benefits at least for the domestic services

were granted long ago in Agreement NoT2336 cited above at a time

when these services had not ripened into the substantial operations they

are today and no one had focused on them Domestic trades ie within

the Continental United States were considered to be mazginal because

of inland competition and it was feared that assessing them under the

normal tonnage formula would jeopardize their continued movement through

New York However in 1984 the facts are now in the record to see

and they show that conditions have changed considerably so that continued

favoritism for such services cannot withstand scrutiny I do not blame

NYSA or anyone

for the many years of favoritism shown to these operations

and to the few carriers since it was thought that these domestic operations

should be handled with special care However as PRMSA has now shown

it appears that three carriers enjoyed a benefit of some 20 million in

19823 which of needs has to be passed onto other containerized carriers

and that PRMSA picked up over 3

million in additional payments to

make up for these privileges enjoyed by the few carriers involved

First as to the transshipped or rehandled cargces the record shows

that only three carriers participated in these operations and enjoyed the

substantial savings in assessments by being excepted from the tonnage

assessment The three carriers are Sea Land Service Inc United States

Lines and the McAllister barge service These three moved approximately

84000 transshipped or rehandled containers in 19823Sea Land moved

57 percent USLmoved 23 percent and McAllister 20 percent PRMSA

reported no such containers and only 784excepted man hours of all kinds

PRMSA op br at 73 All together they paid less than 306889 to

the fringe benefit funds in 19823 which gure is the total man

hour assessment raised from all excepted cargoes PRMSA op br 74

citing Ex 41 at 31 These 84000 containers granted excepted treatment

27FMC
74 FEDERAL MARITIIV COMMISSION

ie free from the tonnage assessment but not the man hour assessment

comprised 12 percent of the containers which were subject to the tonnage

assessments in 19823 Ex 46 at 13 To ohtain some idea of how

much a savings it was to Sea Land and USLnot to have to pay under

the tonnage assessment and why PRMSA is upset consider how much

per container the two carriers paid in 19823 under this favored treat

ment Dividing total payments by containers Sea Land paid an average

of 23 per container For USLthe figure is 1305per container See

container and payment data set forth in PRMSA op br at 734 and

record citations to the data What dces the reader then think was the

reaction of PRM3A which in 19823 paid an average of 272 per

container 16 million divided by 59142 containers PRMSA op br

at 166 and record citations therein PRMSA noted that the burdens allocated

to the containerized carriers were in this instance somewhat uneven PRMSA

further points out that had Sea Land and USLpaid under the tonnage

formula Sea Land would have paid something like 113million instead

of 1 millionUSLwould have paid 46million instead of 252995

which it actually paid PRMSA op br at 74 and footnotes showing how

these estimated figures were derived note that the 820 per ton figure

is an average between 750 and 890to account for the mid yearincrease

in the assessment rate Thus PRMSA notes that Sea Land and USL

did not have to pay some 14 million being excepted from the tonnage

formula and that furthermore as also in the case of domestic cazgces

USLdces not actually pay under the 50per man hour rate but under

a formula which approximates that rate Under Dr Silberman salternadve

formula which would reduce the tonnage rate of assessment from 890

per ton to 590 per ton PRMSA states that Sea Land would have had

to pay 83 million more for its transshipment operations andUSL35

million PRMSA states that these figures show the degree to which Sea

Land and USLhave been favored in their transshipment operations

The third carrier enjoying a special privilege is a non member of NYSA

the McAllister barge service which operates barges between New York

and Boston Providence PRMSA shows that this carrier lives off the excep

don granted to it by NYSA IIAand also urges removal of this special

treatment As I discuss later however I can distinguish between McAllister

and Sea Land USand find offsetting considerations which in my opin

ion warrant continuation of the special treatment for the bazge service

The Justification for Special Treatment

PRMSA contends that every containerized carrier obtained more or less

the same benefits from containerization and should therefore share the

cost burdens of funding the compensating labor benefits GAI equally

absent compelling reasons justifying special treatment Hence PRMSA ar

gues that the Sea Land relay operadons and the USLrehandling or trans

shipment operadons have been granted extraordinary favoritism without jus

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V JSS

NEW YORK SHIPPING ASSOCIATION ET AL

tification Furthermore not only did those carriers enjoy huge monetary

benefits under the excepted basis PRMSA sevidence shows that they

did not even pay their own direct Type I costs in 19823 which

according to Dr Silberman would have required them to pay at least

635per man hour instead of the 50provided in the formula Therefore

other carriers must have contributed toward Sea Land sandUSLs

direct

Type I costs PRMSA op br at 76 No one supports the idea that

some other party should pay a part of a first pazty s direct costs or the

costs of fringe benefits associated with the labor that the first party employs

Mr Scioscia of USL

agreed with such principle as PRMSA notes

PRMSA op br at 76 n 41 citing Tr 808 What then is the justification

for such favoritism

Sea LandUSLand McAllister offer evidence in defense of their spe

cial treatment to the effect that without such treatment they might leave

New York and thereby aggravate the fringe benefit cost situation by remov

ing work opportunities from the Port Acarefully examination of the Sea

Land and USLdefenses shows that such developments are unlikely

Sea Land switness Mr Sutherland testified candidly in the interests

of his company He had submitted written testimony stating that Sea Land

would be forced to seriously consider discontinuing its relay operations

in New York if a tonnage assessment were to be imposed Ex 30 his

testimony at 2

Mr Sutherland as PRMSA points out never stated that

it would discontinue the relay operation only that it would seriously

consider doing so PRMSA op br at 812However Mr Sutherland

testified that Sea Land would also consider a new relay system even if

the assessment were raised from 50 to 55 per man hour Tr 725

726 However Sea Land has such a well established relay system which

depends upon the present use of ports and terminals in a certain configura

tion that a shift of relay operations from New York would require major

modifications in Sea Land soperations Such modifications do not appear

likely to occur merely because Sea Land would have to pay 600 or

so per ton in assessments at New York

The facts show that because of the way Sea Land operates its European

and Central American Caribbean services and the way it calls at ports

in its various services with its oceangoing ships there is no port north

of Florida at which Sea Land could interchange cargces between any Euro

pean and Central American Caribbean service other than the Port of New

York and to avoid New York Sea Land would have to make significant

changes in its vessel deployment PRMSA op br at 823citing numerous

record references This is shown by detailed operational facts about Sea

Land s

present services which facts show that only the Port of New York

through Elizabeth New Jersey and Portsmouth Virginia are served with

its line haul vessels in the North Atlantic which call at certain South

Atlantic ports down to Jacksonville Sea Land operates two European serv

ices out of Elizabeth as well as its service to Puerto Rico and calls

27FMC
75 FEDERAL MARITIME COMMISSION

at certain South Atlantic ports for one service or the other PRMSA op

br at 823 and numerous record citations to Mr Sutherland stestimony

To operate these vazious services Sea Land uses Elizabeth as by faz its

major calling port utilizing vessels with far more capacity than those calling

at Portsmouth which originate relatively little cargo Furthermore its feeder

services between Baltimore Boston and New York do not stop at Ports

mouth because they must connect with the three oceangoing vessels which

serve Elizabeth Sea Land has an exclusive useterminal facility in Elizabeth

with space

and capacity which dwarfs Portsmouth and Sea Land advertises

its Elizabeth facility as one of its worldideprincipal terminal facilities

in its stock offering prospectus To leave New York would require Sea

Land to make major modifications in order to carry on its two European

services as well as its Central American Caribbean service which the facili

ties at Elizabeth aze capable of handling Such a change would require

Sea Land to obtain new facilities other than Portsmouth and a substandal

rearrangement of its line haul oceangoing ships and some way to maintain

its connections for its Boston or Baltimore relay service There is further

more no testimony given by Sea Land that particular cargces handled in

the relay services would be lost to Sea Land if Sea Land had to pick

up its 6 per ton or so share ofGAI relatedcosts at New York

As I mentioned eazlier in this decision the Commission is entitled to

make certain common sense inferences from the facts even if there is

no concrete evidence as to what might happen The common senseinference

here is that it is not very likely that Sea Land would abandon or substan

tially reduce its use of its vast Elizabeth facilities merely because of a

tonnage assessment 1fie preponderance of the evidence in other words

indicates that Sea Land would remain in New York and attempt to maintain

its present configuration relays and service patterns to the fullest extent

possible As I mention later however the assessment agreement maintains

a Contract Board to hear requests regarding particular hardship commodities

Although there is no evidence of any such commodity that needs special

treatment to continue under the Sea Land relay system via New York

the mechanism is there

As to United States Lines there is no credible evidence from which

I can infer that if USLpays its share of industry wide obligations at

New York under Dr Silberman sreduced tonnage assessment formula

it would cause a significant change inUSLsoperations from New York

The USLwimess Mr Scioscia appeazs not to have understood accurately

the impact of the Silberman formula which would have added approximately

35 million in contribudons in 1982 83not 145million which he be

lieved PRMSA op br at 856 and record citations therein On cross

examination Mr Scioscia who isUSLsExecutive Vice President Pacific

Service appeared not to be too familiar with USLsEast Coast feeder

services and knew virtually nothing about possible plans to redeploy USL

vessels in its feeder services which plans are formulated at a higher com

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7S7

NEW YORK SHIPPING ASSOCIATION ET AL

pany level PRMSA op br at 87 and record citations therein USL

is in the process of implementing a new eastbound round the worldservice

with 12 new huge ECON vessels which will call at only Savannah and

New York On cross examination Mr Scioscia acknowledged that the use

of New York by the ECON vessels was not threatened by proposed assess

ment adjustments Tr 7923 797 cited by PRMSA op br at 88

USLhas also changed some of its transshipment operations as a result

of its new ECON service and has changed other operations for reasons

unrelated to this proceeding USLalso has transshipment operations be

tween Europe and South America and Africa which are unlikely to be

changed since New York is the only port at which the relevant services

cross Evidence of record also strongly indicates that USLwould not

leave New York for Savannah and transship using the new ECON class

ships at Savannah because of inland drayage costs and disruption to ship

ment schedules Therefore any significant change in the USLtrans

shipment operations appeazs to be unlikely even if USL were called

upon to pay its share of assessments under Dr Silberman sman hour

tonnage formula However as PRMSA notes even if twohirds ofUSLs

transshipped or rehandled containers left New York as a

result of the

Silberman formula the net result would be that the USLcontribution

would be over one and onehalf times the increase in GAI caused by

the lost hours PRMSA op br at 90 The appeal mechanism as to any

particulaz hardship commodity would still remain as mentioned eazlier

although there is no evidence that any particular commodity moving via

aUSLtransshipment service would be lost to New York ifUSLwere

to pay its share under the Silberman formula

The other type of cargoes granted favoritism under the current formula

by which they are assessed only under the man hour basis and are ex

cepted from the normal tonnage assessment is domestic cargces meaning

cargces moving between ports within the continental United States thereby

excluding Puerto Rico This domestic exception was one of the original

exceptions in the previous mixed man hour tonnage formula approved by

the Commission in Agreement NoT2336 cited above in 1970 which

formula was abandoned in favor of the full tonnage basis with the various

special assessments discussed which formula is currently in use

Whatever was believed about the relative size of the domestic trades

in 1970 the record here shows that it is substantial In contract year

19823 20056 containers moved through New York in the domestic

trade of which almost all were moved by USL19500 It is estimated

that the number of tons in this trade carried by USL was over half

a million in the contract yeaz

Under the man hour excepted rate of

the current formula USLwhich paid under a formula which approximated

the 50per man hour rate USLcontributed 195000to the total pack

age of labor fringe benefit obligations iean average of 10 per container

This is contrasted with PRMSA scontribution of 272 per container on

27FMC
S FEDERAL MARITIME COMMISSION

the average As mentioned earlier according to Dr Silberman payments

at 50per man hour do not even meet costs of fringe benefits associated

with cunent utilization of labor ie Type I costs must less make any

contribudon toward the industry wide GAI type costs caused by displace

ment of labor by containerization Thus as PRMSA azgues the formula

requires other carriers to pay for a share of USLsdirect type labor

costs and for USLsshare of funding the industry wide costs as well

PRMSA op br at 100 citing Ex 41 and 32 PRMSA esdmates that

USLwould have had to pay 46 million under the regular tonnage

formula in 19823 PRMSA op br at 100 Under the Silberman

formula this would have been about 3 million PRMSA op br at

86 n 47

This special treatment granted USLsdomestic cargoes is defended

by NYSA and USLin several ways The obvious first defense is that

the cargces are subject to diversion via inland carriers truck or rail

USLalso defends against having to pay under the tonnage formula because

of the nancial impact on the service However there is considerable

examination of these defenses on the record and they do not emerge

intact after such examination The original written testimony of the USL

wimess seemed rather ominous indicating a serious possibility that USL

might abandon New York or otherwise curtail its domestic service if asked

to pay the tonnage assessment rate On cross examination however many

of these omens evaporated and the evidence failed to show that the USL

domestic service was instituted in reliance on the excepted treatment

at New York or that USLwould delete New York as a port of call

with its new ECON vessels or that is might abandon its all water Faz

East service PRMSA op br at 1012 and record citations therein

As PRMSA notes what was left were allegations that USLmight cease

moving intercoastal cargoes might reduce its Faz East service or might

divert New York intercoastal cargo to Baltimore However there is evidence

which significantly undermines these allegations This evidence is described

in detail in PRMSA s

op br at 10311 with ample citations to the

record The main points are as follows

USL

operates its intercoastal service as part of its larger all water

service between the Faz East and the East Coast and that service is operat

ing at full capacity throughout the yeaz Indeed during peak seasons USL

has been unable to satisfy the demand for eastbound intercoastal space

and has even had to turn away business offered by canned goods shippers

Tlus proceeding involves the lawfulness of the cucrent assessment formula and how it should be modified

if shown to be unfair and discriminatory It appears however that for practical reasoas related to difficulty

in detertnining some man hours spent in cepositioning containers USLpays under a fortnula which is not

quite the same thing as the 50 per man hour rata For its domestic trade the formula works out to an

average of500per ton for its overall excepted services ietransshipped as well as domestic the aver

age worked out to something lower See PRMSA op br at 77 and 101 n56 and record citations shown

PRMSA calls the use of theUSLformula aspecial bonus or afavoritism piled on top of a favor

itism d

27FMC
THE PORT AUTHORITY OF I1EW YORK AND NEW JERSEY V 7S9

NEW YORK SHIPPING ASSOCIATION ET AL

USLsnew ECON vessels will supplement the Far East service and

when the first ECON vessel arrived in New York in late July 1984 it

was entirely filled so that the USLchairman and president was reported

to have stated that more cargo could not have been placed aboard the

ship even with the shcehorn To prepare for its new ECON vessels in

New York USL

has invested in extensive terminal improvements The

USLwitness acknowledged that the Far East ECON service would not

be threatened by assessment adjustments at New York Tr 389 93797

It was also acknowledged that even if most of the domestic containers

carried during the 19823 contract year by USLas part of its east

bound Far East service became unavailable it would be reasonable to

expect that USLcould replace those cargces with additional cazgces from

the Faz East Further evidence indicates that the domestic cargces are essen

tially an incremental byproduct of the USLFar East service There

is conflicting testimony about how much volume such cazgoes comprise

compared to the total carried in the Far East vessels However there

is no conflict that revenue per container for the intercoastal cargoes is

much lower than that for the Far East to West or East Coasts The

exact figures are confidential but can be seen in the confidential portion

of the record Examination of estimated revenues earned on the various

trades strongly indicates that the USLdomestic service as PRMSA calls

it as far as revenue is concerned represents the tail and not the dog

which wags itPRMSA op br at 107

What the above seems to indicate is that USLs Far East vessels

would make their sailings under any circumstance and that the domestic

intercoastal cargoes are what is known as incremental or added traffic

In rate case parlance incremental traffic is often priced below fully distrib

uted costs the theory being that if such cazgo meets direct handling costs

and contributes to indirect overhead type costs it is worth carrying If

so then rates could be lowered to meet possible inland competition so

long as they still met the direct type costs of handling the cargo Ex

41 at 37 There is no reliable evidence showing that inland competition

would require USLto reduce its domestic rates below direct costs if

USLbecame subject to the tonnage assessment at New York A somewhat

questionable cost study on a per container profitability basis using fully

allocated rather than marginal costs was done by USLbut was not even

introduced by USLIt has so many flaws and misunderstandings of the

Silbertnan formula that I cannot rely on it These flaws are detailed in

PRMSA sop br at 10810

There is other evidence furthermore which seriously underminesUSLs

allegations This evidence shows that at least for one major customer

USLalready employs incremental pricing per container and that USL

has increased its domestic rates at least once recently which rate increase

its shippers appazently absorbed Ex 58 Tr 81Cr817 81820 Ex 60

Moreover there is evidence that certain domestic shippers ofUSLprefer

27FMC
7O FEDERAL MARITIME COMMISSION

the USLservice over that of iland carriers because the water service

offers greater security from pilferage and breakage This would tend to

shield USLfrom inland rate competidon Diversion to Saltimore see ns

unlikely since USLsvessels already call at Bal inare yet foreign cargces

continue to New York on these vessels and pay the full tonnage assessment

This indicates that it is still eheaper to carry to New York on those

cazgoes than to discharge at Balt more and pay inland drayage from Balti

moreFrthermore major receivers ofUSLsdomestic eargces are located

in the New York city azea It is estimated that under the Silberman formula

USLwould typically pay 183 80per container at New York whereas

drayage from Baltimore would approximate 400 per container Finally

even if applicatian of the Silberman tonnage fort ula were to occur and

75 percent ofUSLsdomestic containers ceased to move through New

York PRMSA esdmates that there would still bea net increase in contribu

tion to the NYSA ILAfringe bene tprogram som thing close to twice

the increase in GAI that would occur PRMSA op br at 1112

Comparison With PRMSA sEvidence of Diversion

The above discussion dces however indicate an interesting pazadox

The emphasis of this case is on the current tannage formula and how

it affects the Fort of New York and PR1t ISA whether it fairly allocates

cost burdens etc NYSA and the ILA aze properly concemed over the

loss of cargo to other ports as the record indicates and indeed the

joint NYSA ILA Contract Boazd is charged with the duty of protecting

marginal cargces from diversion to other ports However when Sea Land

and USLargue that they might divert to other ports or would seriously

consider doing so if they lost their speeial expected treatment for trans

shipped rehandled or domestic cargoes NYSA defends them and will

not alter its current formula However when PRMSA presents a virtual

smoking gun showing diversion ifact to a non ILA cazrier operating

out of the Philadelphia area complete with names and locations of shippers

even in New York sbackyard NYSA rejec sthe evidence and nds all

sorts of reasons not to believe that its tonnage formula has anything to

do with the diversion Thus PRMSA has shown a list of 40 shippers

from New York sbackyard who have switched their business wholly or

partly to the non ILA carrier in Pennsauken New Jersey PRMSA op

br at 94 citing Ex 45 at Ex BC4Even NY3A switness Mr Sclaz

who defined diversion to an extremely narrow degree admitted that

cazgo to and from Brooklyn which moved via a port other than New

York would be diverted cazgo But PRMSA showed four examples

of shippers located in Brooklyn who switched from PRMSA to the carrier

in Pennsauken New Jersey which is in the Philadelphia azea PRMSA

op br at 95 n 52 and record citations therein

PRMSA scase as I have discussed is based on the gross dispazity

in burdens among carriers which resutt from the current tonnage formula

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7E1

NEW YORK SHIPPING ASSOCIATION ET AL

and not essentially on diversion of cargo The Port Authority scase on

the other hand is based primarily on loss of cargo to other ports caused

by the competitive handicap ofa2003 per container differential at

New York resulting from the current formula There are other reasons

why shippers might choose different carriers and it is not possible to

show that every ton of cargo that moves via one carrier rather than another

dces so solely because of the tonnage formula However PRMSA sevidence

of the diversion of business to Pennsauken comes as close to asmoking

gun as one could expect in proceedings like this 41 Certainly it is more

probable than not that the current formula is significantly responsible albeit

not perhaps solely responsible for PRMSA sloss of business to the non

ILA carrier Yet NYSA slast answer to this evidence is to tell PRMSA

to go sue the other carrier See NYSA r br at 15

The Exemptions for Empty Containers Stu ng and Stripping and

Maintenance Activities

The other major category of special treatment under the current formula

relates to three activities namely the handling of empty containers the

stuffing and stripping of cargo into and out of containers and maintenance

activities Unlike the previous category which paid under the excepted

man hour basis these three activities pay absolutely nothing under the

current formula ie under either the excepted man hour basis or the

normal tonnage rate Thus all other carriers paying under the current for

mula must pick up not only the share these activities would pay toward

the industry wide Type II obligations but the currently employed Type

I costs as well in their totality Such a free ride it would seem warrants

compelling justification Yet except for the maintenance activity there

is little or none Indeed as noted earlier even NYSA sMr Barbera

a terminal operator questioned why empty containers and LCL cargoes

paid nothing under the correct formula Furthermore in the case of stuffing

and stripping NYSA cannot rely upon the defense of possible loss of

this activity if it pays something under the formula because the activity

is mandated by the 50mile Rules on Containers which are in effect albeit

under challenge in a separate Commission proceeding Docket No 81

11

For the handling of empty containers and for stuffing and stripping

PRMSA is asking only that they pay under the excepted man hour

basis but under Dr Silberman scalculations so that they would at least

meet their own direct costs of funding fringe benefits of cunently employed

longshoremen PRMSA would retain the total exemption for maintenance

activities because of the substantial likelihood that any payment for that

41 For a complete discussion of the evidence showing the connection with the ronnage formula and the

diversion to Pennsauken see PRMSA op br at99 and record citations therein 1123 I find that

PRMSA has made out a case of diversion and that the toruage formula is a strong contributing factor

27FMC
72 FEDERAL MARITIME COMMISSION

activity would lead to utilization of non ILA deep sea labor and con

sequently aggravate the funding situation

According to data obtained by PRMSA there were 28347 empty con

tainers which moved through New York during contract year 19823

PRMSA op br at 113 and record citations therein They according

to those data accounted for 26 percent of the total number of containers

which moved through the port during that time The presence of so many

empty

case in

containers

which the

is explainable

Port Authority

when

by

one

the

considers

way also

the

urges

Port Authority s

an end to

these speeial privileges without worrying that such treatment may divert

cazgoes from the Port The problem seems to be to some extent that

a minibridge carrier moves loaded containers from the Far East through

West Coast ports dischazges the cargo somewhere inland then moves

the empty containers to New York to be loaded onto what could be the

same ships for subsequent carriage back to the Faz East Evidently the

Faz East trade is imbalanced with not enough cargo to fill all the containers

returning to the Far East Freeing such empties from any assessment obvi

ously encourages any such carrier to position its containers in such a

way as to move the empties through New York rather than through any

other USport which would require a payment under aman hour formula

But as PRMSA notes handling these empty containers requires ILA labor

and results in costs to fund the fringe benefits attributable to every hour

of labor hired to handle the empdes Therefore PRMSA argues why should

everyone else pay for the peculiarities of an imbalanced trade and for

a carrier sdirect Type I costs I see no evidence justifying this free

ride and agree with PRMSA and Dr Silberman that it should be terminated

Stuf ng and stripping activities are rather substantial Approximately

139784 man hours were utilized for stuffing and stripping in contract

year 19823 about 9 percent of total man hours PRMSA op br

at 115 and record citations therein The activity also accrues fringe benefit

costs for every man hour utilized It is estimated by Dr Silberman that

these direct costs amounted to over72 million all of which was thrown

onto the backs of the other carriers paying under the tonnage formula

Furthermore as PRMSA azgues it dces no good for a carrier to reduce

the need to stuff and svip at the terminal because under the tonnage

formula such carrier pays according to the volume of tons loaded or

unloaded on vessels and furthermore those carriers doing more stuffing

and stripping enjoy a subsidy from those doing less PRMSA op br

at 116

The justificadons offered by NYSA for this free ride are the oginions

of Mr Sclar which Ifind to be inscrutable and consistent with my earlier

observations that I can give that witness sopinions little weight As PRMSA

notes PRMSA op br at 1167 Mr Sclar states that the labor costs

associated with the stuffing and stripping are covered by the current formula

So are all fringe bene tcosts but that dces not answer the question as

Fntr
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 763

NEW YORK SHIPPING ASSOCIATION ET AL

to why should the free ride on the activity cause everyone else to pay

for it Mr Sclar then suggests that making this activity pay even under

the lower man hour basis would not be justified because the hours of

labor spent on the activity benefit the whole port by reducing GAI costs

So they do but they would continue to do that unless the activity would

cease as a result of having to pay the lower man hour rate There is

however not only no evidence that paying such a rate would terminate

such activity but as I noted earlier the activity will continue anyway

because it is required under the Rules on Containers I

therefore see no

valid reason to continue the free ride on stuffing and stripping and agree

with PRMSA and the Port Authority and probably NYSA s own Mr

Barbera that the free ride should come to an end

As to maintenance activities PRMSA was faced with a dilemma as

to the position to take Like stuffing and stripping this activity comprised

slightly over 1 million man hours in 19823 approximately 9 percent

of total man hours at the Port during that time PRMSA op br at 117

citing Ex 41 This activity also resulted in direct Type I

fringe benefit

costs amounting to approximately 69million in 19823 under Dr

Silberman scalculations This free ride would require all other carriers

to pick up these costs Since PRMSA does not use ILA deep sea labor

for maintenance it would not hann PRMSA to argue that the other carriers

using ILA deep sea labor for maintenance work should pay under the

man hour rate However here as in other examples of a

statesmanlike

position PRMSA and Dr Silberman recognize the obvious fact that with

the immediate presence in New York of a different labor force not under

the ILA deep sea contract every carrier or terminal operator would shift

to the other labor force ILA Metro which is readily available at

New York and that this shift would increase GAI costs This is what

PRMSA calls overriding considerations which justify departing from the

general rule PRMSA op br at 1189 The same alternative labor

force it should be noted is not available for stuffing and stripping which

require ILA deep sea labor Therefore even though continuing the free

ride means that PRMSA stonnage assessment increases like everyone else s

PRMSA and Dr Silberman would leave it untouched 42As I have noted

PRMSA and Dr Silberman also take this statesmanlike position for the

good of the Port in another area namely by placing a cap on the contribu

tion which breakbulk cargoes should pay at New York in order to preserve

the intensive use of labor by such breakbulk operators and thereby help

maintain hours of labor at the Port to the benefit of all even though

such a

cap places a burden on other carriers paying under the normal

tonnage rate PRMSA op

br at 19922

ZThe Port Authority swimess Mr Donovan would however assess maintenance under the man hour

portion of his proposed formula Ex 31

27FMC
764 FEDERAL MARITIME COMMISSION

The McAllister Barge Exception

The other carrier of the rst type which receives favored treatment under

the cunent formula ie transshipped rehandled domestic is McAllister

Brothers Inc which operates barges between New York and Boston Provi

dence The favored treatment which McAllister receives is that it is assessed

under the man hour excepted rate of 50 per man hour which is

what Sea Land paid and what USLapproximately paid under its own

calculations Thus McAllister enjoys no free ride as do the empty contain

ers stuffing and stripping and maintenance activities just discussed How

ever at 50per man hour other containerized carriers pay for its share

of the GAI related costs and some of McAllister sown direct Type I

costs under Dr Silberman scalculadons PRMSA urges that the special

treatment for McAllister terminate and that McAllister pay the normal ton

nage assessment under the reduced Silberman rate PRMSA op br at

7781

PRMSA concedes that the impact on McAllister of removing its excepted

treatment would be substantial PRMSA op br at 78 However

PRMSA argues that the McAllister bazge service is entirely a creature

of this excepted treatment and exists solely because of the exception

and its ability to avoid the tonnage assessment completely Thus PRMSA

and all other carriers paying under the tonnage assessment are beazing

the

witness

cost

freely

of keeping

acknowledged

this bazge

that

service

if the

alive

formula

Mr

is

Mullally

changed

McAllister s

to require

McAllister to pay the tonnage assessment all of the Boston Providence

container traffic would be diverted to competing truck transport Ex

30 his testimony at 4

McAllister transported more than 17400 containers between New York

and Boston Providence during 19823 Id at 3 Mr Mullally estimates

at least 10069 man hours he employs at New York that would be lost

if his business at New York terminates Ex 36 his surrebuttal testimony

at 3 Almost half 475 percent of all the containers handled at Boston

in 1983 were transshipped via New York and Massport strongly urges

protection and special treatment for this operation See Port Authority

op br at 601 and record citations also Massport sop br Indeed

Massport actively advertises and enourages carriers serving New York

to avoid the NYSA tonnage assessment by shifting from wck to barge

Ex 44 at Ex FP1

PRMSA argues that even if man hours on the barges were lost they

would be made up to some extent by truck related man hours as Mr

Mullally himself conceded PRMSA presents the azgument that even if

those hours are lost by McAllister if 20000 containers would still move

to or from Boston via wck that would produce over 34 million in

contributions to the fringe benefit funds which would faz offset the increase

in GAI PRMSA op br at 80

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 765

NEW YORK SHIPPING ASSOCIATION ET AL

Although PRMSA is willing to forego any assessment on maintenance

activities for the good of the Port and recommends placing acap on

assessments of breakbulk cargces also for the general good of the Port

although this means that the containerized carriers as a whole must pick

up someone else s shares in the case of maintenance some 69million

PRMSA objects to having the industry subsidize the bazge service Although

PRMSA sevidence and logic is for the most part appealing I cannot

find under a standard of fairness and unjust discrimination that killing

McAllister is the right thing to do

The death of McAllister sservice at New York may to some extent

or other be made up by truck related service and the Port of New York

may thereby not suffer a net loss if the barge service terminates The

possibility of McAllister srelocating to Halifax was suggested by Mr Sclar

but Mr Mullally whose business it is testi ed to no such thing It

seems to me that we are not merely talking about the survival of the

McAllister company or service but the interests of the Port of Boston

and Providence and possibly shippers as well The MLAA asks the Commis

sion to protect the interests of carriers shippers or ports Shifting

McAllister from the man hour payments to the tonnage payments under

the formula would admittedly have a lethal effect on McAllister since

the containers would move more cheaply by truck to and from Boston

Thus we would wave goodbye to the carrier McAllister Second since

475

percent of the Boston containers handled by longshoremen at Boston

are transshipped via New York the death of McAllister sservice and

consequent shift to trucks would eliminate substantial work for the Boston

longshoremen Therefore another port suffers Third though there is no

shipper testimony the routing via barge through New York offers Boston

area shippers an alternative service which would disappear Therefore ship

pers would lose something True one can argue as may PRMSA that

private industry at New York which has its own costs and problems

ought not to be called upon to subsidize McAllister or the Port of Boston

and there is no evidence on this record that any New England shippers

are asking for a choice between truck and water service through Boston

However McAllister is not Sea Land norUSLbut a single operation

carrier Furthermore if McAllister pays under the man hour segment of

Dr Silberman sproposed formula at least no other carrier would have

to pick up any share of McAllister sdirect Type I costs

I would call the decision to save McAllister one reached on the basis

of what PRMSA calls overriding considerations which justify departing

from the general rule which PRMSA cited in support of its recommenda

tion that the industry carry some 69 million to subsidize direct Type

I costs of maintenance labor In trying to make the current formula more

equitable among carriers and eliminate unjustified special treatment and

free rides I do not believe it is also necessary to kill a carrier which

it seems rather obvious from Mr Mullally stestimony would happen at

27FMC
766 FEDERAL MARITIME COMMISSION

New York unless McAllister can pay under the lowerman hour excepted

rate as

Special Discount for the Puerto Rican Trade

After presenting formidable evidence and azguments in support of its

proposed alternative formula which would abandon the current tonnage

formula with virtually all of its special privileges favoritisms and free

rides and would allocate cost burdens more even handedly among the con

tainerized carriers PRMSA requests another feature namely a 25 percent

reduction from the tonnage rate applicable to carriers serving the Puerto

Rican trade To justify such a special discount PRMSA cites undisputed

evidence of the island economic difficulties the fact that it is an American

trade subject to certain inrmities and numerous cases in which the Com

mission has shown concern for the Puerto Rican economy PRMSA op

br at 12240 I find PRMSA sefforts to persuade to be effortful and

do not agree that the 25 percent discount is proper

There is no dispute as to the underdeveloped nature of the Puerto Rican

economy and the evidence in this proceeding illustrates the problems of

that economy rather vividly See PRMSA Op br at 1227 The island

is dependent on maritime trade being over 1000 miles from the neazest

mainland USseaport It is densely populated 3

million people in an

azea of 3459 square miles Its cidzens aze American citizens It has

extremely limited natural resources and must depend upon imports to satisfy

its people s

need for food and other necessities of life Indeed the sum

of the value of the island imports and exports has exceeded its gross

product during each of the last ten yeazs PRMSA was itself established

because of the island need for a reliable economical maritime transpor

tadon system and is required to provide an efficient transportation service

at the lowest possible cost Increases in mazitime transportation costs serve

to raise prices of food and raw materials needed to run Puerto Rico indus

tries

The per capita income of Puerto Rico in 19823 was3900 only

37 percent of the United States average of 10517 and in 1981 was

only about onehalf that of the mainland state with the lowest per capita

income Unemployment for March 1984 was 219percent nearly triple

the 78percent figure for the United States Unemployment benefits provided

by the Puerto Rican government aze minimal and as PRMSA notes aze

43There is a minot complication which accompanies giving McAllister sbarges special treatment for the

cacrier ssake as well as that of Boston Providence or shippers who might wish to retain achoice between

truck service and water service through the Port of Boston or Providence That is that other carriers besides

McAllister might be hendling some of the 475percent of the Boston containers transshipped in New York

Unless these other operations are granted similar treatment there would be an unfair discrimination favoring

McAllister Therefore other transshipment operations competing with McAUister and it dces not appear from

the record that they are substantial would have to be accorded similar treatment Opponents of the McAllister

special treatment will of course anack my decision and cen cite this additional exception as ammunition

However I still do not believe that McAllister Brothers Inc should die or that Masspott s pleas in

McAllister sbehalf should be tumed away

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 767

NEW YORK SHIPPING ASSOCIATION ET AL

far below the GAI benefits provided under the current NYSA ILA labor

contract The Puerto Rican economy suffered setbacks in recent years

ie a recession in 1975 and decrease in federal assistance since 1981

However the Puerto Rican government implements programs seeking to

restore economic growth and it was predicted that such growth would

resume in the 19834 fiscal year Among the programs are the encour

agement of service and high technology industries which require that Puerto

Rico have a satisfactory mazitime transportation network at low costs so

as to make Puerto Rico a center for exports

Puerto Rico is considered to be part of the United States for purposes

of federal shipping laws therefore ships serving the trade must be American

flag and mainly crewed by American citizens These factors result in higher

operating costs Labor costs are also higher than those in foreign trades

the Puerto Rican trade served by the ILA or other American unions at

both ends The current assessment formula furthermore dces not grant

the Puerto Rican trade the excepted treatment granted to domestic inter

coastal trades The impact on PRMSA is signi cant PRMSA pays through

PRMMI close to 300 per loaded container under the current formula

and during the 19823 contract year 13 percent of PRMSA srevenues

from cargo passing through the Port of New York were consumed by

the NYSA assessment It is Dr Silberman s

opinion that the high costs

of this agreement place burdens on essential foodstuffs and on capital

goods needed for Puerto Rican industry

In consideration of all of the above PRMSA s

expert witness Dr Silber

man recommends a 25 percent discount off the normal tonnage rate under

his proposed formula Such a reduction according to Dr Silberman would

have saved PRMSA 28million in contract year 19823 He concedes

however that I

recognize that the 25 percent figure has its basis in

my judgment rather than in a quantitative analysis of the precise discount

required Ex 465 at 28 But he goes on to state that in my judgment

some reduction in assessment beyond that needed to achieve equality among

carriers is required on account of the trade s

special situation Id

As mentioned PRMSA puts forth much case law and argument to the

effect that the Commission has recognized the special needs of the Puerto

Rican economy in past cases and points to the different treatment accorded

the Puerto Rican trade from that granted domestic intercoastal trades under

the subject formula on the purported basis that such trades had been declin

ing and needed protection the situation which PRMSA argues applies pre

cisely to the Puerto Rican trade

Respondents strongly oppose this 25 percent reduction in addition to

opposing the Silberman formula They question why did not PRMSA simply

ask for a discount in the first place instead of creating a new formula

which would affect so many other parties NYSA contends furthermore

that the economic problems of Puerto Rico cannot be attributed to the

Port of New York or any other port Moreover argues NYSA the public

27FMC
7 FEDERAL MARITIME COMMISSION

interest standard has been removed from the MLAA and the special consid

eration given to the Puerto Rican trade by the Commission in the Commis

sion 1970 decision Agreement NoT236ciEed above was designed

only to protect Puerto Rican interests from too abrupt a change over from

the previous man hour formula to tonnage assessments Moreover NYSA

contends it is not shown that any cost break to PRMSA will directly

flow to the consuming public in Puerto Rico considering PRMSA snegative

financial situadon Finally NYSA points out that PRMSA has raised its

freight rates by about 70 percent since February 1981 while the tonnage

assessment rate rose by 52 percent NYSA r br at 2C7 and record

citations therein

I

find that on this particulaz question PRMSA has not tipped the scales

in favor of its proposed 25 percent discount First as is obvious the

figure is a judgment figure based upon the opinion of Dr Silberman who

concedes that reasonable men will differ as to what that discount number

ought to be Ex 46 at 28 But it is not merely that the figure

is not supported by something more objective or concrete than the witnesses

judgment that leads me to conclude that a special discount is not warranted

on this record There aze other factors Thus I note that ifPRMSA succeeds

in this case by obtaining an order modifying the current formula to conform

to Dr Silberman sproposed alternative even without the 25 percent dis

count or the suggested increased assessment on McAllister sbazges PRMSA

stands to benefit substantially Furthermore it is entitled to considerable

credit adjustments for the period between the filing of the complaint and

the Commission sdecision as the MLAA provides In other words one

of the best things that PRMSA can do for the people of Puerto Rico

is to rid itself of the current unfair formula and obtain the monetary

adjustments which will flow from a favorable decision In previous cases

cited by the Commission PRMSA notes that the Commission considered

the needy Puerto Rican economy and exercised some discretion when decid

ing the cases to help that economy In this case the evidence shows

that certain carriers are enjoying unjustified excepted treatment in the

domestic and transshipment azeas and others aze paying nothing for handling

empties and stuf ng and stripping Although PRMSA has shown that all

containerized carriers would bene t

by termination of these unjustified spe

cial privileges the particulaz infirmities which PRMSA shows to exist in

its trades aze factors which indicate that a carrier like PRMSA may well

need the relief more than the others Thus to some extent the economic

problems of Puerto Rico have not been forgotten However there are still

other reasons why I do not believe that a further discount is warranted

PRMSA relies on the previous Commission decision modifying the 1969

1971 assessment agreement in Agreement NoT2336 cited above as well

as on a number of rate cases However as NYSA points out the reasons

for modifying that agreement had to do with the fact that the drastic

shift to a partial tonnage formula resulted in hazsh and sudden cost increases

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V IE9

NEW YORK SHIPPING ASSOCIATION ET AL

It was for that reason as well as for the reason that the Puerto Rican

carriers had not been responsible for certain fringe benefit cost increases

that the Commission relieved the Puerto Rican carriers of certain costs

although admittedly the Commission did consider the state of the Puerto

Rican economy See NYSA vFMC 571 F 2d 1231 1240 DCCir

1978 The Commission sfirst period concessions to the Puerto Rican

interests were based on the need to protect the ocean cargo dependent econ

omy of Puerto Rico from too abrupt a

change over from man hour to

tonnage assessments Agreement No T2336 cited above 15 FMC

at 265 272 aff d7TT vFMC 492 F 2d 617 6278DCCir

1974 In the present case the problem is not to cushion Puerto Rican

carriers from the effects of a sudden increase in costs resulting from a

change overto a new formula but to relieve them from the unequal burdens

caused by an unfair formula Furthermore the MLAA specifically limits

the relief to disapproval or change in the agreement and prospective adjust

ments only has deleted the public interest standard from section 15

as it existed under the previous case and now specifies carriers shippers

and ports as the parties to be protected

Nor do I find that the citations to rate cases are all that helpful to

PRMSA scause True in such cases the Commission reiterated the policy

that ocean rates to Puerto Rico should be maintained at the lowest possible

levels because of the island dependence on maritime trade etc See

cases cited in PRMSA sop br at 1345 and in NYSA rbr at 26

But this is not a rate case and we are not simply dealing with carriers

seeking profits and proper ratemaking principles For example the leading

case cited by PRMSA namely Baltimore O R v United States

345 US 146 1953 is a rate case in which the Supreme Court held

that a carrier could be required to impose rates that were less than fully

compensatory for certain services when such rates would serve the public

interest and when the company as a whole was in a profit position As

mentioned the MLAA no longer contains apublic interest standard

but even if it is still in the statute implicitly in the unjustly discriminatory

and unfair standard under which this case is being decided the NYSA

or the NYSA ILAfund is not quite the same thing as a carrier with

an overall profitable service In fact as this record shows and as the

Commission knows from previous experience with Nl SA in assessment

cases the joint fund from time to time runs a deficit necessitating borrowing

or increases in the assessment rates and the NYSA is a non profit corpora

tion The formula can and should be modi edto remove the unfair burdens

among carriers including the great burden on PRMSA However that is

not the same thing as finding that the NYSA ILAfringe benefit fund

is a profit making carrier that can in the public interest be called upon

to reduce rates to help a depressed economy in the public interest

In other words in this instance I yuestion how far the Commission can

order the NYSA and ILA to become participants in the Puerto Rican

27FMC
O FEDERAL MARITIME COMMISSION

economic recovery programs other than by being ordered to follow a fair

formula and give PRMSA the prospective adjustments to which it is entitled

by law It should be noted furthermore that even in the 1970 decision

relieving the Puerto Rican carriers of responsibility for certain fringe benefit

costs the Commission gave those cazriers no discount from the tonnage

assessment rate for the industry wide frAI obligations In other words

PRMSA wants a discount from the tonnage portion of its proposed formula

which tonnage portion is supposed to fund the GAI type industry wide

obligations However notwithstanding the Commission sconcern for the

Puerto Rican economy it found that the Fuerto RiCan carriers should pay

the tonnage portion at the normal rate for the GAI costs Agreement No

T2336 cited above 15FMCat 27a272 Not onIy that but the Commis

sion after specifically considering the serious ecor cmicproblems affecting

Puerto Rico in that case nevertheless found that the Puerto Rican cazriers

would have to beaz about 45 million more in assessment costs even

under the compromise formula which the Commission had adapted as a

means to relieve the PueRo Rican carriers from abrupt excessive cost

increases 15FMCat 2723 Finally the Commission observed some

what as NYSA dces in this case that the Puerto Rican carriers in that

1970 case had themselves instituted bunker surc iarges and were seeking

rate increases of 18 and 28 percent in other Commission proceedings but

were azguing in those other proceedings that such rate increases would

not hazm the Commonwealth s

economy 15 FMCat 273 In the present

case as NYSA points out PRMSA itself felt the need for more revenue

and therefore increased its rates some 70 pereent compounded since Feb

ruary 1981 compazed to the 52 percent increase in the tonnage assessment

at New York in the same time period NYSA rbr at 2f7 Furthermore

as regazds PRMSA smore recent rate increase in early 1984 135percent

which was under investigation by the ICPRMSA answered a protest

to the increase by stating that The claim that a rate increase will harm

the Puerto Rican economy is a boilerplate argument of the Mfrs Assn

an azgument heazd each time a rate increase is at issue regardless of

the status of the Puerto Rican economy ICSuspension Board Case

No 71131 Reply of PRMSA to Protests January 9 1984 pp 89 Ex

19 Att C pp 1012 In refuting the argument that its rate inereases

would have a detrimental impact on the economy of Puerto Rico PRMSA

further states that the credibility of this argument is doubtful citing

newsletters which failed to mention increased shipping rates as one of

the factors adversely affecting the Puerto Rican economy Ex 19 Att

C p

101 PRMSA went on to state that it would suffer a net loss

even wittr its rate increase but that such increase was necessary to ensure

efficient and high quality shipping service Id at 102

In the present proceeding however PRMSA is arguing that a further

25 percent discount in addition to the oder cost reductions which it would

derive if its proposed formula were adopted is necessary to help the Puerto

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 771

NEW YORK SHIPPING ASSOCIATION ET AL

Rican economy But in this case we aze not talking about PRMSA shaving

to pay new increased costs Rather the question is whether PRMSA should

have received another 28 million in credits if the 25 percent discount

had been in effect rather than only 35million in credits under the Silber

man formula unadjusted without such discount PRMSA op br at 16Cr

167

I therefore conclude that modification of the current formula as Dr

Silberman recommends absent the 25 percent discount and certain other

features discussed above plus the granting of credit adjustments as the

applicable law provides compensates PRMSA fairly but that further relief

in the form of a special 25 percent discount is excessive and untenable

Technical Accounting Disputes

The disputes between NYSA and PRMSA do not relate merely to concep

tual or theoretical differences between the tonnage formula advocated and

currently used by NYSA and the man hour tonnage formula advocated by

PRMSA NYSA appears to understand the theoretical difference between

Type I costs associated with currently employed men and Type II costs

which are industry wide obligations and are related to men not working

because of the advent of containerization Of course NYSA argues that

all costs are Type II and aze industry wide as I have discussed earlier

However even if NYSA were to accept the Silberman type formula NYSA

differs with PRMSA scalculations as to exactly how much of certain

costs should fall under Type I and how much under Type II In each

instance furthermore where there is a disagreement NYSA scalculations

result in a greater amount of the package falling under the Type II category

ie where it would be funded by tons rather than by man hours It would

be tempting to leave much of this technical area to the post decision imple

mentation procedure because it involves to some extent narrow arguments

between specialists in fringe bene taccounting However since the amount

of credits which PRMSA should receive from the filing of its complaint

on February 27 1984 to the date of decision as the MLAA provides

depends upon proper accounting methodology and if the Silberman formula

is adopted future assessments will likewise rely upon these methodologies

04PRMSA also azgues that it has shown an appreciable decline in traffic and diversion to other Adantic

coast ports and that this factor was considered by the Commission in Agreement No T2336 cited above

as a reason to grant domestic trades excepted treatment PRMSA op br az 139J There has indeed been

aserious decline in loaded containers moved through New York by PRMSA from 87715 in fiscal 1979 to

63715 in fiscal 1983 a decline of 274percent Ex 41 at 41 Paz of this decline was caused by recession

in he Puerto Rican economy but part appeazs to reflect the losses to the non IIAcarrier at Pennsauken

Ex 41 at 412The reduction in assessment costs per container resulting from the Silbennan formula from

nearly 300 to under 200 unadjusted by my recommended changes should help PRMSA visathe non

ILAcompetiror as well as the prospective credits However NYSA IIA

Contract Board is supposed to be

concemed about losses of cargo

from New York under the agreement s

terms If this diversion continues

and the Board continues to refuse any relief it is conceivable that PRMSA may be filing another complaint

after the new assessment agreement is filed in 1986

27FMC
772 FEDERAL MARITIME COMMISS ON

some decisions are necessaty prior to the time of implementation under

the post decision procedure outlined later

The nature of the disputes are set forth in some detail in PRMSA s

op br at 14164 to which there is virtually no reply in NYSA sreply

brief They relate to ve azeas The holiday fund vacations welfaze and

clinic pensions and administrative costs45 Although these azeas to some

extent seem highly technical on close examination the arguments are

seen to rest upon determinations as to credibility ieon whom to believe

and on who is the more persuasive As discussed eazlier to a considerable

extent I

find that Dr Silberman who as I mentianed among other things

has earned aBSin Accounting summa cum laude is the more persuasive

and that Mr Sclaz is less so Also certain ot er NYSA witnesses I

found not so responsive or persuasive in certain azeas

Dr Silberman has already allocated 67 percent of the total cost package

to Type II to be funded by tons as compazed to Mr Donovan of the

Port Authority who allocated only certain GAI costs 34 percent of the

total to Type II This by itself rms up Dr Silberman scredibility sinee

it is not in the best interest of a con ainerized and highly productive

carrier like PRMSA to urge more costs to be funded by tons rather than

by

evidence

man hours

and

However there are other reasons why Iind PRMSA s

reasoning to be the more persuasive

First as ta the calculations of holiday payments NYSA apparently dces

not dispute Dr Silberman sconclusion that holiday payments received by

currently employed men fall under Type I whereas such payments received

by GAI reeipients fall under Type II But NYSA contends that Dr Silber

man failed to include some 5 million of holiday payments received by

GAI recipients Dr Silberman did not inlude this amount under Type

II because NYSA sown financial statement which cl arly showec payments

for GAI reeipients for other bene ts shawed no similar payments for

holidays The logical conclusion was that the amount shown by the auditors

for holiday pay did not include holiday pay for GAI but instead holiday

03NYSA and PRMSA have also disagreod about breakbelk producti iryfigures NYSA contends that Dr

Silbem anunderatated breakbulk productiviry and overstated broakbulk hours utilized in 19823 and that

this eiror increased the allceation of Type I costa to bnakballc cargoea thereby causing Dr Silberman to

recommend a cap on those cargas any deficit from their contributian ieing mede up by tha containeriud

carriers at a Type II industry wide obligation Under the current formula NYSA contends breakbulk cargces

would already pay their share under the tonnage formula NYSA op br at 85 However once again thero

appeara to he a credibiliry problem As PRMSA points out PRMSA r

br at 29 nla Dr Silbemian had

been criticized for using a lower productivity figure of 46 essesament t9na per man hour which Mr Sclar

himselfhused in earlier testimony and then Dc Silberman changed to a figurc of 66 which Mr Sclar

later used himselE Thereforo NYSA enda up trying to impeach iu own witness Moreover NYSA attacked

Dr Silberman for allegedly overstating breakbulk hours because of his uu of the 66 figure but in fact his

estimate is actually slightly lower then NYSA sown proposed figure 3618286 wurs compared to 3687838

urged by NYSA

I find Dr Silbemian srebunal testimony Ex 46 to tre very well ezplained and more persuasive on

these accounting and methodology isauea than the testimony of NYSA switnesaes His testimony is all the

moro improssive because he had to obtain data from NYSA srecords and work papers and often made con

cessions or found diacrepancies in the NYSA papecs which NYSA doea not acknqwledge Dr Silberman is

a

very impressive highly qualified expert wiMess who writes lucidly enQ cogently

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 773

NEW YORK SHIPPING ASSOCIATION ET AL

payments to GAI recipients were included in the GAI Fund account Mr

Fier the NYSA ILATreasurer attempted to rebut Dr Silberman sconclu

sion by showing that funds were disbursed from the Vacation and Holiday

Fund for GAI recipients But this rebuttal is unpersuasive because there

were also separate disbursements form the Vacation and Holiday Fund

for Vacation payments yet the NYSA Financial Statement shows vacation

payments attributable to GAI hours in the GAI fund not the Vacation

and Holiday Fund In other words funds were sometimes disbursed in

a manner different from the way in which they were carried in the accounts

What is probably a more simple answer to the issue however is the

fact that if Dr Silberman was wrong in including holiday payments to

GAI recipients in the GAI Fund account rather than in the Vacation and

Holiday Fund NYSA which has access to its own auditors could have

put in the relevant evidence Mr Fier however had not communicated

with the auditors prior to testifying Under such circumstances I am entitled

to draw inferences against the position of NYSA See Insterstate Circuit

v United States 306 US 208 226 1939 Such inference is even more

compelling considering the fact that Mr Fier was asked six times by

PRMSA scounsel and twice by myself how he could conclude that disburse

ments form the Vacation and Holiday Fund meant that the NYSA sauditors

accounted for them in the same way but did not provide a

responsive

answer as PRMSA conectly notes PRMSA op br at 14r147 and record

citations therein

As to vacation payments NYSA argues that Dr Silberman should have

allocated another 65

million to the Type II category This argument

depends on the testimony of Mr Sclar that the fifth and sixth weeks

of vacations should be treated like industry wide Type II costs and obliga

tions Mr Sclaz reasons that one of these weeks is attributable to

containerization and the other to the fact that the present imbalance of

labor compared to available work results in the hiring of more senior

men with longer vacation benefits This position contrasts with NYSA s

position that holiday payments as to currently employed men are all Type

I

expenses In other words in this case NYSA azgues that the first four

weeks of vacation for currently employed men are Type I

costs but the

next two weeks are Type II and therefore become industry wideobligations

to fund

From the outset the argument that vacation costs attributable to currently

employed men which are essentially substituted for direct wages should

in part be the responsibility of someone who is not currently employing

the longshoremen defies logic Because of the imbalance of labor compared

to work opportunities at New York 86 percent of the workforce are senior

workers with maximum vacation benefits Ex 46 at 19 Each hiring em

ployer derives the bene ts of such senior men s skills and experience

and ultimately derives profits from the use of such labor at

facilities Having hired senior workers the employer ought

the

logically

employer s

to

27FMC
74 FEDERAL MARITIME COMMISSION

be responsible for paying the full value of that worker sservices and

the costs that go with those services namely fringe benefits including

six weeks paid vacations There may be some superficial appeal to Mr

Sclar s

argument that containerization has resulted in a shrunken active

workforce consisting mainly of senior men to whom the available work

must first be given But vacations aze still merely other forms of direct

compensadon as are paid holidays which Mr Sclaz agrees as being entirely

Type I costs insofar as cunently employed men aze concerned yet IIA

workers receive more paid holidays now than they did before

containerizadon Finally once again Mr Sclar ppeazs to have taken a

different position when he tesdfied on the West Coast There he did not

contend that an increase in vacation benefits due to containerization should

be treated as past or transition costs ie as industry wide Type II costs

PRMSA op br at 149 n 76 and record citadans therein I therefore

agree

that for 19823 the more persuasive evidence is that Vacation

and Holiday Fund payments received by GAI recipients aee industry wide

expenses and amounted to 107million and that Vacation and Holiday

Fund payments received by currently employed ILA workers are direct

labor costs and in 19823 amounted to 385million PRMSA op

br at I50 151

As to the Welfare and Clinic Fund NYSA and PRMSA disagree on

the calculations NYSA would place 197million of these costs into Type

II and 133million into Type IDr Silberman wonld place 166million

into Type II and 164million into Type I

PRMSA op br at 151

and 152 and record citations therein Here PItMSA and NYSA agree

on the principle that welfare and clinic costs attributable to rerirees and

their dependents plus the portion of these costs attributable to retirees

and their dependents plus the portion of these eosts attributable to GAI

recipients should fall under Type II costs Therefore Dr Silberman accepts

NYSA switness ONeill stheory However Mr ONeill calculates the

Type II figure by adding a proportion of welfare and clinic bene tsto

total welfare and clinic contributions made on behalf of GAI recipients

to arrive at his Type II figure PRMSA op br at 151 and record citations

Dr Silberman criticizes this methodology He would not add contributions

and benefits to arrive at the nal figure Contributions and benefits aze

not the same thing No contributions to the Welfare and Clinic Fund aze

made on behalf of retirees and dependents eligibte to receive fund benefits

Instead their benefits are funded through the contributions made on behalf

of all active ILA men both those currently employed and those on GAI

Dr Silberman has unscrambled the mix by taking the percentage of hours

ofnon pensioners attributable to GAI 27 percent which is the same per

centage derived by MrONeill and multiplying it against the value of

welfaze and clinic benefits received by non pensioners PRMSA op br

at 152 Ex 46 at 223 The product of this multiplication gave Dr

Silberman the amount of costs attributable to non pensioners which was

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 77S

NEW YORK SHIPPING ASSOCIATION ET AL

then added to the amount of costs attributable to pensioners Ex 46 at

22 23 The total figure amounts to 16622515 which are those welfare

and clinic fund expenses attributable to benefits received by still active

men albeit on GAI and to benefits and those expenses which are attrib

utable to retirees See table on Ex 46 at 22 23 All of this package

falls into Type II as an industry wide obligation to get funded by tons

I find Dr Silberman s

methodology to be sound and more persuasive than

that employed by MrONeill and accept Dr Silberman scorrections to

MrONeill s

figure which would reduce the allocation to Type II costs

made by MrONeill by 31 million

The Pension Liabiliry Allocation Problem

This particulaz problem involves an extremely narrow technical dispute

concerning allocation of the amount of pension contributions between Type

I and Type II The incredibly complex subject matter involved in this

narrow dispute is described in detail in PRMSA s

op br at 15360

The parties appazently agree that the pension fund consists of obligations

to retirees and to currently enrolled employees However the portion of

the fund attributable to the financing of pensions of retirees is appazently

not now completely funded There is appazent theoretical agreement as

to allocation of portions of the fund between Type I and Type II costs

egType II costs include contributions applied to funding the unfunded

liability attributable to pensioners and GAI recipients Also there is agree

ment appazently in theory that a portion of pension contributions can be

attributed to funding the benefits that will be received by current workers

PRMSA op br at 153 There is however disagreement as to what

method to use in calculating the amount of pension contributions that

are applied to funding the portion of the plan sunfunded liability attributable

to the pensioners Id at 1534

It is interesting to note that PRMSA s

expert witness Mr LoCicero

and NYSA s

expert witness Mr Camisa do not disagree that this portion

of the pension fund can be allocated between Type I and Type II ie

between current employees and pensioners They disagree however on

the method of allocation 47After completing their calculations under their

different methodologies Mr LoCicero calculates 195 million for Type

I and 302 million for Type II PRMSA op br at 156 and record

citations therein Mr Camisa however calculates 134million for Type

I and 364million for Type II Ex 36 at 89 Under the latter scalcula

tion therefore the containerized carriers would pick up another 6 million

in costs of funding pensions which would be Veated as industry wide

47Although NYSA sexpert Mr Camisa states that there are several methods of allocation NYSA sexpert

witness Mr Sclar states that there is no acceptable method PRMSA op br at 158 n85 Thus Mr Sclaz

who has been shown to have testified in support of a different man hour formula on the West Coast and

has used a productivity figure for breakbulk cargces which NYSA itself attempted to discredit as being too

low now finds that the NYSA sown witness dces not agree with his statement about the lack of a method

of allocation

27FMC
76 FEDERAL MARITIME COMMISSION

obligations under the tonnage portion of Dr Silberman sformula It is

interesting to note that Dr Silberman accepts Mr LoCicero scalculations

of 302million to be allocated to Type II which is an upward revision

from Dr Silberman searlier estimates made when he had not had access

to underlying documents of over 6 million See Ex 46 at 21

Detailed explanations of Mr LoCicero smethosiology are set forth in

PRMSA s

op br at 1546 and are based upon that wimess stestimony

Exs 43 47 Mr LoCicero who is an enrolled actuary employed by

George B Buck Consulting Actuaries has set forth a very careful methodol

ogy step by step to arrive at his ultimate gures He further states that

his methodology follows generally accepted actuarial principles Mr

LoCicero is furthermore a member of the American Academy of Actuaries

and the American Society of Pension Actuaries aad is the Chairman of

the American Academy of Actuaries Committee on Multiemployer Pension

Plans Ex 43 at 2

Kenneth P Camisa NYSA s

expeR witness is a Senior Vice President

of the Martin E Segal Company which serves as consultant and actuary

to more multiemployer bene t

plans covering more employees than any

consulting firm in the United States The Segal rm advises over 75 nego

tiated muldemployer plans including the NYSA ILAplan in New York

Ex 36 Att A at i2

These two experts are obviously high level professional persons in their

technical elds Between the two of them they show that there aze at

least four different methods of allocating the subject pension fund into

Type I and type II There is a technical disagreement in that Mr Camisa

disagrees that in making the calculations all plan assets should be first

assigned to existing pensioners Mr Camisa states that such assignment

would be proper in the case of terminating plans not existing plans such

as the present one Mr LoCicero disagrees giving three examples but

also conceding that there are no statutory rules or actuarial requirements

which require his assignment Ex 47 at 34 This technical discussion

could go on and on but would not help resolve the ultimate question

namely how much of the contributions to the total pension plan should

be assigned to Type II Both experts are impressive and equally persuasive

and perhaps this record could have benefited either by an independent

court appointed expert or by cross examination although with men of

this calibre and testimony of this type which is not based on sense impres

sions or reputadons there is little assurance that cross examination would

be of much assistance To resolve this dilemma I mast use different reason

ing and evidence

As Mr LoCicero states these quesdons have no precise right and

wrong answers Ex 47 at 9 As mentioned above there are at least

four

a

methodologies that could be used If I were to decide the issue on

substandal evidence basis I could nd for Mr LoCicero because

although Mr Camisa questions the propriety of his technique in assigning

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 777

NEW YORK SHIPPING ASSOCIATION ET AL

all the pension fund sassets first to the pensioner group and then comparing

the remaining unfunded liabilities Mr LoCicero defends the technique

giving three examples Thus reasonable persons could differ But the sub

stantial evidence standard is for reviewing courts not for finders of fact

like myself As I discussed I must use the preponderance of the evidence

test and the burden is on complainants to persuade Here ihe quality

of both witnesses is so good and their testimony so persuasive that the

preponderance in my opinion does not shift to complainants However

there are other bases for choosing the methodology to follow

It appeazs that Mr LoCicero would allocate 302 million of pension

funds into Type II and that Mr Camisa would allocate 364million

as I have mentioned Mr Camisa however states that using different

acceptable methodologies the amount allocable to Type II could range

from 36 million to 49 million Ex 36 Att A at 10 Mr LoCicero

on the other hand testifies that he was conservative and could have derived

a figure lower than his 302

million PRMSA op br at 156 n 83

Therefore there is arange of something below 302

million to about

498 million which could be allocated to Type II As noted earlier it

is in the interests of PRMSA to keep that figure as low as possible and

in the interests of NYSA to keep it as high as possible since being

in Type II it would continue to be funded by tons as are all the benefit

plans under the current formula Since this is so and since virtually every

other NYSA witness yielded nothing toward Dr Silberman sformula any

concession by any NYSA witness is tantamount to a

significant statement

against interest If MrCamisa concedes that under one acceptable methodol

ogy as little as 36 million can be allocated into Type II this is quite

a concession indeed and reflects the integrity of Mr Camisa as did Mr

LoCicero suse of a methodology which tended to raise his figure to 302

million I am impressed by Mr Camisa shonest willingness to acknowledge

that one methodology could allocate as little as 36 million to Type II

and recommend the use of that methodology

I have additional reasons why I recommend adoption of the 36 million

figure and its methodology First by raising the Type II costs by 6

million from MrLoCicero s302

million figure this causes less disruption

to the status quo which will be changed inevitably anyway with the adop

tion of Dr Silberman s

formula but justifiably so and without any jeopard

izing of the requirement that all funds must be fully financed The addition

of 6 million to Mr LoCicero sfigure which will go into Type II means

that if NYSA s

predictions of something like 22 million assessable tons

is realized for 19834 NYSA op br at 58 adding another 6

million

averages out to about 27 cents per ton With the addition of domestic

intercoastal and transshipped tons which would no longer be excepted

from the tonnage assessment under Dr Silberman sformula this would

add more assessable tons and help bring the average cost per ton down

possibly to 25 cents or so For contract year 19823 this would have

27FMC
FEDERAL MARITIME COMMISSION

increased the tonnage assessment under Dr Silberman sformula from 590

per ton to 615or so Because of this statutory time period it is obviously

impossible furthermore to determine the credit adjustment amounts and

other means to implement such adjustments

decision when the underlying data have not

on the

yet

day

even

of the

been

Commission s

assembled

A slight increase in the tonnage assessment by 25 cents or so to something

like 6 or so is still better than paying 890per ton as under the current

formula This adjustment obviously would reduce the amount of PRMSA s

credits because it would raise PRMSA s

per ton assessment by this slight

amount over the PRMSA assessment calculated under the LoCicero alloca

don However there must be some room for concessions in this proceeding

on both sides and under this decision PRMSA would achieve a number

of changes to its bene tas would other containerized carriers

Finally to justify a middle ground in selecting Mr Camisa s36 million

figure Inote some peculiar facts about the present situation in New York

namely that the pension fund as a whole seems to be running a deficit

that there are more pension beneficiazies than employees actively working

or available for work in the industry 12676 pension beneficiaries compazed

to only 9565 workers in active status as of December 31 1982 that

this situation must to some extent be attrihutable to containerization and

consequent incentives to men to retire Ex 36 Att A at 3 56 Therefore

raising the Type II industry wideportion of the pension plan costs from

Mr LoCicero s302 million to Mr Camisa s36 million does not

seem so unreasonable

Accordingly I recommend the middle ground 36 million gure and

MrCamisa smethodology by which it was derived

Allocation of NYSA sAdministrative Costs

Finally there is a need to calculate NYSA sadministradve expenses

by proper methodology The NYSA assessment it must be noted funds

not only the ILA sfringe benefits under the collecdve bazgaining agreement

but also funds administrative expenses Dr Silberman would allocate these

expenses into the Type IType II categories in the same proportion as

he would allocate the fringe benefit costs In other words if 40 percent

of fringe benefit costs were found to be Type I and 60 percent to be

Type II the administrative expenses would be allocated to Type I and

Type II as 40 percent and 60 percent respectively The method seems

sound has not been opposed by NYSA and should be employed

There is a final problem however That relates to the fact that as

the evidence shows NYSA administers not only the NYSA ILAcollective

bargaining agreement but another union labor agreement as well Port Policy

and Guards Union PPGU PRMSA op br at 161 and record citation

therein PRMSA contends that the payors under the ILA assessment agree

ment ought not to fund administrative expenses attributable to an entirely

different union scontract NYSA offers no justification to its present prac

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 779

NEW YORK SHIPPING ASSOCIATION ET AL

tice Dr Silberman estimated 7

million in administrative expenses as alloca

ble to the NYSA ILA labor contract which amount is the substantial

majority of total administrative expenses Absent any better evidence from

NYSA I must conclude that Dr Silberman sestimate is reasonable As

PRMSA states however in future years the NYSA should be required

to account for administrative expenses attributable to the ILA contract sepa

rately from those attributable to non ILA contracts PRMSA op br at

162

Overview of the Silberman Formula

During preceding discussions I have indicated that I believe that Dr

Silberman sformula is well considered and supportable with some excep

tions the McAllister barge treatment the special 25 percent discount for

the Puerto Rican trade I strongly urged its adoption In this section

I give a brief summary of certain strong points which I have mentioned

but emphasize now to illustrate further the merits of the formula Further

more Irefer when appropriate to Mr Donovan sformula which has

some similazities but certain deficiencies and is not so refined and support

able as that of Dr Silberman Again I refer the reader to the table in

the appendix which shows the NYSA Silberman and Donovan formulas

and how they vary from each other A good discussion is also found

in PRMSA s

op br at 2335

I do not wish to repeat in detail the features of the Silberman formula

ie the recognition of the difference between Type I costs which aze

related to currently working men and to man hours and the Type II costs

GAI related which aze related to labor costs of inen not working because

of the advent of containerization Mr Donovan also makes a somewhat

similar distinction although not so refined and appears to understate the

industry wide portion of the fringe benefit costs GAI related seriously

What is impressive about the Silberman formula aside from its conceptual

logic are certain admissions against interest For example unlike Mr Dono

van Dr Silberman finds that 67 percent of the total package to be funded

is Type II GAI related costs which are industry wide obligations to be

48Literally the last defense against PRMSA and the Silberman fortnula by the NYSA is the contention

that on an overall average total labor costs per

and several other cacriers The calculations show

ton

for

PRMSA s

example that

labor

PRMSA s

costs aze

total

actually

labor

lower

costs

than

per ton

Sea Land s

average

out to something less than Sea Land and two other carriers and a little more than USLNYSA r br at

289J The exact numbers are confidential but can be found in the confldential portion of the NYSA r

brJ This is supposed to mean that PRMSA is not suffering discrimination at all What is readily apparent

from this last ditch defense however is that NYSA is throwing in all labor costs not just fringe benefit

costs But this case deals with the question whether PRMSA is paying an unfair shaze orsuffering an unfair

burden as to kinge benefit costs under the assessment agreement Costs of direct wages and container royalty

payments aze irrelevant When these irrelevant portions of NYSA scalwlations aze extracted leaving the

relevant factors we are back where we started That is as NYSA stable shows if total assessment under

the cuRent formula aze divided by total tons this shows that PRMSA paid 818 per ton whereas Sea Land

paid only 55 per ton and USL471 per ton Two other lines both foreign flag aze slightly higher

than PRMSA at822and 825per ton This it appears that NYSA has unwittingly put in evidence suppoct

ing PRMSA scase

27FMC
7O FEDERAL MARITIME COMMISSION

funded on the tonnage basis In contrast Mr Donovan finds only 34

percent of total costs to be Type II The more that costs aze allocated

under the Type II category to be paid by tons the greater the contribUtions

by PRMSA as well as by other containerized carriers It would therefore

have been to PRMSA sadvantage and Dr Silbent anfound that only 34

percent of the package was Type II and therefore allowed PRMSA to

pay for 66 percent of the total package on the man hour basis NevErtheless

Dr Silberman analyzed the situation and data and did what he thought

was correct

Another example of Dr Silberman sstatesmanlike analysis is the fact

that under his formula there would be a

cap on the convibution of

breakbulk cargces so that such cazgces would not have to pay more in

toto than what they actually paid under the 19823 contract year

PRMSA op br at 25 and 26 Ex 41 at 356 If this cap results

in breakbulk cargces not paying their full actual Type I costs under the

Silberman formula the deficit is made up by all containerized carriers

paying under the tonnage portion of the formula which decit is treated

as a Type II cost Thus PRMSA is willing to help subsidize the needy

breakbulk ogerators who utilize relatively more man hours of labor and

are consequently needed to help keep down the GAI costs As breakbulk

carriers gradually shift to containerization they would have to make their

tonnage contribution towazd Type II GAI related costs but that is how

it should be since the change to containerization is responsible for the

GAI costs and the newly containerized carrier enjoys the benefits of

containerization and should bear its share of the costs of displaced labor

Another admission against interest is Dr Silberman swillingness to allow

maintenance activities to continue their free ride This activity as discussed

is substantial and it would have been to PRMSA sbenefit to have carriers

utilizing ILA deep sea maintenance labor to pay at least their direct Type

I costs since PRMSA dces not use such labor However PRMSA offers

to continue picking up the costs of other carriers use of such labor for

the good of the entire fund That is because if the activity had to pay

even under the lower man hour basis it would undoubtedly shift to non

ILA deep sea labor ieto ILA Metro labor which is readily available

and is under a different labor contract Such a shift would aggravate GAI

costs I note that Mr Donovan for the Port Authority would assess mainte

nance under the man hour portion of his formula however

I have disagreed with Dr Silberman and PRMSA in their efforts to

obtain a special 25 percent discount for the Puerto Rican trade and their

azgument that the McAllister barge service should pay the full tonnage

rate under their formula as Ihave discussed eazlier These particular changes

in Dr Silberman sformula should temper the features which I cannot

find to be supportable on a preponderance of the evidence

The major objection to the Silberman formula will undoubtedly come

from the special privilege carriers who enjoy the rather enormous benefits

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7H 1

NEW YORK SHIPPING ASSOCIATION ET AL

of not having to pay substantial money as their share of GAI related costs

under the tonnage portion of the Silberman formula Both Sea Land and

USLhave objected to any change in the status quo for their domestic

and relay operations which the evidence shows aze not hardship cases

Should any particulaz commodity show that it were a

hardship case the

present machinery of the joint NYSA ILA Contract Board is supposed

to function although it seems not to have functioned perfectly with respect

to PRMSA scase of diversion from New York to Pennsauken New Jersey

However the MLAA has intended that the Commission have broad

discretion to fashion appropriate remedies for unfair or discriminatory

assessments Sen Rep to the MLAA cited above at 14 if necessary

to cushion the increases that Sea LandUSLor any other unjustifiably

favored carrier should now beaz toward the industry wide obligations by

paying their fair share under the tonnage portion of the Silberman formula

the Commission can consider means to spread the payments over time

or otherwise cushion the transition similar to the offers it made to NYSA

as to how NYSA was to give credits to carriers as a result of the decision

in Agreement No T2336 cited above See Agreement No T2336 19

FMC

248 263 1976 aff d1VYSA vFMC 571 F 2d 1231 DC

Cir 1978 partial payments spread payments over time Arguments could

be made that the special privilege carriers have been enjoying substantial

savings by not paying their shaze toward GAI related costs under the ton

nage formula in the past and should not be given further consideration

However rather than abandon the changes in the formula necessary to

distribute burdens evenly because of outcries from carriers who object

to sudden increases in costs the Commission can adopt the Silberman

formula and fashion an appropriate remedy easing the transition if nec

essary

Implementation of the Remedies

PRMSA suggests a post decision procedure by which NYSA can imple

ment a decision to grant PRMSA credit adjustments and also to compute

reparations which the law dces not allow in cases of this type as I have

discussed PRMSA op br at 1745 Under this plan NYSA would

be directed to submit to the Commission within 30 days of the Commis

sion decision a plan outlining all steps necessary to implement the PRMSA

assessment proposal PRMSA could object within 15 days and then attempt

to resolve differences leaving unresolved disputes to be submitted to the

Commission As to the assessment adjustments PRMSA wants NYSA to

appoint an independent certified public accountant to conduct an audit

and to report its findings to the Commission within 60 days of the Commis

sion decision PRMSA would audit the NYSA auditor sfindings within

40 days subrr itobjections and the parties would be allowed 20 more

days to try to resolve their disputes Unresolved matters would be submitted

to the Commission for resolution

27FMC
72 FEDERAL MARITIME COMMISSION

As Ihave mentioned the Commission has statutory authority to fashion

appropriate remedies The Commission has some experience in fashioning

remedies and procedures as seen from the proceedings following the decision

in Agreement NoT2336 cited above which unfortunately took time to

complete because of continual appeals by the NYSA all of which were

rejected by the courts The above procedure seems reasonable and somewhat

similaz to procedures used by the Commission in reparation cases when

the record dces not quantify the exact amount of reparation See Rule

252 46 CFR 50225 But see also the procedure established by the Com

mission in Agreement NoT2336 cited above 19FMCat 265

In one matter of substance however I do not agr ee with PRMSA

That is the matter of interest which PRMSA is seeking in addition to

adjustments and the unauthorized repazation In Agreement NoT2336

cited above the Commission did not award interest to the carrier group

which obtained adjustments from the NYSA This decision was affirmed

NYSA vFMC571 F 2d 1231 DCCir 1978 The Commission held

that the decision to awazd interest was discretionary but that the equities

of the situation did not warrant such an awazd Thus although the claiming

carrier group had been deprived of the use of its funds because of previous

overpayments under the assessment formula it was not clear for some

time exactly how much the overpayment was NYSA had not delayed

the proceeding unfairly nor had NYSA engaged in any conduct which

it should have known was improper at the time nor had it withheld assess

ment payments from the fund 19FMCat 261

In the present case under the most pressing time constraints NYSA

has furnished considerable data and has worked hard as have all other

parties to meet the tight deadlines imposed by law and its counsel have

been invaziably courteous It fully believes that its formula was and is

lawful and as I have noted this is probably the first time that a complete

factual record has been assembled in one place so that everyone can see

the unfair effects of the formula There is some indication that PRMSA

might have been given the runazound in its last request for relief before

the filing of its complaint and it is questionable whether the Contract

Boazd has been entirely fair to PRMSA which has shown cases of diversion

to a non ILAcarrier There is also a curious advertisement about an NYSA

plan to reduce assessments which has not been revealed and if it

is any good and would help lead to a settlement should probably have

been made public However all of these facts in my opinion do not

justify imposition of interest liability on NYSA I therefore would not

awazd interest for reasons similaz to those expressed by the Commission

in Agreement NoT2336 cited above

ULTIMATE CONCLUSIONS

Two parties the Port Authority of New York and New Jersey and

PRMSA the leading Puerto Rican carrier complain that the current tonnage

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7g3

NEW YORK SHIPPING ASSOCIATION ET AL

assessment formula in use at the Port of New York is unjustly discriminatory

and unfair and ask that it be modified and as to PRMSA that PRMSA

be granted credit adjustments provided by the applicable law Respondents

NYSA et al as well as other parties representing competing ports and

Hearing Counsel oppose any relief but would leave everything up to the

parties to resolve on their own NYSA furthermore raises a number of

legal defenses almost all of which have no merit which defenses would

not allow the Commission even to consider the complaints on their merits

Even if the merits are considered NYSA argues impossibly difficult stand

ards of proof which the Congress rejected when it enacted the MLAA

Contrary to respondents and other parties contentions the extensive

evidence developed by the Port Authority and by PRMSA shows certainly

by a preponderance of the evidence and probably in many respects even

by a cleaz and convincing stanclard even though that stricter standard is

not required that the Port Authority suffers a handicap because ofa200

300 differential assessment on loaded containers moving through New York

which ali competing ports which aze not under the unique New York

tonnage formula do not have to bear This handicaps the Port of New

York in its efforts to attract and maintain containerized cargces mainly

from Midwest destinations and origin points but also other regions The

evidence of this handicap is shown among other ways by admissions

of at least 11 of respondent carriers of cials and by respondent carriers

own cost studies one of which bore the notation The kiiler is NYSA

assessment of7SQton compared

1055

to Baltimore 810Manhour Portsmouth

Manhour Of course the tonnage rate has since increased to 890

per ton Although now denying that such a large differential at New York

exists at least one important official of a respondent terminal operator

conceded to a New York State legislative committee hearing that such

a differential up to about 2S0 existed

In addition to the foregoing admissions data accumulated from the Mari

time Administration and other sources show that the Port of New York

has been stagnating and has declined in its share of containerized cargo

in the North Atlantic from 69 percent in I972 to 56 percent in 1982

Such dectines are not explainable simply in terms of other ports catching

up to New York in containerizing their facilities

Other evidence presented by two expert witnesses shows that this differen

tial which handicaps New York competitively dces not have to exist

merely because New York s

underlying fringe benefit labor costs are higher

than those at other ports which admittediy they are The @ifferential is

to a large extent the result of the peculiar tonnage formula which no

other port employs and two alternative combined man hour tonnage or man

hour container type formulas presented by two expert witnesses among

other evidence show that the underlying costs do not have to result in

such a huge differential

27FMC
74 FEDERAL MARITIME COMMISSION

Finally it should be noted that the Port is not claiming that Midwest

or any other containerized cargo is naturally tributary to New York

or that New York is fundamentally entitled to such cazgo to the exclusion

or detriment of Baltimore the major port competing with New York or

that NYSA is deliberately attempting to handicap New York by employing

some type of harmful device Nor is the Port asking for or entitled to

monetary adjustments All that the Port wants is to have a formula at

New York which will get the competitive handicap off its back and enable

it to compete fairly with Baltimore and other ports The current tonnage

formula as the evidence shows dces not enable the Port to do that and

therefore it is unjustly discriminatory and unfair as between ports as

the MLAA states and should be modified to give the Port relief

Congress specifically enwsted the Commission with the responsibility

to ensure that there would be equal treatment of localities and that there

would be no abuses caused by concerted activity of carriers and others

and restored jurisdiction to the Commission in response to pleas of parties

worried about not having any protection under shipping law See Sen

Rep to the MLAA cited above at 10 On this record and in view of

such a legislative mandate I do not believe that the Port Authority can

be turned away without relief

Similazly on the record developed by PRMSA I do not believe that

the carrier can be turned away without relief PRMSA scase unlike the

Port Authority sis based essentially on the fact that the unique tonnage

formula in New York unfairly distributes burdens among containerized caz

riers in comparison with the benefits which they all received when first

containerizing PRMSA sevidence shows that the cunent tonnage formula

totally fails to distinguish between the type of fringe benefit costs attrib

utable to displacement of work caused by containerization and the type

of costs attributable to labor currently employed Such a flat tonnage formula

not only shoves all costs onto containerized carriers for their general respon

sibility in displacing labor and increasing GAI type costs but also for intro

ducing efficiencies in non vessel loading unloading functions which rep

resent current improvements in terminal efficiencies Such a formula there

fore taxes efficiencies and terminal producdvity reduces incentives to intro

duce such efficiencies and causes more efficient cazriers to pick up some

of the costs of the less efficient carriers Moreover the evidence developed

by PRMSA shows enormous favoridsms to a certain few carriers who

pay no tonnage assessment on domestic intercoastal cazgces or vansshipped

cazgces and favoritisms to a few carriers who pay ahsolutely nothing though

hiring labor for handling empty containers and stuf ng and stripping con

tainers at their terminals These enormous special privileges help to create

a startling situadon in which the evidence shows PRMSA paid an average

of 272 per loaded container in tonnage assessnients under the current

formula whereas another major containerized line paid only 141 per con

tainer and still another only 168 per container those other carriers also

27FMC
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 7HS

NEW YORK SHIPPING ASSOCIATION ET AL

being the prime bene ciaries of the special treatment for domestic and

transshipped cargoes Other evidence shows that on those favored cargoes

the payments per container by one carrier averaged only 23 and for

the other only 1305per container again compared to PRMSA s

average

of 272 per loaded container On some domestic cargces it was even

shown that one carrier paid an average of only 10 per container

The disparities aze enormous and the justifications for them ought accord

ingly be persuasive but extensive examination of such justifications shows

that they are not persuasive and that they rest mainly on speculation and

selferving predictions of adverse consequences if the special privileges

are terminated In some cases however such as the total free ride for

handling empty containers and for stuffing and stripping containers which

free ride burdens everybody else even with the direct type costs of hiring

labor the justification is virtually non existent

To remedy these gross dispazities PRMSA has presented awell explained

alternative combined man hour tonnageformula supported by an impressive

expert witness This formula would relate direct currently employed type

fringe benefit costs with man hours and non employed GAI type costs

which are industry wide obligations with tonnage assessments It would

also for the most part eliminate unjustified special privileges and free

rides In certain instances furthermore it goes against PRMSA sown inter

est for example when it allocates fully 67 percent of industry wide costs

to the tonnage portion of the formula when it puts a cap on breakbulk

cargo payments for the good of the Port and when it recommends retention

of the free ride for maintenance labor because of the cleaz danger that

taxing that activity would result in diversion to non ILA deep sea labor

and consequent aggravation of the GAI costs PRMSA dces overreach

in seeking a further special 25 percent discount for the Puerto Rican trade

and is unduly harsh on a

bazge carrier upon whom other interests depend

and also seeks retroactive reparation which the law does not provide in

this type of case However the formula it proposes is otherwise supportable

and far more fair than the current tonnage formula which is riddled with

unjustified favoritisms and exceptions which burden everyone else trying

to fund the fringe benefits fully

As with the Port Authority PRMSA has presented a persuasive case

The Commission was given the specific responsibility by the Congress

to protect carriers and others against abuses and to strive to ensure fair

and equal treatment as shown by the legislative history to the MLAA

In view of that fact and the persuasive evidence developed I do not

believe that PRMSA can be turned away without relief

S NORMAN D KLINE

Administrative Law Judge

27FMC
78fi FEDERAL MARITIME COMMISSION

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27FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 846

THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

v

NEW YORK SHIPPING ASSOCIATION ET AL

DOCKET NO 84

PUERTO RICO MARITIME SHIPPING AUTHORITY AND PUERTO

RICO MARINE MANAGEMENT INC

v

NEW YORK SHIPPING ASSOCIATION

ORDER

February 27 1985

The Federal Maritime Commission having this date made and entered

of record a Report in the above matter which Report is hereby refened

to and made a part hereof

THEREFORE IT IS ORDERED That the whole tonnage assessment

formula contained in NYSA ILA Agreement No LM86is found to be

unfair and unjustly discriminatory under the Maritime Labor Agree

ment Act of 1980 to the extent indicated herein and on this date modified

to remove such unfairness and unjust discrimination

IT IS FLJRTHER ORDERED That within 61 days of service of this

order NYSA and ILA shall file with the Commission a modified agreement

which 1 embodies the man hour tonnage formula here prescribed and

2removes the expected treatment for domestic and transshipped cazgoes

to the extent here required and

IT IS FLJRTHER ORDERED That within such 61 day period Respond

ents shall file with the Commission a statement describing the means of

phasing out the man hour assessment and phasing in the man hour

tonnage assessment herein prescribed for transshipped rehandled cargoes

and

IT IS FCTRTHER ORDERED That within such 61 day period Respond

ents shall further file any requests for phasing ouUphasing in beyond

September 30 1986 up to and including September 30 1987 together

27FMC 7g7
7 FEDERAL MARITIME COMMISSION

with supporting data based on commitments capital expenditures or oper

adonal difficulties and

IT IS FURTHER ORDERED That within such 61 day period assessment

adjustments shall be made in favor of PRMSAMI in the manner

prescribed herein and Respondents shall file with the Commission a state

ment of the adjustments so made and

IT IS FURTHER ORDERED That to the extent the adjustments in

favor of PRMSAMI described in the preceding paragraph cannot be

made until after the date of this Order additional adjustments shall be

made to insure that PRMSAMI reeeives credits for any portion of

the period between Februazy 27 and April 29 during which it may have

been assessed at the rate applicable under the formula here modified

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

27FMC
FEDERAL MARITIME COMMISSION

46 CFR PARTS 550 AND 580

DOCKET NO 8435

ELECTRONIC FILING OF TARIFFS BY COMMON CARRIERS IN

THE FOREIGN AND DOMESTIC OFFSHORE COMMERCE OF THE

UNITED STATES

March 14 1985

Final Rules

The Commission amends its domestic offshore and for

eign commerce tariff filing rules by permitting the elec

tronic receipt of filings outside of the Commission s of

fices subject to certain stated conditions

DATES Effective April 18 1985

SUPPLEMENTARY INFORMATION

On October 18 1984 the Federal Maritime Commission Commission

issued a notice of proposed rulemaking in Docket No 8435 Electronic

Filing of Tariffs By Common Carriers in the Foreign and Domestic Offshore

Commerce of the United States to amend certain domestic offshore and

foreign commerce tariff filing rules 46 CFR Parts 550 and 580 in order

to allow electronic tariff filings to be received on terminals located in

the same building as the Commission s offices subject to certain stated

conditions 49 FR 40940 Oct 18 1984 Interested parties were invited

to file comments by November 19 1984

Comments on the proposed rule were received from the Inter American

Freight Conference the Journal of Commerce Sumner Tariff Service Inc

Transax Data Corporation and Distribution Publications Inc

The Inter American Freight Conference IAFC asserts that under section

8 a I of the Shipping Act of 1984 46 U S c app 1707 a I the

Act a tariff is not on file with the Commission when it is electroni

cally transmitted to an off premises terminal because a filing must be

physically delivered to the Commission or deposited with a

proper Commis

sion employee The Commission does not agree Strictly ministerial func

tions may be validly delegated to private parties without express authoriza

tion in the Commission s enabling statute Tabor v Joint Bd for Enrollment

of Actuaries 566 F 2d 705 D C Cir 1977 Nothing in section 8 of

the Act prohibits such a delegation Accordingly the Commission is modify

ing its proposed rule to clarify that it is delegating authority to receive

ACTION

SUMMARY

By letter December 27 1984 Delta Steamship Lines Inc amember of IAFC advised that it disasso

ciated itself from the IAFC comments

27 F M C 789
790 FEDERAL MARITIME COMMISSION

tariffs to the operators of data processing terminals specially designated

for this function pursuant to the provisions of the rule Moreover the

rule is further amended to require prompt physical transmission of filed

tariff pages to the Commission These provisions will both clarify the

Commission s authority on this matter and protect the legitimate concerns

of all affected interests

Sumner Tariff Service Inc Sumner commented that the proposed rule

did not address the question of the physical receipt of electronic filings

by the Commission s staff and suggests that a deadline for such physical

receipt should be established in the Final Rule Distribution Publications

Inc also believes that the Commission should establish a specific cut

off time for actual receipt of the printed pages Transax Data Corporation

Transax recommends that the Commission allow electronic filing services

to physically deliver tariff pages to the Commission before noon of the

next business day following receipt of the terminals

The proposed rule is revised to specify a deadline for the physical

receipt by the Commission of pages from electronic filing services Although

Transax s concerns for a noon deadline have been considered we have

set the cut off time at 9 00 a m on the next business day following the

receipt of electronic tariff filings on the receiving machine This deadline

is imposed so that the public can access the previous days filings as

soon as possible Any extended delay including only a few additional

hours could result in interested parties being deprived of necessary tariff

information for an additional day Further the 9 00 a m deadline will

provide administrative processing of electronic filings in the same manner

as tariff filings received from tariff filers which use the Commission s

around the clock tariff mail drop located in the lobby of the Commission s

Washington D C offices

Transax also suggests that the Commission recognize the date that pages

are received on disk rather than by the printing device as the official

filing date The Commission s present policy is to accept for official filing

purposes the time and date that pages are received on disk This policy

will be continued on the final rule with the further prohibition that no

alteration of material filed on the desk shall be allowed Once material

is filed on the disk it must be printed without alteration

Finally Transax urges that the commercial entity operating the receiving

terminals be identified by a

registration number an alpha numeric code

identifying the commercial entity receiving the tariff filing and the specific

work station It further recommends that this number should be unique

to the commercial entity and the location of the work station rather than

a number unique to a specific piece of hardware

It is neither beneficial nor necessary for the registration number of each

electronic tariff filing to identify the commercial entity by an alpha numeric

code The unique machine registration number should be sufficient to iden

tify the commercial entity receiving the filing

27 F M C
ELECTRONIC FILING OF TARIFFS BY COMMON CARRIERS IN 791

OFFSHORE COMMERCE OF THE UNITED STATES

The unique machine registration number would appear to be the best

method of controlling the integrity of the electronic tariff filing system

Moreover this method wiIl provide surveiIlance over the actual hardware

that wiIl be used to receive the filings We perceive no undue burden

either to the Commission or to the commercial entities to register hardware

changes additions or replacements as they may occur

Sumner suggests that the time date and terminal identification be per

mitted to be published at the top or bottom of the tariff page Sumner

claims that some of the filings currently accepted by the Commission

have this information printed at the top of the page and to change the

machines to print this information on the bottom would require expensive

reprogramming This comment has merit and accordingly the final rule

allows the terminal identification number to be printed at the top orbottom

of the tariff page

The final rule also contains various organization changes for the purpose

of clarity The rule moves the formerly applicable electronic filing provisions

from the definition sections 550 2i

and 580 2 w to 5503 e and

580 3 a 2 respectively

This rule contains no substantial information requirements or requests

different than those already present in Part 580 for which O MB approval

has been obtained

The Commission has determined that this final rule is not a major

rule as defined in Executive Order 12291 dated February 17 1981 because

it wiIl not result in

1 An annual effect on the economy of 100 miIlion or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with Foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies that this

final rule wiIl not have a significant economic impact on a substantial

number of small entities including small businesses small organizational

units and small governmental jurisdictions

List of Subjects in 46 CFR Parts 550 and 580

Maritime carriers Rates and fares Reporting and recordkeeping require

ments

Therefore pursuant to 5 U S C 553 sees 8 9 and 17 of the Shipping

Act of 1984 46 U S C app 1707 1708 and 1716 secs 18 a and

43 of the Shipping Act 1916 46 U S C app 817 a and 841 a and

sec 2 of the Intercoastal Shipping Act 1933 46 U S C app 844 the

Federal Maritime Commission amends Parts 550 and 580 of Title 46 of

the Code of Federal Regulations as follows

27 F M C
792 FEDERAL MARITIME COMMISSION

PART 55o AMENDED

1 The authority citation for Part 550 is revised to read

Authority 5 U S C 553 46 U S C app 812 814 815 817 a

820 833a 841a and 8437

2 Revise paragraph i of 550 2 to read as follows

550 2 Definitions

i File Filing of Tariff Matter means the actual receipt by the

Federal Maritime Commission at its offices in Washington D C including

those received by electronic transmission Electronic filings are those trans

mitted through the use of commercial data processing terminals and con

forming to all the regulations applicable to permanent tariff filings The

data processing receiving terminal s are located within the same building

as the Commission s Washington D C offices

3 Revise paragraph e of 550 3 to read as follows

550 3 Filing of tariffs general

e l

Tariff matter will be received by the Commission at its Washington

D C offices 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

2 i Terminals receiving electronic filings must imprint the date and

time received on the top or bottom of each page as well as imprinting

a unique machine registration number

H The unique machine registration number must be registered with

the Director Bureau of Tariffs Owner operators of such registered machines

must obtain certification from the Director as having delegated authority

to receive tariff matter on behalf of the Commission

Hi Information received and stored on a disk must be filed without

alteration All electronically filed tariff pages including those received and

stored on a disk must be delivered to the Commission s Tariff Library

before 900 a m the next successive business day following receipt on

the receiving machine

PART 58o AMENDED

4 The authority citation to Part 580 is revised to read

Authority 5 U S C 553 1702 1705 1707 1709 1712 1714

1716 and 1718

27 F M C
ELECfRONIC FILING OF TARIFFS BY COMMON CARRIERS IN 793

OFFSHORE COMMERCE OF THE UNITED STATES

5 Revise paragraph w of 580 2 to read as follows

580 2 Definitions

w

Tariff filing electronic means the transmission of tariff filings to

the Commission through the use of commercial data processing terminals

The data processing receiving terminal s are located within the same build

ing as the Commission s Washington D C offices

6 Revise paragraph a 2 of 580 3 and add paragraph a 3 to 580 3

to read as follows

580 3 Filing oftariffs general

a 1

2 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 located in the lobby of the

Commission s Washington D C offices

3 i Electronic tariff filings transmitted to the Commission by electronic

modes will be receipted by a date time device on the receiving machine

which will imprint the date and time on the top or bottom of each received

tariff page The receiving machine will also imprint a unique registration

number which must be registered with the Director Bureau of Tariffs

Owner operators of registered receiving machines must obtain certification

from the Director as having delegated authority to receive tariff matter

on behalf of the Commission

ii Tariff material filed electronically must conform to all the regulations

of this part applicable to permanent tariff filings except as follows

A Electronically filed tariff pages received from data processing termi

nals may be used for filing with the Commission

B Information received and stored on a disk must be printed and

filed without alteration

C All electronically filed tariff pages including those received and

stored on a disk must be delivered to the Commission s Tariff Library

before 9 00 a m The next successive business day following receipt on

the receiving machine and

D Electronically filed tariff matter shall be accompanied by an electroni

cally filed letter of transmittal

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

27 EM C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 32

KUEHNE AND NAGEL INC

v

BARBER BLUE SEA LINE AND NEDLLOYD LINES

ORDER OF RE ND

March 28 1985

This proceeding was instituted by the complaint of Kuehne Nagel

Inc K N or Complainant against Barber Blue Sea Line BBS and

Nedlloyd Lines Nedlloyd seeking reparations for alleged overcharges on

four shipments of rock crushing plants and accessories from Baltimore

to Damman Saudi Arabia in violation of section 18 b 3 of the Shipping

Act 1916 1916 Act 46 V S C app 817 b 3 Administrative Law

Judge Seymour Glanzer found in favor of Complainant and awarded repara

tions in the amount of 12 334 54 The case comes before us on Respond

ents Exceptions to the Initial Decision

BACKGROUND

K N acting as the freight forwarder and agent for the purchaser con

signee made four shipments of rock crushing and conveying plants and

accessories from Baltimore to Saudi Arabia from August to November

1981 Each shipment was described on the bills of lading as a rock

crushing and conveying plant Telsmith 2540 PP VGF Portable Primary

Crushing Plant with Vibrating Grizzly Feeder and Accessories Each of

the shipments consisted of two or four large vehicle like or ro ro

pieces and numerous small boxes crates bundles skids cases and pieces

The bills of lading listed Barber Greene manufacturer of the rock crushing

equipment as shipper The freight however was prepaid by Complainant

as agent for the consignee l

The tariff of the 8900 Rate Agreement to which Respondents are

parties in the trade reflected the following provisions effective at the time

of shipment

I

Respondents originally contested K N s standing to seek reparations on ground that it was nOl the pany

injured by the violation alJeged See Respondents Motion For Summary Judgment 4 and Respondents Pro

posed Finding of Fact and Conclusions of Law 8 This issue was resolved however with the filing of an

assignment of the claim from the consignee by Complainant at the behest of the Presiding Officer with the

acquiescence of Respondents See Initial Decision 4

7Qd 7 1 M
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 795

NEDLLOYD LINES

Commodity Description Packing Rate Basis Rate

Item 765

MACHINES AND MACHINERY PARTS THEREOF

NO C NOT AGRICULTURAL OR ROAD

BUILDING

Rock Crushing Plant lfMobile See Item 1255 W M

Item 1255 of the tariffprovided

Vehicles Specially Equipped UNBOXED Incl W M

Mobile Rock Crushing Plants

Units exceeding 60 gross tons in weight per piece or package apply to

the 8900 Lines

In addition Rule 2 H of the tariff read

2 APPLICATION OF RATE

H Whenever rates are provided for an article named herein

the same rate will also be applicable on named parts of such

articles when so described on ocean bills of lading except where

specific rates are provided herein for such parts

Although the nOl1 ro ro components made up by far the greater proportion

of the items in eacn snipment on a numerical basis the ro ro pieces

accounted for a majority proportion of three of the four shipments by

volume as well as by weight and were a majority proportion of the fourth

shipment by weight

The ro ro pieces of the rock crushing plants were rated under Item

1255 at 122 25 W M and the remaining packages and pieces were rated

under Item 765 at 13125 W M Complainant sought to have the entire

shipment rated at the lower rate under Item 1255 alleging that all of

the shipments consisted entirely of mobile rock crushing plants and their

associated parts and accessories

No evidentiary hearing was held The parties submitted a stipulation

of facts Respondents filed a Motion for Summary Judgment accompanied

by two affidavits and several exhibits and Complainant filed a Cross

Motion for Summary Judgment with an affidavit and exhibits The Presiding

Officer found however that the material facts remained in dispute and

refused to resolve the matter on the basis of the cross motions The parties

agreed to submit the matter for decision on the basis of the existing

record supplemented by proposed findings of fact and briefs with supporting

27 F M C

13125

122 25
i

1

i

I

j

1

796 FEDERAL MARITIME COMMISSION

exhibits These exhibits however consisted entirely of material previously

submitted

The Initial Decision granted Complainant s

request for reparations finding

that Respondents had violated section 18 b 3 of the 1916 Act by applying

the wrong rate under the tariff to part of each of the four shipments

in issue Peripheral issues of standing and a statute of limitations defense

were disposed of in favor of Complainant on grounds that a complaint

timely filed may be perfected by a later executed assignment of the claim

to the filing party citing Rohm Haas Co v Italian Line 21 SRR

213 1981 and Interconex Inc v Federal Maritime Commission 572

F2d 27 2nd Cir 1977

The Presiding Officer similarly disposed of Respondents affirmative de

fense of estoppel by reason of Complainant s alleged agreement in advance

to the tariff interpretation pursued by Respondents on grounds that the

evidence of the alleged agreement a letter from one of the Respondents

to Kuehne and Nagel and statements by Respondents affiants was insuffi

cient to prove Complainant s acquiescence in the stated tariff interpretation

Relying upon Tariff Rule 2 H under which parts of an article are

to be moved under the same commodity description and rate as the article

of which they are components the Presiding Officer found in favor of

Complainant on the major issue of interpretation of the tariff items in

issue reasoning that the commodity description in Item 1255 should apply

to the entire shipment if more than half of a shipment measured by

weight or volume consists of vehicles 10 20

Respondents except to the Presiding Officer s conclusion that their appli

cation of the tariff provisions in question was inconsistent with the clear

language of the tariff itself Respondents argue that Item 1255 must be

read as referring only to vehicular parts of plants not entire plants

because it is stated as Vehicles Specially Equipped UNBOXEO

Incl uding mobile rock crushing plants Respondents assert that

there is no such thing as a completely mobile rock crushing plant

and therefore an entire plant could never be considered a vehicle They

maintain that the non ro ro pieces which constituted a majority of the

packages shipped should be and were rated as parts of a stationary plant

under Item 765

Respondents also argue that their interpretation of the tariff is supported

by the lower cost of loading and unloading ro ra cargo and by custom

and usage and agreement among the parties In affidavits submitted with

their Motion for Summary Judgment employees of both lines averred that

they had discussed the application of rates to similar shipments with employ

ees of both the Complainant and the consignee Respondents note that

complainant has stated only that it was not aware of any agreement

covering the freight rate assessed without further contesting the statements

contained in Respondents affidavits that the two lines rating policies

were understood and agreed to by all parties Affidavits of Edward

27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 797

NEDLLOYD LINES

L McCabe 2 and Carmine Disclafani 4 attached to Respondents Motion

For Summary Judgment In addition the failure of Complainant or the

shipper to respond to an October 29 1980 letter from a Nedlloyd sales

representative setting forth Nedlloyd s

rating policy for a rock crushing

and conveying plant booked on a Nedlloyd vessel is cited as evidence

consistent with both the unrebutted affidavits and customary business prac

tices Respondents thus contend that a mutual interpretation of the tariff

existed which precludes Complainant s assertion of improper application

of the rates

Finally Respondents fault the Presiding Officer s analysis of the propor

tion of the shipment to be considered as governing which commodity

description it fits The Presiding Officer used weight and volume in deter

mining that the rock crushing plants were mobile because the ro ro pieces

constituted a greater proportion of each shipment Respondents urge that

the more appropriate factor in such a judgment is the proportion of the

nOn ro ro pieces to overall number of packages in each shipment

Complainant in its Reply to the Exceptions argues that the Presiding

Officer correctly found that Respondents misapplied the higher tariff rate

for stationary rock crushing plants to the non ro ro portions of the four

shipments Complainant points to the clear language of Tariff Rule 2 H

and Respondents failure to mention that Rule until the last substantive

paragraph of their brief as support for its contention that the no ro ro

items were misrated

As evidence of the mobile nature of the rock crushing plants Complainant

cites the manufacturer s brochures and the bills of lading which describe

the shipments as portable rock crushing plants Complainant argues that

the comparative weight and volume of the few major ro ro pieces vis

a vis the numerous smaller components of the plants are the distinguishing

feature of mobile rock crushing plants

In response to the argument that Respondents tariff interpretation is

rooted in agreement or custom and usage Complainant argues that nei

ther prior notification of Respondents incorrect application of their tariff

nor a shipper s acquiescence in such an incorrect application can vary

the clear terms of a tariff Complainant also points to inconsistent action

by BBS i e a 1982 shipment on which all of the component parts of

a rock crushing and conveying plant identical in description to those at

issue herein were freighted at the then effective rate for mobile rock crush

ing plants Reply to Exceptions 11 Exhibits Band C Those exhibits

also appear in the record as attachments to Complainant s Answer to Re

spondents Motion For Summary Judgment and Complainant s Cross Motion

For Summary Judgment

DISCUSSION

For the most part Respondent s Exceptions are re arguments of points

made below and addressed in the initial Decision

27 EM C
798 FEDERAL MARITIME COMMISSION

The argument that Complainant is estopped from bringing the present

action by its prior agreement to the Respondents tariff interpretation was

rejected by the Presiding Officer on evidentiary grounds We agree with

the Presiding Officer that the evidence is insufficient to show Complainant s

acquiescence in Respondents tariff application We would also point out

that while such evidence may be used to adduce the precise nature of

the commodity shipped or the meaning of the tariff it may not be used

to estop a party from raising such an issue The only rate which may

be lawfully charged under Respondents tariff is the correct rate and a

shipper s agreement to application of any other rate cannot immunize a

carrier from violation of section 18 b 3 or justify its application of a

different rate Louisville and Nashville R R v Maxwell 237 U S 94 1914

United States v Pan American Mail Line Inc 359 F Supp 728 S D

N Y 1972 Kansas Southern Ry v Carl 227 U S 639 1913

Respondents on exceptions reiterate their contention that the reference

in tariff Item 1255 to specially equipped vehicles unboxed makes their

vehicular nature the major characteristic of commodities covered and there

fore only those portions of the named examples which are actually vehicles

come within the commodity description This argument is not compelling

As the Presiding Officer noted tariff Item 1255 does not limit applicability

to the roro portions of the named items To the contrary the tariff item

contemplates inclusion of pieces or packages of the named units which

are to be carried under the Item 1255 rate unless they individually exceed

60 gross tons in weight in which case shippers are directed to apply

to the 8900 Lines

The Presiding Officer s

reading of tariff Rule 2 H in conjunction with

Items 1255 and 765 as requiring the application of a single rate to the

entire shipment appears correct The record evidence is insufficient to con

vince us however whether the rate to be applied to each of the shipments

in its entirety should be the higher rate under tariff Item 765 for stationary

rock crushing plants or the lower rate under tariff Item 1255 for vehicular

mobile plants

Tariff Items 765 and 1255 clearly contemplate the existence of mobile

rock crushing plants Item 765 contains a proviso within its commodity

description for rock crushing plants specifically referring shippers of such

plants If mobile to Item 1255 which lists mobile rock crushing plants

among other commodities Emphasis supplied The Presiding Officer ruled

that each of the rock crushing plants as a unit should be considered mobile

for purposes of classification under the tariff based upon the preponderance

of the mobile or ro ro pieces as a proportion of each shipment measured

by weight or volume The problem with this resolution is not as Respond

ents contend that it utilizes the wrong yardstick weight and volume rather

than number of pieces per shipment Weight and volume are the traditional

yardsticks for determining total transportation charges They are not how

ever ordinarily useful determinants of the nature of the commodity shipped

27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 799

NEDLLOYD LINES

for purposes of finding the applicable rate The Presiding Officer appears

to have accepted the preponderance of the ro ro pieces in each shipment

as an indication of the mobile nature of the rock crushing plants shipped

and therefore concluded that these plants were sufficiently mobile to fit

within the tariff description of mobile rock crushing plants

The question however which remains unresolved in our opinion is wheth

er these rock crushing plants may in common parlance be considered

mobile consistent with the usual sense of that word as reflected by

the other mobile units listed under tariff Item 1255 2 We find the evi

dence as to the nature of the commodity actually shipped insufficient to

resolve this question 3 While the Presiding Officer himself expressed some

reservations as to the sufficiency of the record in declining to dispose

of the case on the basis of the parties cross Motions for Summary Judg

ment the parties subsequent filings of a Stipulation of Facts proposed

findings of facts briefs and supporting exhibits added nothing new to

the record We therefore remand the case to the Presiding Officer for

further hearing on the question of whether the portable rock crushing plants

here at issue may generally be considered mobile rock crushing plants

Without binding the Presiding Officer in structuring a further hearing we

note that the characterization or classification of such plants within the

industries which produce and use them may be the most material evidence

to the question at issue here 4

THEREFORE IT IS ORDERED That this proceeding is remanded to

the Presiding Officer for the purpose of determining whether the rock

crushing plants at issue herein may be considered mobile rock crushing

plants within the meaning oftariff Item 1255 and

2

Tariff Item 1255 applies inter alia to aircraft servicing trucks airfield vacuum cleaners audiovisual

aid units automobile and scrap metal crushing machinery mobile batching plants asphalt or cement com

munication repair trucks conveyor trucks crash trucks fire engines fork lifts pickup and Warehouse

N OS hoists or lifts telescoping not truck mounted machine shop trucks meteorological instrument

equipped trucks mobile asphalt mixing plants mobile cafeterias and kitchens mobile health clinic mobile

laboratories mobile motion picture units mobile rock crushing plants platforms aerial work radar trucks

radio trucks rigs drilling trucktrailer mounted road sweeping vehicles seismograph instrument equipped

trucks sewer cleaning trucks soil testing laboratory vacuum tank trucks vibratory compactors and welding

trucks

3

The evidence of record consists of the following

Both the bill of lading description and the manufacturers brochure describe the rock crushing plants

as portable The brochures refer to their excellent mobility See e g Barber Green Bulletin

423 Telsmith Portable Crushing Plants up to 280 tph which describes the unit as follows at

p

2

Excellent Mobility

All plant components come equipped with running gear Except for the crushers all motors are

factory wired to a

plug and receptacle on the chassis The control trailer standard with the 3 stage

plant is also wired with plug and receptacle Just plug in and you reready to crush

Exhibit C to Respondents Proposed Findings of Fact and Conclusions of Law

4

It would be particularly helpful to learn for example whether there exist mobile rock crushing vehicles

such as might be used for tunnels or road construction that are selfpropelled and to which tariff Item 1255

would clearly apply as distinguished from the equipment which constitutes the shipments in issue

27 F M C
800 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That the Initial Decision is adopted to

the extent not inconsistent with this Order and vacated in all other respects

i

I

By the Commission

S BRUCE A DOMBROWSKI

Assistant Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 32

KUEHNE AND NAGEL INC

v

BARBER BLUE SEA LINE AND NEDLLOYD LINES

Respondents overcharged Complainant on four shipments in violation of section 18 b 3

of the Shipping Act 1916 46 U S C 817 b 3 Reparation with interest awarded

Paul S Aufrichtig and Bruce LStein for Kuehne and Nagel Inc Complainant

Marc J Fink and Kelly A Knight for Barber Blue Sea Line and NedIloyd Lines Respond

ents

INITIAL DECISION 1 OF SEYMOUR GLANZER ADMINISTRATIVE

LAW JUDGE

Partially Adopted March 28 1985

This is a complaint proceeding filed pursuant to section 22 of the Ship

ping Act 1916 46 U S C 821 Treating the complaint as having been

amended 2

and as having been conformed to the proof it alleges that

the Respondents 3 common carriers by water in foreign commerce and

members of Eighty Nine Hundred Rate Agreement charged demanded

collected and received greater compensation for the transportation of prop

erty than the rates and charges specified in that Rate Agreement s tariff

on file with the Commission and duly published and in effect at the

time in violation of section 18 b 3 of the Shipping Act 1916 46 U S C

817 b 3 in connection with four shipments of rock crushing and conveying

plants and accessories transported from Baltimore Maryland to Damman

Saudi Arabia

BACKGROUND OF THE PROCEEDING

The complaint was filed July 28 1983 by Kuehne and Nagel Inc

In it Kuehne and Nagel claimed standing as an aggrieved party entitled

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

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2

The amendment was made informally in aletter dated October 25 1983 In that letter counsel for Com

plainant advised counsel for Respondents that Complainant had written its claim forovercharges with respect

to ashipment of batching plants carried by Respondent Nedlloyd Lines on August 19 1981 from New

Orleans Louisiana to Damman Saudi Arabia

3

The complaint named the first of the two Respondents Barber Steamship Lines Inc as Agents for Bar

ber Blue Sea Line The caption of the proceeding was changed to its present style by order of September

27 1983 In keeping with the usage employed by the parties in their Stipulation of Facts infra Barber will

be referred to hereafter as BBS

27 EM C 801
802 FEDERAL MARITIME COMMISSION

to reparation by virtue of having paid the freight for the four shipments

as agents for the consignee E A Juffali and Bros Jeddah Saudi Arabia

For present purposes the following are the pertinent details of the four

shipments

Date Bill of Lading Respondent

Amount of

Claimed Over

charge

IAugust 9 1981 BBS 11 448 65

2 August 9 1981 BBS 2 285 80

3 November 21 1981 Nedlloyd 2 287 66

4 November 21 1981 Nedlloyd 2312 43

The answer filed August 31 1983 denied that there were any over

charges affirmatively contested Complainant s standing to sue and affirma

tively invoked the statute of limitations as a bar to suit A third affirmative

defense alleged that Complainant and the consignee were estopped from

alleging the overcharge claims because they agreed in advance of shipment

that the now disputed charges were correctly assessed

After a prehearing conference was held Respondents moved for summary

judgment Complainant s answer to the motion contained a cross motion

for summary judgment 4 Respondents motion was not granted because

factual issues remained in dispute but no written ruling was necessary

because at a further prehearing conference it was decided that the case

would be disposed of by an initial decision based upon a factual record

consisting of 1 a Stipulation of Facts agreed to by counsel for both

sides and filed with the Commission on April 24 1984 2 Exhibits attached

to the separate proposed findings of fact to be submitted by the opposing

parties or exhibits otherwise in the record and incorporated by reference

in those proposed findings s

Subsequent to the filing of the stipulated and proposed findings of fact

I asked Complainant s counsel if Complainant could obtain an assignment

from the consignee of any claims the latter might have against the Respond

ents arising from the four shipments underlying the complaint6 On June

8 1984 Complainant s counsel furnished a telex of such assignment dated

June 7 1984 By telephone counsel for Respondents advised me in effect

that Respondents would not object to a finding that a valid assignment

had been made but that Respondents continued to assert the affirmative

defense of the statute of limitations

The cross motion was not timely See Notice of Further Prehearing Conference served January 9 1984

ordering Respondents notto respond to the cross motion Nevenheless as indicated at a subsequent prehear

ing conference the arguments made in the cross motion willbe considered here

See also Procedural Order served April 30 1984 The Respondents Proposed Findings etc were filed

May 15 1984 Complainant s Proposed Findings etc were received by me on May 18 1984

6Respondents counsel was advised of this telephone conversation with Complainant s counsel and in

formed me that Respondents didnotobject to what I was doing

27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 803

NEDLLOYD LINES

FACTS

In addition to those matters appearing in the Stipulation of Facts my

findings of fact will include those portions of the proposed findings specifi

cally set forth infra Any proposed findings not included are rejected

Nevertheless for convenience some findings of fact appear under headings

of this decision other than Facts

THE STIPULATION OF FACTS

The following is the Stipulation of Facts entered into by counsel for

the parties

1 The Complainant challenges the tariff classification which Respondents

have applied to four 4

shipments of rock crushing and conveying plants

and accessories from Baltimore to Saudi Arabia during the period August

November 1981

2 For each of these shipments Kuehne and Nagel Incacted as agents

for the consignee E A Juffali and Bros Jeddah Saudi Arabia and paid

the freight for the shipments Respondents have contested the standing

of the Complainant to bring this action

3 The Respondents named above are common carriers by water engaged

in transportation of cargo between US ports and Middle East ports and

as such are subject to the provisions of the Shipping Act of 1916 as

amended

4 Under BL8 No 143944028 81 Shipment 1 Barber Blue Sea Line

hereafter BBS carried from Baltimore to Saudi Arabia a shipment

described on the face of the bill of lading as a rock crushing and

conveying plant Telsmith 3646 PP VGF Portable Primary Plant with Vi

brating Grizzly Feeder and Accessories More specifically this shipment

consisted of 66 packages 4 of these packages were ro ro pieces whereas

the remainder were in boxes crates etc and were thus non ro ro pieces

Together these 66 packages weighed 462 190 lbs and encompassed a vol

ume of 38 825 8 CFT 9

The ro ro pieces accounted for 36 by weight

and 53 by volume ofthis shipment

5 Under BL No 143943067 81 Shipment 2 BBS carried from Baltimore

to Saudi Arabia a shipment described on the face of the bill of lading

as a rock crushing and conveying plant Telsmith 2540 PP VOF Portable

Primary Crushing Plant with Vibrating Grizzly Feeder and Accessories

More specifically this shipment consisted of 46 packages 2 of these pack

ages were ro ro pieces whereas the remainder were in boxes crates etc

and were thus non ro ro pieces Together these 46 packages weighed a

7

Kuehne and Nage is alicensed freight forwarder

8

All Bills of Lading involved in this proceeding designate Barber Greene as the shipper

9

As the weight and measurement figures indicate the Barber Greene Telsmith Model 3646 is massive

Its portable primary unit weighs about 159 000 pounds and measures about 50 feet long 23 2 feet high and

14Y2 feet wide The plant includes one 50 foot several 6O foot and one 70 fool conveyers

27 EM C
804 FEDERAL MARITIME COMMISSION

total of 239 010 lbs and encompassed a volume of 17 383 1 CFI IO The

ro ro pieces accounted for 52 by weight and 52 by volume of this

shipment

6 Under BL No 141947032 81 Shipment 3 Nedlloyd Lines hereafter

Nedlloyd carried from Baltimore to Saudi Arabia a shipment described

on the face of the bill of lading as a rock crushing and conveying

plant Telsmith 2540 PP VGF DD Portable Primary Plant with Vibrating

Grizzly Feeder and Accessories More specifically this shipment consisted

of 46 packages 2 of these packages were ro TO pieces whereas the remain

der were in boxes crates etc and were thus non ro TO pieces Together

these 46 packages weighed a total of 239 060 lbs and encompassed a

volume of 17 246 2 CFI The ro ro pieces accounted for 52 by weight

and 52 by volume of this shipment

7 Under BL No 141947029 81 Shipment 4 Nedlloyd carried from

Baltimore to Saudi Arabia a shipment described on the face of the bill

of lading as a rock crushing and conveying plant Telsmith 2540 PP

VGFIDD Portable Primary Plant with Vibrating Grizzly Feeder and Acces

sories More specifically this shipment consisted of 46 packages 2 of

these packages were ro TO pieces whereas the remainder were in boxes

crates etc and were thus non ro TO pieces Together these 46 packages

weighed a total of 239 760 Ibs and encompassed a volume of 17 355 8

CFI The ro TO pieces accounted for 52 by weight and 52 by volume

of this shipment

8 A rate of 122 25 W M was applied to the ro ro pieces in these

shipments This rate is contained in item 1255 of the 8900 Rate Agreement

Freight Tariff No 8 FMC No 8 tariff ll and applies to Vehicles

Specially Equipped UNBOXED Inc Mobile Rock Crushing Plants

A rate of 13125 W M was applied to the non mobile i e the non

ro ro pieces This rate is contained in item 765 of the tariff and applies

to MACHINES AND MACHINERY AND PARTS THEREOF N O S

NOT AGRICULTURAL OR ROAD BUILDING Rock Crushing

Plants IfMobile See Item 1255

9 Complainant contends that the ro ro pieces are the basic components

of the rock crushing plants and that the non TO ro pieces are parts of

the plants and should have been rated at the lower 122 25 rate BBS

and Nedlloyd on the other hand maintain that the rock crushing plants

are not mobile units since the plants themselves are incapable of moving

on wheels and thus do not qualify for the lower rate in item 1255 which

is reserved for specially equipped unbaxed vehicles 12 Accordingly Re

10 Although not as large as Model 3646 Barber Greene Telsmith Model No 2450 is big Its portable pri

mary unit weighs 88 000 pounds and measures about 50 feet long 21 feet high and 14V4 feet wide The

plant includes several SO and one 6Ofoot conveyers

Under Rule 9 of the tariff Kuehne and Nagel was entitled to freight forwarder compensation for services

provided to a member line ofthe Rate Agreement

12 Respondents urge that the rock crushing plants cannot be moved without being completely disassembled

See Respondents Motion for Summary Judgment p

7 Appendix B to Respondents Motion for Summary

27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 805

NEDLLOYD LINES

spondents believe that the rate of 13125 is applicable to all pieces except

for those mobile ro ro pieces which qualify for the lower 122 25 rate

provided for in item 765 of the tariff Respondents contend such rating

is consistent with tariff items 765 and 1255 and with Rule 2H which

provides that Whenever rates are provided for an article named herein

the same rate will also be applicable on named parts of such articles

when so described on ocean bills of lading except where specific rates

are provided herein for such parts Complainant contends that the ro

ro pieces are the main part of the plant Complainant also contends that

the plants should be rated at the 122 25 rate for mobile rock crushing

plants and that the non ro ro parts should according to Rule 2 H be

rated at the same rate 13

10 The total charges for shipment No 1 were 161 171 42 Complainant

believes that the freight should have been 149 722 77 It therefore seeks

a refund of the difference of 11 448 65 As noted BBS maintains that

it charged the correct rate and that no refund is owing

11 The total charges for shipment No 2 were 69 318 99 Complainant

believes that the freight should have been 67 033 19 It therefore seeks

a refund of the difference 2 285 80 As noted BBS maintains that it

charged the correct rate and that no refund is owing

12 The total charges for shipment No 3 were 68 792 56 Complainant

believes that the freight should have been 66 504 90 It therefore seeks

a refund of the difference 2 287 66 As noted Nedlloyd maintains that

it charged the correct rate and that no refund is owing

13 The total charges for shipment No 4 were 69 24151 Complainant

believes that the freight should have been 66 929 08 It therefore seeks

Judgment paras 6 12 In accordance with the terms of the Procedural Order of April 30 1984 supra Ap

pendix B was received in evidence without objection from Complainant There is of course adifference

between evidence being adduced and evidence satisfying the burden of persuasion Appendix B is an affidavit

of Nedlloyd s Assistant Manager for Pricing and Manager of Conferences The affiant states that it is clear

that after assembly none of these plants could be moved without being completely disassembled While

it is probably true that the plant would require some disassembly before it could be moved it is not clear

from any exhibit that it would have to be completely disassembled to be moved It is evident that the

plant was not completely disassembled when it was moved aboard Respondents vessels Consequently

I do not find that the statement of the affiant reflects the facts of record or meets the burden of persuasion

Moreover I

can perceive of no relevancy to the statement The issue is not whether the plant can be moved

when assembled The issue is whether the plant was mobile when shipped Webster s Third New Inter

nationat Dictionary of the English Language Unabridged G C Merriam Company 1967 p 1450 offers

many definitions of the word mobile One is vehicle Another meaning is capable of moving orbeing

moved about readily

13 Appendix B previously described and Appendix A an affidavit of aBBS official attached to the Re

spondents Motion for Summary Judgment state among other things that the lower rate was intended to

pass on to the shipper some of the cost savings realized by thecarrier in loading ro ro equipment thus imply

ing that it costs more to load boxed shipments or boxed parts or accessories of ro ro equipment These state

ments standing alone and there is no other probative evidence do not justify afinding that it costs less

to load and unload ro ro equipment It may be true in many instances that it costs less to handle rOoro

shipments than non rOoro shipments but that lower cost depends upon many factors affecting costs and this

record is barren of any evidence of those factors I find that those statements are merely conclusory and

are unsupported by the evidence

27 F M C
806 FEDERAL MARITIME COMMISSION

a refund of the difference 2 312 43 As noted Nedlloyd maintains that

it charged the correct rate and that no refund is owing

THE APPLICABLE TARIFF PROVISIONS

At the time the shipments were made the following tariff provisions

were in effect

Item No 765 at tariff page 120 read

Commodity Description

Packaging

Machines and Machinery and

PartsThereof N O S Not

Agricultural or Road Build

ing

Rock Crushing Plants1f

Mobile See Item 1255 W M 13125

Item No 1255 at tariff page 149 read as pertinent

Commodity Description Packag

ing

Vehicles Specially Equipped

UNBOXED Incl

Aircraft Servicina Trucks

Airfield Vacuum Cleaners

Audio Visual Aid Units

Automobile and Scrap Metal

Crushing Machinery Mobile

Batching Plants Asphalt or Ce

ment

Communication Repair Trucks

Conveyor Trucks

Crash Trucks

Fire Engines

Fork Lifts Pickup and Ware

house N O S Also see Item

1240

Hoists or Lifts Telescoping Not

truck Mounted

Machine Shop Trucks

Meterological Instrument

Equipped Trucks

Mobile Asphalt Mixing Plants

Mobile Cafeterias and Kitchens

Mobile Health Clinic

Mobile Laboratories

Mobile Motion Picture Units

Mobile Rock Crushing Plants

Platforms Aerial Work

Radar Trucks

Radio Trucks

Rigs Drilling Truckrailer

Mounted

27F M C

Rate Basis Rate

Rate Basis Rate

W M 122 25
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 807

NEDLLOYD LINES

Commodity Description Packag

ing Rate Basis Rate

Road Sweeping Vehicles

Seismograph Instrument

Equipped Trucks

Sewer Cleaning Trucks

Soil Testing Laboratory

Vacuum Tank Trucks

Vibratory CompactorsEff thru

8 20 81 A

Welding Trucks

Units exceeding 60 gross tons in weight per piece or packages Apply

to the 8900 LINES 14

Rule 2 H at page 10 read

RULES AND REGULATIONS

2 Application ofRates

H Whenever rates are provided for an article named herein the same

rate will also be applicable on named parts of such articles when so

described on ocean bills of landing except where specific rates are provided

herein for such parts

DISCUSSION AND CONCLUSIONS

I Affirmative Defenses

It will be helpful to examine the affirmative defenses before proceeding

to the section 18b 3 or tariff overcharge issue

A Standing and Statute of Limitations

The affirmative defenses of lack of standing and running of the statute

of limitations are related and may be examined together even though

standing may no longer be in issue by virtue of Respondents offering

no objection to the validity of the assignment which took place in June

1984

14 It is noted that the primary unit of Telsmith Model 3646 weighs in excess of 60 tons but the Respond

ents do not defend on this basis Under these circumstances it may be assumed that the tariff procedures

were complied with

27 F M C
808 FEDERAL MARITIME COMMISSION

Section 22 a of the Shipping Act 1916 46 U S C 821 a

15 limits

the filing of a complaint for reparation to a period of not more than

two years from the time a cause of action accrues 16

It is not necessary to engage in a prolonged discussion of the twin

affirmative defenses asserted by Respondent in the fact situation presented

for it is now well settled that if a complaint is filed within two years

of accrual of a claim relief by way of reparation will not be denied

merely because a complainant did not perfect its claim by the time the

complaint was filed In enunciating this principle the Commission held

that if a complaint was otherwise timely filed proof of an assignment

of the claim to the complainant after the two year period had run satisfied

the complainant s burden of establishing it was the person that suffered

injuryP See Rohm Haas Co v Italian Line 24 F M C 429 1981

Interconex Inc v Federal Maritime Commission 572 F 2d 27 2 Cir

1977

On the authority ofRohm Haas Co v Italian Line supra the affirma

tive defenses alleging lack of standing to sue and alleging the bar of

the statutory limitations are dismissed

B Estoppel By Agreement

It is not necessary to decide whether the defense of estoppel by agreement

is an available defense to causes of action alleging overcharges because

the existence of that agreement is denied by Complainant and in the

face of that denial there simply is no proof that either Kuehne and Nagel

or Juffali agreed in advance of shipment that the now disputed charges

were correctly assessed

Presumably the evidentiary matter relied upon by Respondents to support

this affirmative defense are the following statements which appear in affida

vits attached to this motion for summary judgment

Paragraph 7 of the affidavit of aBBS vice president states

The shipments involved here are part of a long series of similar

shipments beginning in 1979 or 1980 Prior to and during such

series of shipments I discussed the subject charges with Kuehne

Nagel personnel in New York and Juffali Bros personnel

15 As peninent section 22 a provides

That any person may file with the Commission asworn complaint selling fonh any violation of

this Act by acommon carrier by water and asking reparation for the injury caused there

by The baird if the complaint is filed within two years after the cause of action accrued

may direct the payment on orbefore a day named of full reparation to the complainant for the

injury caused by such violation

16 By Notice Application of Shipping Act of 1984 to Formal Proceedings Pending Before Federal Mari

time Commission on June 18 1984 served May 15 1984 49 Fed Reg 21 798 May 23 1984 the Com

mission stated that determination of the applicability of the Shipping Act of 1984 in cases pending before

the agency on June 18 1984 the effective date of the 1984 Act would be made on acase by case basis

In light of the decision reached herein it is not necessary to determine the applicability of section 11 of

the 1984 Act which provides for a three year statute of limitations to this proceeding See section 11 of

the Shipping Act 1984 46 U S C app 17I0g

17 Of course there must also be proof of a violation of the Shipping Act

27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 809

NEDLLOYD LINES

in Saudi Arabia BBS s

rating policies as reflected and explained

in the accompanying Motion for Summary Judgment were under

stood and agreed to by all parties

Paragraphs 15 and 16 of the affidavit of Nedlloyd s assistant manager

for pricing and manager of conference state

In further support of our position I would point out that the

shipments involved here are part of a long series of similar ship

ments beginning in 1979 or 1980 Prior to and during such series

of shipments I discussed the subject charges with employees of

both Juffali and Bros and Kuehne and Nagel by telephone telex

and letter Nedlloyd s

rating policies as reflected and explained

in the accompanying Motion For Summary judgment were under

stood and agreed to by all parties

Since these shipments began Nedlloyd has always made clear

that ro ro components of stationary batching and rock crushing

plants would be rated under the lower rate received for mobile

plants but that other pieces of such stationary plants would be

rated at the higher rate reserved for stationary plants A letter

from Nedlloyd to Kuehne Nagel reflecting Nedlloyd policy

on this subject is attached

The referenced letter from a Nedlloyd sales representative to a named

but otherwise unidentified Kuehne and Nagel employee 18 reads in pertinent

part

RE NEDLLOYD ROUEN VOYAGE 0129 BALTIMORE

DAMMAM ONE TELSMITH 3646 PP VGF ROCK CRUSHING

AND CONVEYING PLANT

We are writing in reference to your recent booking of this Rock

Crushing and Conveying Plant on the Nedlloyd Rouen voyage

0129

To reiterate on what was quoted to you the following rates will

apply on this shipment

All Rolling Stock Pieces 116 25 W M

All Break Bulk Pieces 125 00 W M

Break Bulk Pieces are subject to heavy lift charges where applica

ble Rock Crushing and Conveying Plant must be shown on the

Bill of Lading in order for these rates to apply

These rates are subject to the Bunker Surcharge and War Risk

Surcharges in effect at the time of shipment

We trust all of the above will satisfy your requirements Should

you have any further questions please feel free to call us at

212 432 9150

18All that the record shows is that she is the notary public before whom the complaint was veIified

27 F M C
810 FEDERAL MARITIME COMMISSION

It is apparent that all that those affidavits and the letter establish is

that a letter dated October 29 1980 was sent from Nedlloyd to Kuehne

and Nagel setting forth Nedlloyd s quotation for the Telsmith Model 3646

rock crushing plant It does not manifest Kuehne and Nagels agreement

or even acquiescence that the quoted rates were the rates published in

the governing tariff Inasmuch as the burden of proof is on the party

alleging an affirmative defense and the Respondents have failed to meet

that burden the affirmative defense of estoppel by agreement must be

dismissed

In apparent recognition that their affirmative defense is unfounded and

unsound in their proposed findings of fact Respondents do not seek a

finding that an agreement existed and in their motion for summary judg

ment Respondents make no argument in support of this defense But they

do not entirely abandon their defense Instead they alter it and call it

custom and usage Thus they claim that the cited passages from the

affidavits and the letter are evidence of custom and usage which they

assert are useful and reliable factors to be considered in determining the

meaning of a tariff item

In Allied Chemical SA v Farrell Lines Inc 23 F M C 381 401

ID 1980 adopted 23 F M C 375 1980 the Commission did state

that custom and usage were useful and reliable tools for interpreting a

tariff but the Commission also stressed that custom and usage as an

aid to interpretation come into play only when certain conditions are satis

fied First custom and usage cannot vary the terms of a tariff Second

there must be evidence that carrier and shipper both accorded the same

meaning to the tariff provision This is the way the Commission put it

Custom and usage cannot vary the terms of a tariff But custom

and usage as demonstrated by the actions of carriers and shippers

are useful and reliable factors to be considered in determining

the meaning of a tariff item

For present purposes it is not necessary to examine the first condition

because the second condition has not been met Respondents have made

no showing of mutuality of tariff interpretation nor any showing of acquies

cence by the shipper interests in the interpretation provided by Nedlloyd

In this respect it must be noted also that there is no evidence of record

showing a course of conduct dating back to shipments made in 1979

despite the statements to that effect in the affidavits The only evidence

of record which shows when the rock crushing plant shipments might

have begun is the Nedlloyd letter of October 29 1980 but that letter

relates to a single booking and cannot be considered as persuasive evidence

of mutuality of tariff interpretation Neither does the letter constitute proof

that the shipment contemplated by the booking took place 19

This finding should not be misunderstood I do not find that Kuehne and NageVJuffali did not ship rock

crushing plants under the 8900 Rate Agreement tariff until the fall of 1981 I merely fmd that the record

27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 811

NEDLLOYD LINES

Accordingly whether it is intended as an adjunct to the estoppel defense

or merely as an aid to tariff construction the custom and usage argument

must be rejected

II THE 18 b 3 ISSUE

The contentions of the two sides to the dispute with respect to the

tariff overcharge issue appear in Paragraph No 9 of their Stipulation of

Facts supra and will not be repeated here except when required for clarity

This much is clear about the facts which bear on the question Sometime

in the fall of 1980 the Complainant booked a shipment of a Te1smith

3646 Rock Crushing Plant aboard a Nedlloyd vessel When that shipment

was booked Nedlloyd quoted a rate of 116 25 W M on all rolling stock

pieces and a rate of 125 00 W M on all break bulk pieces Official

notice may be taken that on October 29 1980 the following rates appeared

in the tariff 20

Item No 76521 125 00 W M

Item No 125522 116 25 W M

It is manifest then neither in 1980 when the letter was sent nor in

1981 when the shipments took place was there any tariff commodity

description for rock crushing plants which included the terminology rolling

stock pieces or break bulk pieces Thus rather than providing an

aid to construction of the tariff provisions the letter introduces elements

dehors the tariff and as will be seen at variance with the terms of the

tariff

While it may be possible armed with the October 29 1980 letter

to reach the conclusion that Respondents intended the tariff to mean what

was represented in the letter the tariff as published is not susceptible

of being accorded that construction The tariff plainly provides for the

application of the Item No 1255 rates to each of the four shipments

of rock crushing plants in their entirety An explanation follows

By way of introduction it should be noted that there is no dispute

that the Item No 765 rate applies to all non mobile rock crushing plants

does not establish that they made shipments before that date Neither do I

find that shipments if any made

before the fall of 1981 were rated any differently by the carriers than were these shipments I find only that

there is no evidence of probative value in the record before me to warrant a

finding that these four shipments

are part of a

long series of similar shipments beginning in 1979 or 1980

20Prior to the writing of this decision Respondents were orally advised that I would take official notice

of the effective tariff provisions at the time of the October 29 1980 lelter Respondents agreed that the tariff

provisions cited infra were in effect at that time See section 7d of the Administrative Procedure Act

5 U S C 556 e and Ru e 226a of the Commissions Rules of Practice and Procedure 46 CFR 502 226 a

authorizing the taking of official notice of a material fact not in the record

21 The tariff description for Item No 765 at 8th rev p

121 effective September 29 1980 was nearly

identical to the one shown in the text under the heading The Applicable Tariff Provisions supra

22The tariff description for Item No 1255 at 16th rev p147 effective October 27 980 differs from

the one shown in the text supra by the absence of the word UNBOXED following the words Vehi

cles Specially Equipped

27 F M C
812 FEDERAL MARITIME COMMISSION

The underpinning of Respondents overcharge defense lies in the belief

that the commodity description set forth in Item No 1255 is applicable

only to unboxed vehicles ie ro ro pieces They put it this way There

fore mobile rock crushing plants that are in the form of unboxed vehicles

get a lower rate than such plants would otherwise obtain 23 From this

base they urge that because the ro ro pieces Whether by weight or

volume amounted to less than 54 of each shipment 24 the remaining

percentage consisting of boxes crates and skids were properly rated under

Item No 755

Respondents argument assumes that there may be a minimum percentage

of vehicle weight or volume which might allow the remainder boxes

skis and crates to carry the vehicle rate Of course the tariff provides

no minimum nor do Respondents suggest what that minimum might be

Under the circumstances it is fair to construe the commodity description

in Item No 1255 to mean that if more than half of a shipment measured

by weight or volume consists of vehicles that commodity description fits

the shipment Respondents attempt two separate approaches to fill the gap

between premise and conclusion First they posit that after assembly the

plants could not be moved without being completely disassembled 25 They

follow this statement with the curious assertion that it would be reasonable

for them to argue therefore that even the ro ro pieces would not qualify

for the vehicle rates by virtue of the fact that since the plants are not

mobile the vehicles could not be components of a mobile plant but

instead should be viewed as components of a stationary plant Seemingly

recognizing that this approach might jeopardize the manner in which they

actually rated the bills of lading Respondents resolve their quandary by

saying that they gave the shipper the benefit of the doubt and classified

the ro ro pieces only under the rates for mobile plants

However the facts upon which Respondents rely for their benefit of

the doubt argument and the facts upon which they attempt to support

their estoppel custom and usage defense collide head on Given the docu

mentary nature of the evidence underlying the custom and usage defense

the benefit of the doubt argument and the facts implied by that

argument are determined to be devoid of credibility

23 Respondents Motion For Summary Judgment p

6

24 See Stipulation of Facts Nos 4through 7 inclusive supra Summarized those Facts disclose the follow

ing with respect to weight and measurement percentages

Shipment

Ro Ro RoRo

Weight Volume

36 53

52 52

52 52

52 52

No 1

No 2

No 3

No 4

2

See n 12 supra rejecting afinding to this effect

27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 813

NEDLLOYD LINES

Second Respondents urge an equally fanciful conclusion bottomed on

their cost saving hypothesis 26 They say that the lower Item No 1255

rate which applies only to unboxed vehicles was intended 27 to pass

on the savings from less costly handling to the shipper One may observe

that this argument is also at loggerheads with the benefit of the doubt

argument Overlooking their admission that the non ro ro portions consisted

of components other than boxes they complete their point by saying Thus

even if the non ro ro pieces in issue were vehicles or parts of vehicles

and they are not most would not qualify for the lower rate because

they are not unboxed 28 Even if the cost savings basis for this argument

had not been rejected I can perceive scant merit to the logic of this

argument for in addition to being without evidentiary support it overlooks

the unambiguous language of the tariff

It is evident that if the tariff writers wanted to limit the application

of the Item No 1255 rate to only those parts of rock crushing plants

which were unboxed ro ro vehicles they were not without the means

to do so Yet they did not They did not make the rate applicable only

to ro ro parts of Mobile Rock Crushing Plants They did make the

lower rate applicable to entire Mobile Rock Crushing Plants whether

or not some components were non ro ro One does not have to go beyond

the commodity and packaging provisions of Item No 1255 for confirmation

that the parts rule of the tariff Rule 2 Application of Rates supra is

to be applied to non ro ro component parts of mobile rock crushing plants

for those provisions specifically identify pieces or packages as units

of Mobile Rock Crushing Plants

Summarizing the commodity description did not limit the lower rates

under Item No 1255 to Vehicles Specially Equipped UNBOXED Incl

Mobile Rock Crushing Plants ro ro pieces only There are no such words

of limitation in the tariff To the contrary as if the unconditional language

Mobile Rock Crushing Plants were not sufficient to allow for the inclu

sion of non ro ro parts Item No 1255 expressly denominates pieces and

packages as units within the scope of that Item Apackage is after all

26See n 13 supra for rejection of the cost saving contention

27Respondents Motion For Summary Judgment p 7

281d In using the word most to describe the quantity of not unboxed components Respondents treat

themselves generously However their proposed findings do not attempt to show the breakdown by number

weight or volume of the components An examination of the bills of lading and riders thereto show the fol

lowing numbers of non ro ro pieces ineach shipment

Shipment Boxes Skids Crates Bundles Cases Pieces

No I 6 9 2 4 9 32

No 2 6 I 2 3 7 25

No 3 6 3 2 3 7 23

No 4 5 I 3 3 7 25

It should be noted that Respondents make no claim that skids crates bundles cases and pieces

do not meet the definition of unboxed

27 F M C
814 FEDERAL MARITIME COMMISSION

a commodity in a container or wrapping of some sort 29 Moreover even

if the package provision did not appear in Item No 1255 the non ro

ro pieces skids crates bundles etc clearly qualify for the rate shown

for that Item under Rule 2 because they are parts of Mobile Rock Crushing

Plants 30

The lesson to be learned from this exercise is that a tariff must be

given the plain meaning of the language which appears within the four

comers of the tariff pages The language of this tariff is quite clear The

only element which detracts from that clarity and which at best treating

that element most favorably to Respondents introduces an ambiguity is

the Nedlloyd letter of October 29 1984 However extrinsic evidence may

not be used to vary the plain meaning of the terms of a tariff nor will

an ambiguity be resolved in favor of the tariff publisher See West Gulf

Maritime Association v Port of Houston Authority 22 F M C 420 451

1980 Rejection of Petition For Reconsideration 22 F M C 560 1980

affd memo sub nom West Gulf Maritime Association v Federal Maritime

Commission 652 F 2d 197 D C Cir 1981 cert denied 454 U S 893

1981 Accordingly I find that Complainant was overcharged for each

of the shipments in violation of section 18 b 3 31

ORDER

It is ordered that Barber Blue Sea Line make reparation to Kuehne

and Nagel Inc in the amount of 13 734 45 together with interest thereon

said interest to be computed in accordance with Rule 253 of the Commis

sion s Rules of Practice and Procedure 46 C F R 502 253

It is further ordered that Nedlloyd Lines make reparation to Kuehne

and Nagel Inc in the amount of 4 600 09 together with interest thereon

said interest to be computed in accordance with Rule 253 of the Commis

sion s Rules ofPractice and Procedure 46 CFR 502 253

S SEYMOUR GLANZER

Administrative Law Judge

29 See Webster s Third New International Dictionary of the English Language Unabridged supra at pp

1617 1618

3oRespondents would apply Rule 2 to their arguments in this way Bearing in mind that Rule 2 allows

parts to take the same rate as the article the commodity described in the tariff they urge that the non

ro ro parts of the rock crushing plants must be viewed as stationary rock crushing plants thus taking the

specific rate provided in Item 765 They do not explain however how component parts of amobile plant

can without more become parts of astationary plant

31 There is no cause to independently examine the substantive applicability of the Shipping Act 1984 46

V S C app 1701 to this proceeding beyond the statement which appears in this note inasmuch as the provi

sions of sections 18 b 3 and 22 of the Shipping Act 1916 which bear upon the subject matter of this case

have not been substantively altered by the comparable provisions in the new statute sections 10 b I and

11 46 V S C app 1709 b 1 and 1710 N B Attorneys fees were not requested inthe complaint nor subse

quently See Notice cited in n 16 supra

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 8421

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN

THE FOREIGN COMMERCE OF THE UNITED STATES SERVICE

CONTRACTS AND TIME VOLUME CONTRACTS

DOCKET NO 8423

FILING OF TARIFFS AND DUAL RATE CONTRACT SYSTEMS IN

THE FOREIGN COMMERCE OF THE UNITED STATES

DOCKET NO 8426

RULES GOVERNING AGREEMENTS BY OCEAN COMMON

CARRIERS AND OTHER PERSONS SUBJECT TO THE SHIPPING

ACT OF 1984

ORDER DENYING PETITIONS FOR RECONSIDERATION

APRIL 5 1985

On November 15 1984 the Federal Maritime Commission published

Final Rules in the above captioned proceedings which implemented various

provisions of the Shipping Act of 1984 46 D S C app 1701 1720

the Act or the 1984 Act 49 Fed Reg 4532096 These Final Rules

became effective on December 15 1984

Subsequent to the publication of the Final Rules the Commission received

pleadings including petitions for reconsideration and replies thereto which

seek modifications of certain aspects of the Final Rules A group of con

ferences serving the Mediterranean Australian and New Zealand trades

filed petitions for reconsideration in Docket Nos 8421 8423 and 84

26 1 A group of conferences serving the North Atlantic trades filed petitions

for rulemaking or alternatively replies in support of the Mediterranean

Conferences petitions in Docket Nos 8421 8423 and 8426 2 A group

I The conferences which are hereinafter collectively referred to as the Mediterranean Conferences are

AustraliaEastern U S A Freight Conference GreeceU S Atlantic Rate Agreement IberianU S North Atlan

tic Westbound Freight Conference Med Gulf Conference Mediterranean North Pacific Coast Freight Con

ference U s Atlantic Gulf Australia New Zealand Conference and West Coast of Italy Sicilian and Adri

atic Ports North Atlantic Range Conference

2

The conferences which are hereinafter collectively referred to as the U S European Carrier Associa

tions are North Europe U S Gulf Freight Association Gulf European Freight Association North Europe

U S Atlantic Conference U S Atlantic North Europe Conference and Pan Atlantic Carrier Trade Agreement

Continued

27 F M C 815
816 FEDERAL MARITIME COMMISSION

of conferences serving the transpacific trades filed a

reply in support of

the Mediterranean Conferences petitions in Docket Nos 8421 and 84

23 3And the North Europe U S Pacific Freight Conference NEUSPFC

filed a

reply in support of the U S European Carrier Associations petition

in Docket No 8426 4

One issue raised in the Petitions regarding conference membership is

currently being addressed in arecently inaugurated rulemaking proceeding 5

The proposed rule would among other things allow conference membership

changes to become effective upon filing and would essentially provide

the relief requested by the Petitions on this issue In fact one of the

petitioning conferences acknowledges that final adoption of the proposed

rule in Docket No 854 will render the conference membership issue

moot

It is the intention of the Commission to take this same approach to

another issue raised in the Petitions and to inaugurate a future rulemaking

on service contracts which will address the question of whether the Shipping

Act of 1984 allows a service contract to be stated in terms of a fixed

portion or percentage of the total quantity of the commodity described

in the contract The Commission believes that such a separate proceeding

will offer a better vehicle for the consideration of this issue in light of

the overall objectives and policies of the 1984 Act This future rulemaking

will also provide an opportunity for further public comment on this specifi

cally defined question

The requested relief from the quarterly index of documents requirement

will not be granted at this time but the rule may be reconsidered at

a future date based on the Commission s experience under the rule The

document index rule requires conferences and rate agreements to maintain

an index of twelve specific categories of documents and to file this index

with the Commission on a

quarterly basis 6 The Petitions have urged the

Commission to withdraw the index rule or to suspend its effectiveness

until the completion of further rulemaking essentially on the grounds that

it is an unreasonable and unnecessary burden In denying the requested

relief at this time the Commission is directing the staff to review the

index filings for the first quarter of 1985 in order to determine the extent

to which such filings may be an undue burden on the industry and to

evaluate the regulatory utility of such indices The Commission will review

the staff s

report concerning the indices filed for the first quarter of 1985

The Office of the Secretary advised filing counsel by letters dated February 20 1985 and March 7 1985

that the pleadings submitted on behalf of the U S European Carrier Associations would be treated as replies

insupport of the Mediterranean Conferences Petitions

3

The conferences which are hereinafter collectively referred to as the Transpacific Conferences are

Trans Pacific Freight Conference of JapanKorea and Japan Korea Atlantic and Gulf Freight Conference

4

All of these pleadings are hereinaftercollectively referred to as the Petitions

S See Docket No 85 4 Miscellaneous Modifications to Existing Agreements Exemption 50 Fed Reg

5401 5402 February 8 1985

6See 46 C F R tiS72 704 The first quarterly reports for the period January I 1985 to March 31 1985

areto be submitted on orbefore April 30 1985

27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 817

THE FOREIGN COMMERCE OF THE UNITED STATES

and based upon this experience will at that time determine whether to

rescind or modify the index requirement

Finally the Commission has determined not to withdraw its statement

that loyalty contracts would appear to be subject to both the Shipping

Act of 1984 and the federal antitrust laws The Commission s statement

was made in response to a comment which suggested that the use of

a loyalty contract is an activity which enjoys antitrust immunity under

section 7 of the 1984 Act 46 U S c app 1706 The statement was

not volunteered by the Commission as is suggested in the Petitions

Nor is the statement an advisory opinion as is suggested in the Petitions

Nor is the statement intended to assert or imply that the Commission

has any jurisdiction over the antitrust laws The statement is merely a

response to a comment and an explanation of the action taken by the

Commission in issuing its Final Rules This statement remains the Commis

sion s view of section 7 of the Act and the Commission does not see

any need to further address this question in a future rulemaking

Accordingly the Commission has determined to deny the Petitions In

the case of the service contract and quarterly index issues this denial

is without deciding the ultimate merits of the various arguments presented

in the Petitions

TIIEREFORE IT IS ORDERED That the Petitions filed on behalf of

the Mediterranean Conferences in Docket Nos 8421 8423 and 84

26 the Petitions filed on behalf of the U S European Carrier Associations

in Docket Nos 8421 8423 and 8426 the Petitions filed on behalf

of the Transpacific Conferences in Docket Nos 8421 and 8423 and

the Petition filed on behalf of the North Europe U S Pacific Freight Con

ference are denied

By the Commission

5 BRUCE A DOMBROWSKI

Acting Secretary

27 F M C
FEDERAL MARITIME COMMISSION

46 CPR PART 580

DOCKET NO 8427

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN

THE FOREIGN COMMERCE OF THE UNITED STATES CO

LOADING PRACTICES BY NVOCCS

April 10 1985

Final rule

This Final Rule addresses the practices of Non Vessel

Operating Common Carriers NVOCCs combining

cargo usually for the purpose of attaining full container

loads such practices being commonly known as co load

ing The rule requires each NVOCC to describe in its

tariffs the undertaking to offer or perform co loading

Further the Rule requires that NVOCCs give actual no

tice to a shipper that its cargo has been co loaded and

of the identity of the other NVOCCs involved in the

co loading Special rates published by one NVOCC for

the exclusive use of other co loading NVOCCs will

be prohibited

DATES Effective May IS 1985

SUPPLEMENTARY INFORMATION

The Commission initiated this rulemaking proceeding by publication of

a Notice of Proposed Rulemaking in the Federal Register on July 25

1984 49 FR 29980 The Commission received 15 comments on the Pro

posed Rule Commenting parties or groups of parties are 1 3 Way Ocean

2 Airport Brokers Corporation 3 John v Carr Son Inc 4 F X

Coughlin Co 5 Greene Companies International Inc 6 Hemisphere

Forwarding Inc 7 FW Myers Co Inc 8 New England Groupage

9 Reardon Export Inc 10 Associated Latin American Freight Con

ferences Atlantic GulfWest Coast of South America Conference East

Coast Colombia Conference South Atlantic GulfGuatemala EI Salvador

Honduras Rate Agreement South Atlantic Gulf Panama Costa

Rica Rate Agreement United States Atlantic Gulf Ecuador Freight Con

ference United States Atlantic Gulf Jamaica and Hispaniola Steamship

Freight Association United States Atlantic GulfSoutheastern Caribbean

Conference United States Atlantic Gulf Venezuela Freight Association

United States FloridaEcuador Steamship Conference West Coast of South

America Northbound Conference 11 8900 Lines Greece U S Atlantic

ACTION

SUMMARY

818 27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 819

THE FOREIGN COMMERCE OF THE UNITED STATES

Agreement Iberian U S North Atlantic Westbound Freight Conference

Italy South France South Spain Portugal U S Gulf and the Island of

Puerto Rico Conference Marseilles North Atlantic U S A Freight Con

ference Mediterranean North Pacific Coast Freight Conference U S Atlan

tic Gulf Australia New Zealand Conference West Coast of Italy Sicilian

and Adriatic Ports North Atlantic Range Conference I2 JapanKorea At

lantic and Gulf Freight Conference New York Freight Bureau Philippines

North America Conference Trans Pacific Freight Conference Hong Kong

Trans Pacific Freight Conference of JapanKorea 13 Council of European

Japanese National Shipowners Associations I4 International Associa

tion ofNVOCCs and I5 National Customs Brokers and Forwarders Asso

ciation of America Inc

In general the commenters views were as follows

Individual NVOCC s Comments

New England Groupage New England supports the Proposed Rule with

out any changes New England states that the abuses of co loading greatly

exceed any benefit that the shipping public might derive from the practice

Three other commenters 3 Way Ocean 3 Way John V Carr Son

Inc Carr and EX Coughlin Co Coughlin support the Commission s

Proposed Rule in part These commenters essentially object to the docu

mentation requirements and the prohibition of special co loading rates Fur

ther details ofthese and other commenters views are outlined herein under

the various sub parts of the Proposed Rule

The five other commenting NVOCCs Airport Brokers Corporation Air

port Greene Companies International Inc Greene Hemisphere Forward

ing Inc Hemisphere EW Myers Co Inc Myers and Reardon

Export Inc Reardon do not support the Proposed Rule because in their

opinion co loading does not require special treatment with a special tariff

filing rule Hemisphere urges the Commission to enter into an investigation

prior to pursuing a final rule which might result from the instant rulemaking

procedure Hemisphere Airport Greene Myers and Reardon are of the

opinion that the public is aware of the liability and responsibilities inherent

in co loading and that the present tariffs and rate structures of the NVOCCs

and the VOCCs accommodate the economics and efficiencies of co loading

Further Greene is of the opinion that the Commission lacks jurisdiction

in the matter of co loading agreements

Conferences Comments

The Conferences support the Commission s effort to promulgate a rule

covering co loading The Conferences however would modify the rule

to provide I additional documentation requirements which would require

NVOCCs to notify the shipper prior to booking of the fact that the shipper s

cargo would be co loaded 2 a restriction to allow co loading only for

27 F M C
I

I

i

820 FEDERAL MARITIME COMMISSION

LCL shipments and 3 a clarification of the rule as it relates to NVOCCs

co loading activities which involve agreements

Transportation Organizations Comments

The Council of European Japanese National Shipowners Associations

CENSA support the Proposed Rule but suggest that the Commission

review and clarify its jurisdiction in any circumstance where an NVOCC

also acts as an ocean freight forwarder or undertakes other activities in

connection with export or import shipments

The International Association of NVOCCs IANVOCCs shares Greene s

views with respect to the Commission s

jurisdiction over NVOCC agreement

matters The IANVOCCs supports the Proposed Rule in principle but urges

that the Commission delete any reference in the rulemaking that suggests

that NVOCCs can avoid their responsibility in publishing tariff information

concerning co loading by merely mentioning that such an activity is per

formed under the terms of an agreement

Lastly the National Customs Brokers and Forwarders Association of

America Inc NCBFAA is of the opinion that the Proposed Rule will

impede lawful NVOCC activities which are regarded as beneficial to U S

exports and thus requests that the Commission grant its request for oral

argument in order to develop further details in this rulemaking Briefly

NCBFAA states that the proposed requirements relating to the explanation

of liability in both the tariff and in shipment documentation in section

580 17 b 3 and the proposed prohibition of special co loading rates in

section 580 17 d are burdensome to the NVOCCs harmful to the shipping

public and will curtail viability of the forwarder NVOCC

Comments directed to specific portions ofthe proposed rule are discussed

below

Section 580 17 Special Rules and Regulations Applicable to Co loading

Activities of Non Vessel Operating Common Carriers NVOCCs

a Definition

For the purposes of this section Coloading means the com

bining of cargo by two or more NVOCCs for tendering to

an ocean carrier under the name of only one of the NVOCCs

The National Customs Brokers and Forwarders Association of America

Inc NCBFAA suggests that where the term ocean carrier appears

in section 580 17 a it should be amended to state ocean common carrier

to be consistent with the statutory term and definition We will not adopt

this suggestion because it would unnecessarily narrow the scope of the

regulations An NVOCC is a common carrier regardless of whether the

cargo it handles is ultimately transported by an ocean common carrier

or by some other type of ocean carrier such as a contract or tramp

27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 821

THE FOREIGN COMMERCE OF THE UNITED STATES

carrier I The ability to co load and the necessity for notice to and equal

treatment of shippers are unaffected by the NVOCC s choice of underlying

vessel operator

Greene states that the definition ignores the important distinctions between

co loading by agreement and co loading through published tariffs While

there may be important distinctions between these two types of co loading

arrangements the definition is not the place in which these distinctions

need be reflected We believe that co loading by either type of arrangement

does and should meet the definition set forth in the Rule As indicated

below the substantive requirements of this Rule are made applicable only

to those co loading arrangements where a shipper carrier relationship exists

between the tendering and receiving NVOCCs regardless of the existence

of an agreement

The Associated Latin American Freight Conferences et al ALAFC

suggest that the words in the import or export foreign commerce of

the United States be added to the definition of co loading to make it

clear that these regulations apply equally to foreign based NVOCCs operat

ing in U S import trades It was the intent of the Commission to apply

these rules to all NVOCCs subject to the Shipping Act of 1984 and we

will therefore adopt ALAFC s suggestion in the interest of clarity

The U S Atlantic Gulf Australia New Zealand Conference et al

AGANZ suggest that the definition be amended to delete the words under

the name of only one of the NVOCCs Their concern is that the regulations

would arguably not apply if cargoes are tendered to an ocean common

carrier under the name of more than one NVOCC The Commission is

unaware of present co loading arrangements by which cargo is tendered

to an ocean common carrier under the name of more than one NVOCC

However the possibility would appear to exist as suggested by AGANZ

and if so could circumvent the intent of the Rule Therefore we will

adjust the definition to accommodate AGANZ s concern but will leave

intact the concept that the cargo must be tendered to the ocean carrier

in the name of one or more of the NVOCCs involved in the co loading

To delete the phrase completely would broaden the scope of the regulations

and could arguably encompass activities beyond the Commission s

jurisdic

tion such as those of shippers agents freight brokers etc One or more

of the NVOCCs involved in the co loading must be named as the shipper

on the ocean carrier s bill of lading

I The definition of NVOCC found in section 317 of the Shipping Act of 1984 46 V S C App 17027

states that an NVOCC is ashipper in its relationship with an ocean common carrier We view this language

as aclarification of the relationship between an NVOCC and the only type of ocean carrier that is regulated

by the 1984 Act when the NVOCC tenders cargo to that type of carrier We do not believe that Congress

intended by that language to limit regulation of NVOCCs to only those which tender cargo to ocean com

mon carriers The activities of the NVOCC which are sought to be regulated ie its holding out to the

public as a common carrier are not affected by the type of vessel operating carrier to which the NVOCC

chooses to tender the cargo

27 F M C
822 FEDERAL MARITIME COMMISSION

Section 580 17 b 1

a Filing Requirements

1 All tariffs filed by an NVOCC shall contain a role which

describes its co loading activities If co loading is accomplished

pursuant to the terms of an agreement between or among

NVOCCs it is only necessary to note the existence of such agree

ment in each of the applicable NVOCC tariffs If a co loading

service is not offered or performed by an NVOCC its tariffs

shall contain a rule which states that co loading is not offered

or performed by the publishing carrier

Greene argues that the Commission lacks jurisdiction to promulgate regu

lations which require information concerning the implementation of private

co loading agreements and that none of the proposed sections of the Rule

effectively deal with co loading when offered or performed pursuant to

an agreement between NVOCCs

The IANVOCCs shares the same view as Greene with respect to the

Commission s

jurisdiction over NVOCC agreement matters The

IANVOCCs however supports the Commission s proposed rule in principle

and suggests that the Commission delete any reference in the rulemaking

which infers that NVOCCs can avoid their responsibility in publishing

tariff information concerning co loading by merely mentioning that such

an activity is performed under an agreement

ALAFC are of the opinion that NVOCCs should be required to append

any agreement it has executed on co loading to its tariff so that shippers

are made aware of any arrangements between NVOCCs

AGANZ and the Transpacific Freight Conference of JapanKorea et al

Trans Pac suggest that section 580 17 be amended to accommodate co

loading activities which are implemented through an agreement It is

AGANZ s and Trans Pac s opinion that agreement matters relating to co

loading must be viewed as a practice subject to tariff filing requirements

AGANZ further suggests that a distinction should be drawn between

co loading agreements which do not involve the furnishing of common

carrier services and co loading agreements which do involve the furnishing

of common carrier services by the receiving NVOCC to the tendering

NVOCC In the latter case AGANZ argues that the tariffs of the receiving

NVOCC should be required to reflect the terms ofthe arrangement regard

less of the existence of an agreement

AGANZ also comments that co loading agreements could be required

to be filed under the Shipping Act of 1984 when an NVOCC party to

such an agreement is otherwise subject to agreement filing requirements

of either the 1984 Act or the Shipping Act 1916 Attention is called

to the Commission s Notice of Proposed Rulemaking of August 29 1984

49 FR 34253 in which the Commission announced an opinion that section

15 of the 1916 Act continued to apply to agreements between freight

forwarders

27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 823

THE FOREIGN COMMERCE OF THE UNITED STATES

This last suggestion is one that is beyond the scope of this rulemaking

proceeding and one that we believe addresses an unlikely situation Since

AGANZ filed its comments Congress has acted to remove agreements

among freight forwarders from the filing and approval requirements of

the Shipping Act 1916 H R 5833 Pub L No 98 595 98 Stat 3130

1984 See 49 FR 46174 November 23 1984 The only two entities

now required to file agreements with the Commission relating to foreign

commerce are ocean common carriers and marine terminal operators neither

of which is a typical affiliate of an NVOCC Should such a situation

arise in which ocean common carriers or marine terminal operators enter

into an NVOCC co loading agreement we would address that situation

on an ad hoc basis

The general subject of co loading performed pursuant to the terms of

an agreement requires some clarification As we said in the Notice of

Proposed Rulemaking p

4 note I we express no opinion on the relation

ship that may be created between two or more NVOCCs by the terms

of a private agreement However we agree with the comments that suggest

that all shipper carrier relationships between two or more NVOCCs should

be reflected in appropriate NVOCC tariffs regardless of the existence of

a separate agreement Section 8 of the Shipping Act of 1984 is very

explicit in its requirement that each common carrier file

tariffs showing all its rates charges classifications rules and

practices between all points or points on its own route and on

any through transportation route that has been established

Complementing the filing requirement of section 8 are the prohibitions

of section lO b of the act

b Common Carriers No common carrier either alone or in

conjunction with any other person directly or indirectly may

I charge demand collect or receive greater less or different

compensation for the transportation of property or for any serv

ice in connection therewith than the rates and charges that

are shown in its tariffs or service contracts or

3 extend or deny to any person any privilege concession

equipment or facility except in accordance with its tariffs or

service contracts

As long ago as 1935 the Commission s predecessor the United States

Shipping Board Bureau recognized that

The law prohibits special arrangements between shippers and

carriers unless the terms thereof are fully disclosed in the tariff 2

2 n1erCoaslal 1IIeSligalioll 1935 I USSBB 400 416 1935 While that case was decided under the Inter

coastal Shipping Act 1933 46 U S c app 843 el self the tariff filing and adherence provisions of that

Act are virtually identical to those now contained in the Shipping Act of 1984 with the exception of the

COlllillued

27 F M C
J

824 FEDERAL MARITIME COMMISSION

The important question pertinent to this proceeding is whether a shipper

carrier relationship exists between the NVOCCs in a co loading arrangement

If it does the statute requires that the carrier party to that arrangement

include all of the applicable rates charges concessions privileges etc

in its tariffs The rate in the effective tariff affords the only legal basis

upon which freight charges may be collected any agreement to the contrary

notwithstanding 3

A shipper carrier relationship is established in a co loading arrangement

when the receiving NVOCC issues a bill oflading to the tendering NVOCC

for the transportation of the co loaded cargo In such instances the tendering

NVOCC looks to the receiving NVOCC in the event of loss or damage

to the co loaded cargo and the tendering NVOCC has no privity of contract

or other type of direct relationship with the ocean carrier or other carrier

which forms the next link in the transportation chain

In contrast one example of a carrier carrier relationship would appear

to be where two NVOCCs hold themselves out jointly to the shipping

public to co load and transport cargo In such cases we would expect

that a joint or common bilI of lading would be issued to the originating

shipper and that the cargo would be tendered to the ocean carrier in

the names of both co loading NVOCCs Other types of carrier carrier rela

tionships may be created by co loading agreements and are not meant

to be excluded by this example

We have clarified section 580 17 b l

to distinguish between co loading

agreements which create a shipper carrier relationship and those which create

a carrier carrier relationship The issuance of a bilI of lading by the receiving

NVOCC to the tendering NVOCC wilI create a presumption that a shipper

carrier relationship exists In neither case are we suggesting that the agree

ment itself must be filed with the Commission nor are we asserting any

other type of jurisdiction over the agreement per se We are only taking

the position that a common carrier s tariff must include all of the terms

and conditions of its offering to the shipping public and that this fundamen

tal principle cannot be circumvented or avoided by a private agreement

A final comment on section 580 17 b l

is made by Trans Pac who

suggests that NVOCCs should be restricted to co loading only less than

containerload LCL cargo Trans Pac states that the Commission and

NVOCCs have relied upon LCL service as justification for the activity

and it should therefore be so restricted

The Commission will not adopt this suggestion The fact that co loading

of LCL cargo is more prevalent and more likely than co loading of fun

container loads is no reason to prevent the latter The concern that Trans

Pac expresses over possible delay and unnecessary expense to shippers

and consignees is one that the market should be able to control given

new provisions for Service Contracts contained in the 1984 Act Since only ocean common carriers and not

NVOCCs may offer such contracts this difference has no relevance to the instant proceeding

3C W Spmce v Pacific Atlantic S S Co I USSBB 624 626 1936

27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 825

THE FOREIGN COMMERCE OF THE UNITED STATES

the notice that these rules will require concerning the co loading activities

of NVOCCs

Section 580 17 b2

In the event an NVOCC tenders cargo to another NVOCC

for co loading its tariffs shall provide a clear explanation of its

liability to the shipper and its responsibility to pay any other

common carrier s rates and charges necessary in order to transport

the shipper s cargo to its destination

Hemisphere is of the opinion that NVOCC tariffs are clear and definite

with respect to the liability ofNVOCCs participating in co loading activities

If that is true then this part of the rule presents no additional burden

or imposition upon the NVOCC industry

However the Commission s concern here is that confusion may exist

in the minds of both shippers and NVOCCs in a situation where there

is a failure of performance or damage to the cargo at some intermediate

step in the transportation network We want the initial NVOCC to make

it absolutely clear to its shippers that it will live up to its obligations

as a common carrier regardless of lower liability limits by subsequent

NVOCCs lack of privity with the ocean carrier the absence of its own

employees or facilities at particular destinations or a myriad ofother prob

lems which may arise when cargo is co loaded

Section 580 17 c Documentation Requirements

NVOCCs which tender cargo to another NVOCC for co loading

shall notify each shipper of such action by annotating each applica

ble bill of lading with a a summary statement of its liability

and its responsibility to pay any other rates and charges necessary

to transport the cargo to its destination and b the identity of

any other NVOCC with which its shipment has been co loaded

3 Way states that the requirements of the proposed rule relative to docu

mentation ie to provide a

summary statement of liability and the

identity of any other NVOCC with which its shipment has been co

loaded is redundant and ineffective 3 Way is of the opinion that

NVOCCs tariffs already contain provisions setting forth liability

3 Way does not support the identity requirement unless the other

co loading NVOCCs liability is also stated 3 Way further states that if

there is any justification for the identity requirement it should be ex

panded to include the identification of the VOCC

3 Way contends that the question is not one of identity but one of

demonstrating the capability of liability 3 Way s answer is that capability

probably means licensing and bonding

Carr objects to the proposed requirement to identify the name of the

other NVOCC on the bill of lading because it could compromise its

relationship with the shipper According to Carr NVOCCs not only co

27 F M C
826 FEDERAL MARITIME COMMISSION

load because of short freight commitments less than containerload but also

because ofoverflow conditions

Coughlin supports 3 Way s views that the separate documentation require

ments are unnecessary so long as liability requirements are clearly set

forth in the tariff

Greene argues that the documentation requirements are burdensome

Reardon is of the opinion that the liability issue is really between

the NVOCC and the ocean carrier with the responsibility being passed

up to the master loader and the steamship company

The NCBFAA is of the opinion that it is unnecessary to require NVOCCs

to state separately their liability and responsibility to pay any other NVOCCs

charges First NCBFAA states that the NVOCC s

liability is already pro

vided in its specimen bill of lading regardless of co loading and that it

is common knowledge that a shipper is not responsible for any charges

beyond those charged by the NVOCC which receives its cargo NCBFAA

alleges that the Commission s proposed rule is unnecessary and discrimina

tory in that there are situations involving the handling and custody of

cargo by VOCCs which are analogous to co loading which are not subject

to special tariff filing requirements e gan intermodal movement wherein

a VOCC uses an inland carrier to whom a portion of the through rate

is due

ALAFC suggests that the Commission require the NVOCC which engages

in co loading to advise the shipper in writing of such fact prior to booking

cargo ALAFC has provided suggested language to accommodate the added

requirement

In view of these comments the Commission is deleting the requirement

for annotating each applicable bill of lading with a

summary statement

of the NVOCC s

liability and responsibility to pay any other rates and

charges necessary to transport the cargo to its destination We are persuaded

that the inclusion of such information in the NVOCC s tariffs and specimen

bill of lading will be sufficient to avoid possible confusion over liability

and the responsibility for payment of transportation charges

However we will continue the requirement that an NVOCC provide

a shipper with notification of the identity of other NVOCCs with which

the shipper s cargo has been co loaded We view this notice as an essential

ingredient of our goal of ensuring that the shipping public is fully aware

ofan NVOCC s co loading activities

A shipper which tenders cargo to an NVOCC does so with the clear

understanding that the cargo will in turn be tendered to a vessel operating

carrier Many shippers would be surprised however to learn that their

cargo had been tendered to another NVOCC for co loading If this is

the type of service offered by an NVOCC then shippers have a

right

to know that fact They can then make an intelligent choice of the type

of service they prefer

27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 827

THE FOREIGN COMMERCE OF THE UNITED STATES

We believe that the method we have chosen for identifying other

NVOCCs annotating the bill of lading is straightforward and of minimal

burden to the industry Because of this we are rejecting the suggestion

of ALAFC that the NVOCC should notify the shipper in writing prior

to booking the cargo This requirement would appear to be notonly more

burdensome but also unrealistic in that a decision to co load cargo may

not be made prior to its booking

580 17 d

d Co Loading Rate Application

No NVOCC tariff shall contain special co loading rates for

the exclusive use of other NVOCCs If cargo is accepted by

an NVOCC from another NVOCC which tenders that cargo in

the capacity of a shipper it must be rated and carried under

tariff provisions which are available to the general public

3 Way states that the Commission has apparently considered the status

of NVOCCs as shippers only rather than as shippers carriers since it

has proposed to prohibit any special rates which apply for the account

of another NVOCC 3 Way questions why the prohibition for NVOCCs

to publish special rates for the account of other NVOCCs does not apply

in the instance of VOCCs which publish rates to apply only for the account

of NVOCCs 3 Way is of the opinion that NVOCCs are a distinct class

of shipper because they are also a common carrier According to 3

Way without the Commission s

recognition of the above distinction which

would permit special co loading rates between NVOCCs the economic

incentive to the NVOCCs to co load and the advantages of co loading

services will be lost

Airport supports 3 Way s position that the Commission should recognize

NVOCCs as a distinct class of shippers for the purpose of allowing special

co loading rates which are applicable only for the account of another

NVOCC Airport is of the opinion that the proposed rule will result in

NVOCCs 1 holding shipments for consolidations until they build a volume

large enough to fill a container 2 going out of business andor 3

diverting cargo through the unregulated CanadianMexican ports Airport

views the proposed rules as discriminatory when other entities are per

mitted to pool cargoes Airport describes the operation of an Export

Trading Company and the Japanese space charter arrangement as being

analogous to co loading

Airport maintains that special rates are justified since co loading elimi

nates sales calls extraordinary assistance in setting up shipments and docu

ments credit checks rate quotes for shipments that might never be shipped

and various other services that require the publication of higher rates to

general shippers

Hemisphere argues that no discrimination is involved in the practice

of NVOCCs co loading or in the application of the rates for such services

27 F M C
828 FEDERAL MARITIME COMMISSION

Hemisphere indicates that the only instruction received by NVOCCs from

shippers is to obtain the most economical and expedient manner ofhandling

their shipments that is available Further Hemisphere states inasmuch as

NVOCCs are not a major force in all trading areas the publication of

special rates by NVOCCs which are restricted to other NVOCCs is bene

ficial to the shipping public by allowing NVOCCs as a group of shippers

carriers to take advantage of full containerload rates offered by VOCCs

Myers sets forth the same views as 3 Way Airport and Hemisphere

in attempting to justify the continuation of special co loading rates among

NVOCCs Additionally Myers suggests that NVOCCs and other shippers

are not similarly situated and is of the opinion that the elimination of

co loading rates would create discrimination in favor of large and specialized

NVOCCs which would enjoy VOCC Freight AIl Kinds FAK rates exclu

sively

Carr Couglin Greene Reardon and NCBFAA share the views of 3

Way Airport Hemisphere and Myers in the matter of the Commission s

proposed rule prohibiting special rates

The ALAFC AGANZ Trans Pac and CENSA support the Commission s

rule prohibiting special rates ALAFC suggests that the Commission s analy

sis was not comprehensive enough to conclude that co loading was bene

ficial to the shipping public ALAFC suggests that co loading and the

special tariff rates only benefit the NVOCCs and not the actual shippers

using NVOCCs which co load

The suggestion that NVOCCs and other shippers are not similarly situ

ated or that NVOCCs are a distinct class of shippers is one that

must be supported by transportation factors The fact that they can all

be identified as NVOCCs or that they are also carriers is not sufficient

It is well settled that the identity of a shipper is not a legitimate transpor

tation factor 4

The fact that NVOCCs have a carrier alter ego is irrelevant to their

status as shippers when tendering cargo to another carrier They are acting

solely as shippers in that capacity and the question to be resolved here

is whether their shipments can be distinguished from those ofother shippers

of like commodities

Some effort is made in the comments to distinguish between NVOCC

shipments and those tendered by other shippers One suggestion is that

the greater volume of the shipments received from other NVOCCs warrants

lower rates Ifthat is the case volume discounts could certainly accommo

date the cargo and would not suffer from the infirmity of being offered

only to certain shippers on the basis of their identity

Another suggested distinction is alleged savings in costs of sales customer

service documentation etc inherent in shipments from other NVOCCs

4

I C C v Delaware Lackawanna v Western Railroad Co 220 U S 235 252 1911 I C C v United

Slales 289 U S 385 1933 Milchell v United Slales 313 U S 80 94 1941

27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 829

THE FOREIGN COMMERCE OF THE UNITED STATES

While cost savings could certainly warrant a difference in rates very few

specifics are offered which could be identified solely with NVOCC co

loaded cargo For example it would appear that cargo tendered by a

freight

forwarder would entail savings in sales services and documentation similar

to those alleged to be realized in connection with NVOCC co loaded cargo

Several of the commenters also suggest that special co loading rates

for NVOCCs should not be prohibited because some VOCCs offer special

FAK rates for consolidated cargo tendered by NVOCCs consolidators and

freight forwarders We do not find this argument persuasive Any VOCC

rates which are limited would be evaluated on the same principles discussed

in connection with this rule Without focusing specifically on the VOCC

rates to which the commenters made reference we cannot make any judg

ment as to whether any such rates may be justified on the basis of transpor

tation characteristics At the very least it seems clear that the VOCC

tariff description referred to in these comments is not identical to the

special NVOCC co loading rates addressed in this rule

The Commission is not attempting to prohibit legitimate discounts which

may apply to NVOCC co loaded cargo However on the basis of the

comments herein we are still not persuaded that co loaded cargo tendered

by NVOCCs is sufficiently distinct in and of itself to warrant a rate

based solely upon the fact that the cargo is tendered by an NVOCC

There are numerous other legitimate means of offering discounts to

this type of cargo so long as the same rates would apply to any other

shippers of the same type of cargo For example FAK rates time volume

rates and consolidated cargo rates are all conventional ratemaking devices

which could be used to offer reduced rates to other NVOCCs without

the stigma of excluding other shippers of like commodities

Our intent in this rule is not to eliminate or to discourage co loading

activity but rather to raise the level of shipper awareness of this activity

and to ensure that it is not being used as a device for unjust preference

prejudice or discrimination among shippers To that end this rule is being

added to 46 CFR Part 580

Inasmuch as NVOCCs will be required to describe co loading activities

in each of their tariffs the Commission is amending its tariff filing regula

tions so that such information will appear in a uniform location Paragraph

5 d 14 of Part 580 presently listed as Reserved will therefore be

assigned to the subject rule and shall be captioned Special Rules and

Regulations applicable to co loading activities of Non Vessel Operating

Common Carriers NVOCCs

Oral argument has been requested by NCBFAA The Commission has

determined to deny this request because it believes that the issues have

been duly considered in this proceeding NCBFAA has had the same oppor

tunity as other commenters to argue its position and it has in fact done

so eloquently in its comments No other commenter has either filed a

similar request or indicated support for the request of NCBFAA

27 F M C
830 FEDERAL MARITIME COMMISSION

The Commission has determined that this final rule is not a major

rule as defined in Executive Order 12291 dated February 17 1981 because

it will not result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individuals indus

tries Federal State or local government agencies or geographic regions

or

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with Foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies pursuant

to section 605 b of the Regulatory Flexibility Act 5 U S C 601 et seq

that this rule will not have a significant economic impact on a substantial

number of small entities including small businesses small organizational

units or small governmental jurisdictions

ColIection of Information requirements contained in this regulation have

been approved by the Office of Management and Budget under provisions

of the Paperwork Reduction Act of 1980 P L 96511 and have been

assigned control number 3072 0046

List of subjects in 46 CPR Part 580

Cargo Cargo vessels Exports Harbors Imports Maritime carriers Rates

and fares Reporting and recordkeeping requirements Water carriers Water

transportation

Therefore pursuant to 5 U S C 553 and sections 8 and 17 of the Shipping

Act of 1984 46 U S C app 1707 and 1716 the Federal Maritime Commis

sion is amending Title 46 CPR Part 580 as folIows

1 The authority citation to Part 580 continues to read

Authority 5 U S C 553 46 U S C app 1702 1705 1707 1709

1712 17141716 and 1718

2 Section 580 5 is amended by adding paragraph d 14 to read as

folIows

580 5 Tariff contents

d

14 Special Rules and Regulations Applicable to Co loading Activities of

Non Vessel Operating Common Carriers NVOCCs

i Definition For the purpose of this section Co loading means the

combining of cargo in the import or export foreign commerce of the

United States by two or more NVOCCs for tendering to an ocean carrier

under the name of one or more of the NVOCCs

ii Filing Requirements

A lAII tariffs filed by an NVOCC shaH contain a rule which describes

its co loading activities

27 F M C
PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN 831

THE FOREIGN COMMERCE OF THE UNITED STATES

2 If co loading is accomplished pursuant to the terms of an agreement

which establishes a carrier to carrier relationship between or among

NVOCCs it is only necessary to note the existence of such agreement

in each of the applicable NVOCC tariffs But if two or more NVOCCs

enter into a co loading agreement which establishes a shipper carrier rela

tionship between or among the NVOCCs the co loading activities must

be described in a tariff rule pursuant to paragraph d 14 ii A J of

this section

3 A

shipper carrier relationship shall be presumed to exist where the

receiving NVOCC issues a bill of lading to the tendering NVOCC for

carriage of the co loaded cargo

4 If a co loading service is not offered or performed by an NVOCC

its tariffs shall contain a rule which states that co loading is not offered

or performed by the publishing carrier

B In the event an NVOCC tenders cargo to another NVOCC for

co loading its tariffs shall provide a clear explanation of its liability to

the shipper and its responsibility to pay any other common carrier s rates

and charges necessary in order to transport the shipper s cargo to its destina

tion

iii Documentation Requirements NVOCCs which tender cargo to an

other NVOCC for co loading shall notify each shipper of such action by

annotating each applicable bill of lading with the identity of any other

NVOCC with which its shipment has been co loaded

iv Co Loading Rates Application No NVOCC tariff shall contain special

co loading rates for the exclusive use of other NVOCCs If cargo is accepted

by an NVOCC from another NVOCC which tenders that cargo in the

capacity of a shipper it must be rated and carried under tariff provisions

which are available to all shipments with similar transportation characteris

tics

3 580 91 is amended by adding the following to the Table at the

end

580 91 OMB control numbers assigned pursuant to the Paperwork Re

duction Act

580 5 d 14 3072046

By the Commission

S BRUCE A DOMBROWSKI

Acting Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 844

WARNER LAMBERT COMPANY

v

THE EGYPTIAN NATIONAL LINE

NOTICE

April 17 1985

Notice is given that no appeal has been taken to the March 12 1985

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

the Commission could detennine to review has expired No such detennina

tion has been made and accordingly the dismissal has become administra

tively final

5 BRUCE A DOMBROWSKI

Acting Secretary

1

832 27 P M C
FEDERAL MARITIME COMMISSION

DOCKET NO 844

WARNER LAMBERT COMPANY

v

THE EGYPTIAN NATIONAL LINE

DISMISSAL OF COMPLAINT

Finalized April 17 1985

The respondent has moved for dismissal of this complaint and continues

to press its motion on the grounds that the complainant has failed to

meet its burden of proof that the complaint is not barred by the applicable

statute of limitations

By ruling served March 28 1984 a

preliminary ruling was made denying

the motion to dismiss on the grounds that for the purposes of resolving

a motion to dismiss prior to any hearing stipulation of facts or final

resolution of the facts it was appropriate to base the ruling on the alleged

facts stated by the non moving party The preliminary ruling was made

without prejudice to renewal of the motion to dismiss at a later date

A prehearing conference was held on June 18 1984 at which the parties

agreed that certain facts should be discovered all relating to the statute

of limitations and that a

ruling on the statute should be made prior

to any hearing on the merits of the complaint

By its motion to dismiss dated August 15 1984 received August 17

1984 the respondent moved for dismissal of the complaint One of the

attachments to the motion was a stipulation of facts signed by attorneys

for both parties

By ruling served September 18 1984 by the Administrative Law Judge

further information was required It was pointed out that the complaint

was filed on February 1 1984 that the check in payment of the transpor

tation charges in issue herein was dated December 31 1981 that the

stipulation of facts stated that the check was received by Uiterwyk Corpora

tion as agent for the respondent Egyptian National Lines in no event later

than February 1 1982 and that the check was received by Egyptian

National Lines sometime after the issuance of the check ie December

31 1981 and on or before the date the check was deposited in Manufactur

ers Hanover Trust Company i e February 1 1982 emphasis supplied

It was ruled that the stipulation of in no event later than February

1 1982 was imprecise Further information was requested as to the

precise date the check was received by Uiterwyk and whether Egyptian

27 F M C 833
1

I

I

1

i

1

834 FEDERAL MARITIME COMMISSION

National Lines the principal and not its agent ever physically received

the check or constructively received it through its agent

A copy of the check itself on its back shows that it was endorsed

and deposited by Uiterwyk Corporation as agent for Egyptian National

Lines

The parties asked and were given certain extensions of the times to

submit clarifying data Respondent pointed out that its former agent

Uiterwyk Corporation was in bankruptcy and that it was difficult if not

impossible to obtain clarifying information from Uiterwyk Respondent in

sisted that complainant had the burden of proof to show that its complaint

was commenced timely

Accordingly respondent demanded that the complainant search its records

and those of its freight forwarder who was able after some prompting

to present the original check in issue Respondent also promised to continue

its efforts with Uiterwyk The last advice from the parties was that each

felt the other had the burden of producing any more clarifying information

and each party asks final judgment in its favor on the issue of the statute

of limitations

Under the above circumstances I conclude that the critical facts are

as follows

This complaint was filed on February 1 1984 alleging overcharges of

12 367 30 on certain cargo shipped from New York New York to Alexan

dria Egypt Freight to be Prepaid bill of lading dated December 30

1981 A check for 18 704 92 dated December 31 1981 in payment of

the freight charges for this cargo was made out to the order of the respond

ent by Export Import Services Inc as forwarding agent for the complain

ant shipper exporter

Presumably the said check was mailed or delivered on or after December

31 1981 In the normal course of business this may have been on Decem

ber 31 1981 or on the next business day after the January 1982 holiday

Whether or not this check was mailed or delivered promptly the record

does not show In this situation the burden of proof properly is on the

complainant because through its forwarder Export Import Services the com

plainant was in the best position to obtain proof of the mailing or delivery

date of the said check dated December 31 1981

The endorsement s on the back of the check copy submitted as evidence

as attachment to the motion to dismiss are not clear except for a stamp

marked Paid February 2 1982 The check was drawn on the Chemical

Bank and was endorsed on the back pay to the order of Manufacturers

Trust Co Any interbank endorsements on the back of the check are not

clear but it is conceded by the parties that the February 2 1982 date

is the one when the Chemical Bank stamped the check as paid

The invoice attachment C to the motion to dismiss shows that Export

Import Services Inc billed the complainant Warner Lambert on December

31 1981 for the ocean freight charges of 18 704 92 plus certain other

27 F M C
WARNER LAMBERT COMPANY V THE EGYPTIAN NATIONAL 835

LINE

of its charges for messenger fees forwarding fees consular fees consular

forms certificate of origin etc a total of 18 91192

Exhibit D attached to the motion to dismiss shows that Warner Lambert

satisfied the invoice for 18 91192 on or before January 19 1982 as

shown by a daily statement dated January 19 1982 from the First National

Bank of Boston to Warner Lambert

Presumably the check for 18 704 92 in payment to respondent for the

freight charges was received by respondent s agent Uiterwyk on or after

December 31 1981 and on or before February 1 1982 when it was

deposited The stipulation of facts states that the Chemical Bank stamped

the February 2 1982 on the back of the check when it paid the check

and that the stamp dated February 1 1982 showing the date of deposit

in Manufacturers Hanover Trust Company was obliterated on the copies

of the check which are of record but apparently was visible to counsel

for the parties who saw the original check

Since the check admittedly and as agreed by the parties was deposited

on February 1 1982 where was it between December 31 1981 when

it was drawn and when it was deposited

When was the check received by the respondent or by respondent s

agent Of necessity it was so received on or before February 1 1982

But this is still imprecise for the purposes of deciding the issue of the

statute of limitations

The computation of time under the statute begins on the date following

the date on which the cause of action accrued Rule 101 of the Commis

sion s Rules of Practice and Procedure 46 CFR 502 101 Under the two

year statute of the Shipping Act 1916 the Act if the cause of action

accrued on February 1 1982 the two year period began on February 2

1982 and ended on February 1 1984

The question remains when did the act event or default in issue that

is the cause of action accrue herein

If the cause of action accrued on February 1 1982 then the complaint

was filed timely But if the cause of action accrued prior to February

1 1982 then the complaint is barred

The stipulation that Uiterwyk received the check in issue from Warner

Lambert or from its agent freight forwarder no later than February 1

1982 does not satisfy the law

Jurisdiction of the Federal Maritime Commission cannot be presumed

or assumed Rather there must be a definite showing of jurisdiction Regard

less of who has the burden of showing jurisdiction no one in this proceed

ing has shown jurisdiction definitely The check in issue was received

on a date certain but that date has not been shown It follows that jurisdic

tion has not been shown

It is ultimately concluded and found that it has not been shown that

the Federal Maritime Commission has jurisdiction to rule on the issues

in this complaint

27 EMC
836 FEDERAL MARITIME COMMISSION

Under section 22 of the Act complaints must be filed within 2 years

from the time the cause ofaction accrues to vest jurisdiction in the Commis

sion As a general rule when jurisdiction is conferred by statute every

act necessary to such jurisdiction must affirmatively appear Emphasis

supplied 1 U S M C 794 795 796 797

In the present case it does not affirmatively appear when the cause

of action accrued and so it is not shown that the complaint was filed

within 2

years from the time the cause of action accrued

The motion to dismiss for lack of jurisdiction is granted The complaint

is dismissed

S CHARLES E MORGAN

Administrative Law Judge

27 F M C
FEDERAL MARITIME COMMISSION

46 CPR PART 572

DOCKET NO 85 4

MISCELLANEOUS MODIFICATION TO EXISTING AGEEMENTS

EXEMPTION

ACTION

SUMMARY

April 24 1985

Final Rule

This Rule sets forth the approach the Commission will

take under the Shipping Act of 1984 with regard to

modifications to existing agreements which provide for

cancellations of agreements and reflect changes in con

ference membership officials of agreements and neutral

body authority and procedures Copies of these modifica

tions shall be submitted to the Commission for informa

tion purposes in the proper format but are otherwise

exempt from the Information Form notice and waiting

period requirements of the rules

EFFECTIVE

DATE April 29 1985

SUPPLEMENTARY INFORMATION

In order to fulfill an obligation of the Commission as stated in its

Final Rule in Dockets Nos 85 26 and 8432 Rules Governing Agreements

by Ocean Common Carriers and Other Persons Subject to the Shipping

Act of 1984 49 FR 45320 November 15 1984 the rule proposed in

this proceeding would exempt modifications to existing agreements which

provide for cancellations of agreements and reflect changes in conference

membership officials of agreements and neutral body authority and proce

dures from the waiting period requirements of section 6 of the Shipping

Act of 1984 46 U S c app 1705 and allow them to become effective

upon filing

The Proposed Rule was published in the FEDERAL REGISTER on

February 8 1985 50 FR 540I with comments due on March II 1985

Comments were received from I the Trans Pacific Freight Conference

of JapanKorea the JapanKorea Atlantic and Gulf Freight Conference the

Trans Pacific Freight Conference Hong Kong and the New York Freight

Bureau collectively 2 the North Europe U S Pacific Freight Conference

3 the MediterraneanU S A Freight Conference the North Atlantic Medi

terranean Freight Conference the U S Atlantic and Gulf Australia New Zea

land Conference and the U S Atlantic Ports Italy France and Spain Freight

Conference collectively 4 the Atlantic and Gulf West Coast of South

7FMr wn
838 FEDERAL MARITIME COMMISSION

America Conference the West Coast of South America Northbound Con

ference the United States Atlantic and Gulf Colombia Conference the

United States Atlantic and Gulf Venezuela Conference and the United States

Atlantic and Gulf Ecuador Freight Conference collectively 5 the Phil

ippines North America Conference and 6 the North Europe U S Gulf

Freight Association the GulfEuropean Freight Association the North Eu

rope U S Atlantic Conference the U S Atlantic North Europe Conference

the Pan Atlantic Carrier Trade Agreement and the Trans Atlantic American

Flag Liner Operators Agreement collectively

All of the conferences with the exception of the five South American

conferences fully support the Rule and urge the Commission to adopt

it as proposed

The five South American conferences recommended that the Commission

modify its rule with respect to agreement cancellations and changes in

membership to allow these to become effective upon receipt of a letter

from the agreement chairman or whatever title is afforded the senior official

of the agreement or agreement counsel provided that the modification

is subsequently received by the Commission within 30 days of receipt

of the letter The reason given by the conferences was that there exists

a pre submission delay occasioned by the need to collect the signatures

to such modifications from parties whose corporate offices are located

in cities or countries other than the location of the conference office

This suggested change cannot be accommodated Adequate notice of

an agreement cancellation or change in membership would not be assured

by such proposal because the Commission and the public could be uncertain

of the effectiveness of such changes for as long as 30 days after notice

is received This could seriously compromise the Commission s surveillance

responsibilities and contribute to possible abuse and manipulation of events

in regard to a conference member s status rights and responsibilities under

the law

For the reasons stated in the Notice of Proposed Rulemaking the Com

mission remains of the opinion that the proposed exemption will not substan

tially impair effective regulation by the Commission be unjustly discrimina

tory result in substantial reduction in competition or be detrimental to

commerce within the meaning of section 16 of the Act Accordingly the

proposed rule is adopted as final without change

The Commission has determined that this Rule is not a major rule

as defined in Executive Order 12291 dated February 17 1981 because

it will not result in

1 An annual effect on the economy of 100 million or more

2 A major increase in costs or prices for consumers individual indus

tries Federal State or local government agencies or geographic regions

or

27 F M C
MISCELLANEOUS MODIFICATIONS TO EXISTING 839

AGREEMENTS EXEMPTION

3 Significant adverse effects on competition employment investment

productivity innovations or on the ability of United States based enterprises

to compete with foreign based enterprises in domestic or export markets

The Chairman of the Federal Maritime Commission certifies pursuant

to section 605 b of the Regulatory Flexibility Act 5 U S C 601 et seq

that this rule will not have a significant economic impact on a substantial

number of small entities including small businesses small organizational

units and small governmental jurisdictions

The Commission has determined that this rule is excepted from the

30 day effective date requirement of 5 U S c 553 because it grants an

exemption and relieves a restriction from existing requirements

List of Subjects in 46 CFR Part 572

Antitrust Contracts Maritime carriers Administrative practice and proce

dure Rates and fares Reporting and recordkeeping requirements

Therefore in order to exempt these agreements from the waiting period

requirements of section 6 of the Act and allow them to become effective

upon filing the Commission pursuant to section 4 of the Administrative

Procedure Act 5 U S C 553 and sections 16 and 17 of the Shipping

Act of 1984 46 U S C app 1715 1716 hereby amends Parts 572 of

Title 46 of the Code of Federal Regulations as follows

I The authority citation is revised to read

Authority 5 U S C 553 46 D S C app 1701 1707 1709 1710 1712

and 17141717

2 A new 572 307 is added to read as follows

S 572307 Miscellaneous Modifications to Agreements Exemptions

a Each of the following types of modifications to agreements is exempt

from the Information Form notice and waiting period requirements of the

Act and of this part provided that such modifications are filed for informa

tional purposes in the proper format

lAny modification which cancels an effective agreement

1 Any modification to the following designated agreement articles

i

Article 3 Parties to the agreement limited to conference agreements

ii Article 6Officials of the agreement and delegations of authority

iii Article lONeutral body policing limited to the description of neu

tral body authority and procedures related thereto

b Any modification exempt under paragraph a is effective upon filing

3 572 605 Requests for Expedited Approval is amended by the removal

of paragraph c

By the Commission

S BRUCE A DOMBROSWKI

Acting Secretary

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 849

INGERSOLL RAND COMPANY

v

MAERSK LINE

NOTICE

MAY 2 1985

Notice is given that no exceptions were filed to the March 26 1985

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 BRUCB A DOMBROWSKI

Acting Secretary

840 27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 849

INGERSOLL RAND COMPANY

v

MAERSK LINE

Proper rate applied to shipment of air compressors Reparation denied and complaint dismissed

Frank J Hathaway from complainant Ingersoll Rand Company

Marc J Fink and Karen S Ostrow forrespondent Maersk Line

INITIAL DECISION I OF JOHN E COGRAVE ADMINISTRATIVE LAW

JUDGE

Finalized May 2 1985

Complainant IngersolJ Rand Company Rand charges Maersk Line with

the improper application of its tariff to a shipment of air compressors

on wheels from Newport News Virginia to Singapore Malaya Maersk

a member of the Conference rated the shipment at 140 00 W M under

Item 1446 44th Revised Page 180 of the Atlantic and GulfSingapore

Malaya and Thailand Conference Freight Tariff No 16 FMC No 6 Forty

fourth Revised Page No 180 reads in relevant part

SPECIAL RATES EXPIRING MARCH 31 1983

Machinery Air Compressors and air Dryers C W M 140 00

Machinery Air Compressors

To Singapore Only C 321 00 W

In CY CY containers only subject to a minimum of 14

revenue tons per container

Rand says that Maersk should have charged the 32100 rate even though

its air compressors were not in CY CY containers In Rand s view the

language quoted above does not limit the 32100 rate to only those ship

ments moving in CYICY containers In order to reach this conclusion

Rand goes back to 42nd Revised Page 180 which reads in pertinent part

Machinery Air Compressors

Singapore Only C 32100 W

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

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

27 F M C 841
842 FEDERAL MARITIME COMMISSION

If in a CY CY container minimum of 14 Revenue tons per con

tainer would apply

Rand next points out that when the Conference published 43rd Revised

Page 180 the critical language was changed to its present form In CY

CY containers only subject to aminimum of 14 revenue tons per container

This change according to Rand made the provision unclear and subject

to numerous interpretations because of the R reduction symbol which

accompanies the change and the lack of punctuation As an example

Maersk offers

for example 1 42nd RP 180 Ifin a CY CY container

this would have application on a non containerized cargo without

a minimum weight application and 2 43rd RP 180 ln CY

CY container bearing an R symboL Ifthe charge effective

on October 1 1983 on 43rd Revised Page was intended to restrict

the item to CY CY containers only the item should have had

an increase symbol because the 140 00 W M would apply on

a measurement basis on non containerized cargo If the entry on

42nd R P 180 was interpreted to only apply in CY CY containers

and the item was opened on 43rd Revised Page 180 to include

non containerized it would have an R reduction symbol

Whatever merit may be found in this reasoning by the complainant as

an exercise in logic it is without relevance to the question presented

here The all important R appeared on 43rd Revised Page 180 The

shipment on which Rand seeks reparation moved under 44th Revised Page

180 There is no R reduction symbol on 44th Revised Page 180 The

time to raise the argument now made by Rand has passed The question

of the proper interpretation of 43rd Revised Page 180 should have been

made when that page was in effect Probably Rand made no shipments

during that period

As for the lack of punctuation grammar purists might place a comma

between only and subject so that sentence would read In CY

CY containers only subject to a minimum of 14 revenue tons per con

tainer But with or without the comma the meaning of the provision

is clear To try as Rand does to read the provision as if it said when

in CY CY containers shipments are subject to a minimum of 14 revenue

tons per container and that the provision has application to non container

ized cargo strains the natural interpretation of the provision and the plain

meaning ofthe words

Complainant s

request for reparation is denied and the complaint is dis

missed

5 JOHN E COORAVE

Administrative Law Judge

27 F M C
FEDERAL MARITIME COMMISSION

46 CFR PART 580

DOCKET NO 8427

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS IN

THE FOREIGN COMMERCE OF THE UNITED STATES CO

LOADING PRACTICES BY NVOCCS

ACTION

SUMMARY

May 9 1985

Deferral of Effective Date ofFinal Rule

Due to the uncertainty expressed by various segments

of the affected industry as to the application of the

final rule issued in this proceeding the effective date

of the final rule is being deferred for 90 days

Final Rule effective August DATE 13 1985

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register on April 15 1985 50

FR 1470414710 the Commission issued a Final Rule in this proceeding

with a scheduled effective date of May 15 1985 Since the publication

of this final rule numerous non vessel operating common carriers

NVOCCs and representatives of the NVOCC industry have written or

contacted the Commission indicating uncertainty as to the application of

certain aspects of the rule to the various types of NVOCC operations

Particular concern was expressed over the meaning of a carrier to carrier

relationship and the requirement for bills of lading to identify any other

NVOCC involved in a co loaded shipment Several parties have requested

postponement of the effective date of the final rule and given the apparent

uncertainty on the part of certain portions of the affected industry the

Commission believes a deferral is warranted Accordingly the effective

date of the final rule in this proceeding is being hereby postponed until

August 13 1985 During the deferral period the Commission staff will

further review the entire situation and make an appropriate recommendation

to the Commission as to the final disposition of this matter

By the Commission

S BRUCE A DOMBROWSKI

Acting Secretary

27 F M C 843
i

FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1191

APPLICATION OF LYKES BROS STEAMSHIP CO INC FOR THE

BENEFIT OF WILHELM SCHLEEF GMBH CO KG

Initial Decision of Administrative Law Judge reversed

Application to waive collection of 18 481 19 of freight charges granted

Joey J Radabaugh and RJ Finnan for applicant Lykes Bros Steamship Co Inc

1

REPORT AND ORDER

May 10 1985

By the Commission Alan Green Jr Chairman James J Carey Vice

Chairman Thomas F Moakley Edward J Philbin and Robert Setrakian

Commissioners

Lykes Bros Steamship Co Inc excepts to the Initial Decision of Admin

istrative Law Judge Seymour Glanzer denying it permission to waive collec

tion from Wilhelm Schleef GMBH Co KG of a portion of the freight

charges assessed on a shipment of dried flowers parts of dried flowers

decorative wood used for ornamentation which moved from Cucamonga

California to Hamburg Federal Republic ofGermany I

Lykes asks that the Initial Decision be set aside and the case remanded

to the Presiding Officer for further proceedings

BACKGROUND

By application filed pursuant to section 18b 3 of the Shipping Act

1916 the Act 46 U S C 817 c 3 Lykes requested permission to

waive collection of 18 48119 of the 21 23119 in freight charges assessed

on a shipment described in the bill of lading as DRIED FLOWERS

PARTS OF DRIED FLOWERS DECORATIVE WOOD USED FOR OR

NAMENTATION 2

The application indicates that on November 29 1983 Lykes Seabee

Department requested the Pricing Division to file a rate of 2 750 per

40 foot container to cover a

shipment of dried flowers from California

terminals to Hamburg A commodity rate of 2 750 00 for Flowers Dried

was filed in Lykes Eastbound Pacific Coast to Europe Joint Container

Freight Tariff No 2 FMC No 145 to take effect December 1 1983 3

1 Lykes Exceptions are inthe fonn of a letter addressed to the Secretary which forthe expeditious resolu

tion of this malleris treated as fonnally filed Rules of Practice and Procedure 46 CPR 502 1O

2

The bill of lading lists 262 cartons 4bundles and 83 loose pieces

31st Rev Page 122 effective 1211183

844 27 F M C
APPLICATION OF LYKES BROS STEAMSHIP CO INC FOR 845

THE BENEFIT OF WILHELM SCHLEEF GMBH CO KG

The shipment was delivered to the inland carrier which issued the bill

oflading dated December 2 1983 When Lykes Seabee Department became

aware of the discrepancy between the commodity description in the tariff

and the description of the shipment in the bill of lading it requested

the Pricing Division to revise the tariff to include andor Decorative

Wood Used For Ornamentation in the commodity description and to set

forth a thirty day expiration date for the rate A second revision to the

tariff effective December 13 1983 added the expiration notice but made

no changes in the commodity description The vessel

upon which the ship

ment was loaded sailed on December 14 1983 Subsequently a third revi

sion effective December 15 1983 included the 2 750 00 rate the descrip

tion Flowers Dried andor Decorative Wood used for Ornamentation

and the expiration date

Thereafter in the belief that the incomplete tariff commodity description

in effect on the date of shipment subjected the cargo to the Cargo N O S

rate of 296 00 W M Lykes applied for permission to waive collection

of 18481 19 which represents the difference between the 2 750 00 lump

sum per container rate promised the shipper and freight charges of

21 231 19 computed on the basis of the 296 00 Cargo N O S rate

The Presiding Officer denied the application on the ground that there

was no error in the tariff within the meaning of section 18 b 3 of the

Act because Lykes intent to publish a rate for the expanded commodity

description was formed some time after the shipment began 4

Lykes maintains on exception that under Rule 2 L of its tariff the

commodity description as originally filed adequately covered the shipment

and made the negotiated rate applicable s

Lykes argument is that dried

flowers and similar decorative items are often shipped together and have

historically been accorded the same rates and basis for parts and

accompany

ing items as the generic item Finally Lykes refers to the procedural

breakdowns misinformation incomplete filing procedures which took

place in the filing of the 2 750 00 rate none of which were attributable

to the shipper

DISCUSSION

The Presiding Officer s denial of the waiver rests on the premise that

Lykes had agreed to and promised the shipper a lump sum per container

rate for dried flowers only and that the decision to extend the rate to

4

Section 18b 3 provides that the Commission may grant a refund or waiver where it appears that there

is an error in atariff of aclerical oradministrative nature or an error due to inadvertence in failing to file

anew tariff and that such refund orwaiver will not result in discrimination among shippers 46 U S c

817 b 3

Date of shipment for special docket applications has been defined by the Commission to mean the date

of sailing of the vessel from the port at which the cargo was loaded Rules of Practice and Procedure 46

CFR 502 92 aX3

Rule 2 L provides Wherever rates are provided for articles the same basis will also be applicable

on parts of such articles where so described in the Ocean Bill of Lading except where specific rates are

provided for such parts

27 F M C
846 FEDERAL MARITIME COMMISSION

include decorative wood was reached only after delivery of the cargo to

the inland carrier In refusing relief the Presiding Officer relied on Munoz

y Cabrero v Sea Land Service Inc 20 F M C 152 1977 In that case

Sea Land had failed to timely file a 44 00 rate promised the shipper

Before applying for a waiver Sea Land mistakenly published a 40 00

rate in lieu of the 44 00 rate it intended to file The Commission held

it had no authority to grant a waiver upon a rate the carrier never intended

to file 6

Here Lykes request for the tariff revision contains an annotation asking

that the commodity description be amended in accord with the description

in the bill of lading Were the Commission to agree that only at that

time Lykes formed the intent to publish the expanded commodity descrip

tion the strict construction of the statute applied in the Munoz case would

support adoption of the Initial Decision

It should be noted however that two of Lykes offices participated

in the publication of the lump sum rate the Pricing Division which filed

the rate and the Seabee Department which requested the filing As men

tioned when specifically requested to revise the tariff by adding decorative

wood to the commodity description and to set forth a thirty day expiration

date the Pricing Division only added the expiration notice leaving the

description Flowers Dried unchanged This indicates a misunderstanding

between Lykes two offices on the matter of the publication of the lump

sum rate and evidences a clerical or administrative error in filing by the

Pricing Division in the second revision of page 122 of the tariff This

in turn raises the inference of a similar error in the tariff published on

December 1 1983

There is also no reason to believe that the shipper who accurately de

scribed the contents of the house to house container in the bill of lading

withheld that information from the carrier when negotiating the rate More

over the promptness with which Lykes moved to amend the tariff clearly

suggests that when it agreed to the 2 750 lump sum per container rate

for this particular shipment which otherwise would be subject to the payment

of 21 231 19 in freight charges Lykes had from the beginning the intent

to publish a commodity description which properly identified the cargo

and covered the entire shipment The failure to do so in the first instance

can be said to result from the misunderstanding between Lykes Seabee

Department and its Pricing Division

The Commission therefore frods that the rate filed by the Pricing Division

did not reflect the rate Lykes from the outset intended to file for this

shipment and that there was an error of an administrative nature in the

tariff as contemplated in section 18b 3 of the Act

6

As distinguished from he Munoz case before applying for a waiver Lykes here had on file with the

Commission the 2750 rate agreed upon with the shipper

12nd Rev Page 122 effective December 13 1983

27 F M C
APPLICATION OF LYKES BROS STEAMSHIP CO INC FOR 847

THE BENEFIT OF WILHELM SCHLEEF GMBH CO KG

Consequently the Initial Decision of the Presiding Officer is reversed

and Lykes is granted permission to waive collection of the amount of

18 481 19 of the freight charges assessed the consignee Wilhelm Schleef

GMBH Co KG In so deciding it is unnecessary to rule whether

under the holding in Nepera Chemical Inc v Federal Maritime Commission

662 F2d 18 D C Cir 1981 the absence of a specific reference to

decorative wood in the tariff would preclude the application of the lump

sum rate to the shipment8

THEREFORE IT IS ORDERED That the Initial Decision denying the

application is reversed and

IT IS FURTHER ORDERED That pursuant to section 18 b 3 of the

Shipping Act 1916 46 U S C 817 b 3 Lykes Bros Steamship Co

Inc is granted permission to waive collection of 18481 19 of the

21 231 19 freight charges assessed the consignee Wilhelm Schleef GMBH

Co KG and

IT IS FURTHER ORDERED That Lykes Bros Steamship Co Inc

shall published within thirty 30 days from the service of this Report

and Order the following notice in an appropriate place in its tariff

Notice is hereby given as required by the decision of the Federal

Maritime Commission in Special Docket No 1191 that effective

December 1 1983 and continuing through December 14 1983

inclusive the rate on Flowers Dried andlor Decorative wood

used for ornamentation is 2 750 00 per 40 ft container This

notice is effective for purposes of refund or waiver of freight

charges on any shipment of the goods described which may have

been shipped during the specified time

FINALLY IT IS ORDERED That this proceeding is discontinued

By the Commission

S BRUCE A DOMBROWSKI

Acting Secretary

8In Nepera Chemical Inc v Federal Maritime Commission 662 F 2d 18 D C Cir 1981 the Commis

sion following the holding in Munoz supra had denied the waiver request because the rate on which the

waiver was to be based was different from the rate the carrier had promised the shipper

The difference amounted to 9125 The denial of the waiver meant an increase of 42 569 90 in transpor

tation costs On appeal the court reversed noting the absence of any language either in the statute or in

the legislative history of section 18 b 3 that required precise equivalence between the published and the

intended rate The court also emphasized the remedial purpose of the statute and insisted on the need for

a reasonable construction to achieve that purpose

27 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1220

APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF

GENERAL MOTORS CORPORATION

SPECIAL DOCKET NO 1225

APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF

GENERAL MOTORS CORPORATION

ORDER CONDITIONALLY ADOPTING INITIAL DECISIONS

May 10 1985

The Commission determined to review the Initial Decisions issued on

December 31 1984 in Special Docket No 1220 and on January 8 1985

in Special Docket No 1225 by Administrative Law Judge Charles E Mor

gan Presiding Officer Though they were not consolidated the proceedings

involve the same parties and essential facts and present identical issues

of law

For the reasons set forth below the Commission hereby adopts the Initial

Decisions subject to the meeting of certain conditions by Hapag Lloyd

In reaching that result we have concluded that we will no longer impose

on special docket applications involving intermodal cargo movements the

requirement first articulated in Application of Lykes Bros Steamship Co

Inc for the Benefit of Texas Turbo Jet Inc 24 F M C 408 1981 that

the ocean carrier must prove that it actually provided the inland service

originally intended in strict accordance with the terms and conditions of

its tariffs

BACKGROUND

Hapag Lloyd seeks the Commission s permission pursuant to section

8 e of the Shipping Act of 1984 46 U S C app 1707 e and Rule

92 a of the Commission s Rules of Practice and Procedure 46 CFR

502 92 a to waive certain freight charges The charges apply to a total

of 28 shipments of automobile parts from inland points in Michigan via

railroad to Baltimore or New York to various ports in Europe and then

to European inland destinations The earliest shipment was dated February

18 1984 and the last was dated August 2 1984 The shipments were

1 The Initial Decision in Special Docket No 1220 explains pI

n 2 thai Special Docket No 1225 was

necessary to cover certain rates for which new corrective tariffs had not yet been filed as of the filing date

commencing Special Docket No 1220

R4R 27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 849

GENERAL MOTORS CORPORATION

consigned to various subsidiaries or affiliates of General Motors The con

signees were to be responsible for the payment of all freight charges

except that General Motors was responsible for payment of the terminal

handling charges at the United States exit ports

In 1983 Hapag Lloyd offered independent intermodal rates in connection

with its service from East Coast ports of the United States to countries

in Northern Europe On August 5 1983 General Motors requested Hapag

Lloyd to quote intermodal rates on various shipments of auto parts By

letter dated September 16 1983 Hapag Lloyd quoted competitive rates

over the requested routings which General Motors accepted on October

24 On November 18 Hapag Lloyd supplemented its rate offerings and

made clear its intention to offer these rates for the period from November

1 1983 through October 31 1984 Of those rates there are a total of

nine involved in these two proceedings seven in Special Docket No 1220

and two in Special Docket No 1225

On Friday December 9 1983 the Commission granted authority to the

North Atlantic Continental Freight Conference NACFC of which Hapag

Lloyd was a member to offer intermodal rates The Conference met the

next day Saturday December 10 and scheduled another meeting for Sun

day December 11 to discuss intermodal rates to be charged The decision

was made to require all member lines to submit to the Conference at

the December 11 meeting any rate commitments they had with customers

When the NACFC met on December 11 Hapag Lloyd had prepared

a list of its intermodal rate commitments including those with General

Motors The list was compiled hurriedly by the carrier in Hamburg West

Germany and sent by telex to the Conference meeting Due to clerical

oversight the nine rates here in issue were omitted from the telex

NACFC implemented its intermodal authority by filing rates to become

effective February 1 1984 at which time all intermodal rates published

by individual members including Hapag Lloyd were canceled Because

Hapag Lloyd had failed to present the nine rates at the December 11

1983 meeting they were not reflected in the NACFC tariff As a result

the 28 shipments here in issue incurred higher freight costs involving a

combination of certain NACFC port to port rates terminal handling charges

at U S ports U S inland charges and container service charges and inland

carriage charges in Europe However Hapag Lloyd charged and collected

amounts based on the lower intermodal single factor through rates it had

intended to apply to these shipments It seeks the Commission s permission

to waive collection of the difference between those rates and the combined

charges listed above The total amount for which waiver is sought is ap

proximately 277 000

27 F M C
i

1

1

850 FEDERAL MARITIME COMMISSION

DISCUSSION

In his Initial Decisions the Presiding Officer found that the statutory

requirements of section 8 e of the Shipping Act of 1984 had been met2

and granted Hapag Lloyd s applications However these proceedings raise

several issues not specifically addressed by the Presiding Officer

The primary issue is whether Hapag Lloyd should be required to prove

as part of its special docket application that it actually arranged and paid

for the inland service necessary to move the shipments from Michigan

to New York or Baltimore In Application of Lykes Bros Steamship Co

Inc for the Benefit of Texas Turbo Jet Inc 24 F M C 408 1981 which

was brought under section 8

e s predecessor section 18b 3 of the Ship

ping Act 1916 46 U S C 817 b 3 the administrative law judge found

that due to the carrier s failure to file an amendment to its intermodal

tariff reflecting an agreed rate the cargo moved under a conference port

to port rate and that the shipper arranged and paid for the inland movement

Nevertheless the administrative law judge granted the carrier s application

to refund part of the ocean freight charges to the shipper The Commission

reversed stating

A threshold question in considering a request for relief under

Section 18b 3 is whether the carrier performed the service for

which it seeks permission to apply a rate not on file in its tariff

at the time of shipment

In this instance while Lykes had apparently agreed to move the

shipment from Leghorn Italy to Dallas its failure to perform

that service is fatal to the instant application Lykes port to

port bill of lading issued under the Conference tariff provided

for delivery of the cargo to the shipper at Houston to the exclusion

of any further land transportation ITJ and not Lykes arranged

and paid for the carriage by motor carrier to Dallas Consequently

Lykes did not perform the transportation service contemplated

in its agreement with ITJ and for which it now asks permission

to apply a special rate

Furthermore the tariff which Lykes seeks to apply is joint Ica

FMC in which certain rail and motor carriers have agreed to

participate at rates or divisions which are set forth in the

tariff None of those rail or motor carriers participated in this

movement Thus the conclusion reached by the Presiding Officer

that a refund here will not affect the land portion of through

rate has no meaning in this case The rail and motor divisions

of the through rate have not and cannot be paid because the

service was not performed

2He found that there was aclerical or administrative error in failing to file a new tariff that NACFC

filed corrective tariffs effective August 7 and August 23 1984 setting forth the intended rates that the appli

cations were timely filed and that granting the waivers would not result in discrimination among shippers

ports or carriers

27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 851

GENERAL MOTORS CORPORATION

As a remedial statute Section 18b 3 needs to be liberally con

strued The Commission however may exercise its discretionary

powers only within the limits permitted by statute In this instance

Lykes filed a tariff covering a service it had not performed and

then applied for permission to refund a portion of the charges

collected not under its own tariff but under the Conference s

tariff Moreover the tariff sought to be applied to this shipment

reflects a service that would clearly contradict the terms of the

bill of lading under which this cargo moved

21 S R R at 115 footnotes omitted

The principles stated above were followed more recently in Application

of Trans Freight Lines Inc for the Benefit of BNP Distributing Co

Inc 22 S RR 475 administratively final Dec 16 1983 In that case

Trans Freight Lines Inc TFL negotiated an intermodal rate for two

shipments of wine from France through New York City and then to Syosset

New York but failed to file that rate prior to the shipments Furthermore

TFL rated and carried the shipments under its port to port tariff rather

than under a general intermodal tariff that it had on file and in effect

TFL explained that it did this deliberately because the port to port rate

was substantially lower than the intermodal general cargo N O S rate See

22 S R R at 477 When the cargo arrived at New York it was carried

to Syosset by a motor carrier that was listed as a participating carrier

in TFL s intermodal tariff However the importer rather than TFL paid

the motor carrier for the inland movement and also paid TFL under the

bills of lading rated according to TFL s port to port tariff TFL sought

permission to refund to the importer the difference between the total charges

paid by him and the lower single factor intermodal rate that had been

negotiated

The administrative law judge denied the application on the ground that

he was bound by the Commission s decision in Texas Turbo Jet He found

that there were some factual distinctions between the two cases particularly

that the motor carrier was a participant in TFL s tariff Nevertheless he

concluded that i n both cases the carriers did not provide the intermodal

service instead providing a port to port service under a port to port tariff

and under a port to port bill of lading 22 S R R at 477 He noted

that TFL s motives in deciding to charge the lower port to port rate may

have been commendable but that it easily could have performed the inter

modal service under its general intermodal tariff collected only the nego

tiated rate filed that rate promptly thereafter and sought permission from

the FMC to waive the additional freight due under the general N O S

rate

Section 8 e of the 1984 Act is identical in substance to the special

docket provisions of section 18b 3 of the 1916 Act and Hapag Lloyd s

applications and supporting material including the bills of lading do not

clearly demonstrate whether the carrier assumed responsibility for moving

27 F M C
j

852 FEDERAL MARITIME COMMISSION

the cargo from its origin points in Michigan to the U S ports of export

Thus the Texas Turbo Jet principles could be applied fully to the instant

cases

However these cases also present the Commission with an opportunity

to reconsider Texas Turbo Jet The practical effect of that decision is

to require a carrier such as Lykes in Texas Turbo Jet which has negotiated

an intermodal service with a shipper but failed through clerical error to

file a tariff covering that service prior to shipment and which can comply

with the jurisdictional requirements of the special docket procedure specified

by the statute to comply with an additional requirement of providing the

full service without a tariff as a condition precedent to fiUng a special

docket application for the benefit of its shippper This non statutory require

ment places the carrier in the position of possibly violating the prohibition

in section 8 of the 1984 Act against providing service without a tariff

particularly where as in Texas Turbo Jet the intended service is entirely

new If the carrier chooses not to incur such legal jeopardy the innocent

shipper who has been harmed by the carrier s error must according to

Texas Turbo Jet be denied relief

The carrier s dilemma may only be escaped if it happens to have on

file and in effect at the time of shipment a general intermodal tariff which

generally requires higher rates than specific commodity tariffs covering

the desired inland origin or destination as TFL did in the B N P Distribut

ing case and if the cargo in fact moves under that tariff and via a motor

or rail carrier named in that tariff Even in that situation there is nothing

that requires the carrier to do as the administrative law judge suggested

in BN P Distributing i e collect only the agreed upon rate and apply

for a waiver 3 On the contrary the rule of Texas Turbo Jet may give

a carrier in such circumstances a rationale for forcing the shipper to incur

higher initial costs and giving itself use of the shipper s money by applying

its N O S intermodal rate in full before seeking special docket relief In

any event the approach suggested in BN P Distributing results in relief

to the shipper turning entirely on happenstance i e its carrier must have

in effect an N O S intermodal tariff that can and was used to move its

cargo albeit at a possibly much higher rate

The additional requirement or condition imposed by Texas Turbo Jet

on special docket applications involving intermodal movements is not re

quired by the terms ofeither the 1916 Act or the 1984 Act The Commission

has concluded that the continued application of that case is inconsistent

with our obligation to administer the special docket procedure liberally

with the goal of effectuating the procedure s remedial purpose which is

to relieve shippers from the burdens of carrier mistake or negligence Nepera

Chemical Inc v FMC 662 F 2d 18 DC Cir 1981 Texas Turbo Jet

3

It should be DOted that in the instant proceedings the accession of the NACFC tariff in February 1984

makes it unlikely that Hapag Lloyd retained an intennodal tariff under which the shipments of automobile

parts could have moved

27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 853

GENERAL MOTORS CORPORATION

erects an artificial barrier to shipper relief on the basis of concerns that

are purely theoretical The special docket procedure cannot be permitted

to become a subterfuge for rate discrimination or rebates Ifthe new policy

announced herein is shown in the future to facilitate such malpractices

the Commission will take corrective measures At present however any

abuses that might result from a lifting of Texas Turbo Jet s restrictions

are difficult to conceive and are far outweighed by the concrete harm

to shippers caused by that decision

With reference to the particular facts before the Commission in these

proceedings we recognize that if General Motors consignees did in fact

arrange and pay for the movement of their shipments from Michigan to

New York or Baltimore they did not receive the complete service for

which Hapag Lloyd now seeks to waive a portion of the freight charges

However it is clear that all concerned parties understood what that service

should have been and that Hapag Lloyd at least performed the port to

port portion of its original undertaking Under such circumstances there

is no apparent basis for suspecting unlawful collusion among the parties 4

It is beyond the Commission s powers to remedy any inconvenience or

out of pocket expense that General Motors consignees may have suffered

as a result of Hapag Lloyd s error But we can at least ensure that the

final cost to them of transporting these 28 shipments of automobile parts

is what they had originally agreed to

Because Texas Turbo Jet will not be applied to these cases the result

of the Initial Decisions can be affirmed As discussed below there are

other flaws in the carrier s applications not addressed by the Initial Deci

sions However these flaws can be resolved without the necessity for

a remand

First the applications fail to include NACFC or more precisely

NACFC s successor the Atlantic North Europe Conference as a party

The Commission s

regulations at 46 CPR 502 92 a Irequire that where

the intended rate was to be offered under the authority of a conference

the conference must join with the individual carrier as an indispensable

party to the special docket application Part 502 Rules of Practice and

Procedure 21 F M C 340 343 1978 In cases such as these where

the administrative or clerical error was committed by a conference member

rather than by the conference itself the requirement still applies because

the conference in effect has ratified the intended rate by publishing a

corrective tariff under its auspices See D F Young Inc v Compagnie

Nationale Algerienne de Navigation 21 F M C 730 1979 Accordingly

Hapag Lloyd will be given thirty days to correct its applications to include

the Atlantic North Europe Conference However Hapag Lloyd s original

4

Hapag Lloyd s applications state that it is not aware of any shipper ssimilarly situated to General Motors

In addition the Initial Decisions require that appropriate notice of this matter and of the details of this

waiver shall be published in both the Conference s

port to port tariff and its intermodal tariff These con

stitute additional safeguards against discrimination among shippers

27 F M C
j

1

j

j

I

854 FEDERAL MARITIME COMMISSION

applications remain valid insofar as is necessary to satisfy the 180 day

time limit imposed by section 8 e of the Shipping Acts

There is also an issue whether the applications can be granted on behalf

of General Motors General Motors apparently was responsible only for

paying the U S terminal charges The format for special docket applications

prescribed by 46 CFR 502 92 a 5 requires that applications must be

filed for the benefit of the person who paid or is responsible for paying

the freight charges No distinction is drawn by the statute or the regulations

between refunds and waivers as the Presiding Officer has done If the

Commission permitted waivers to be granted to persons not responsible

for paying the ocean freight the remedial purpose of the special docket

procedure would be obscured and opportunities for malpractices could be

facilitated Accordingly either the overseas consignees must be substituted

for General Motors as beneficiaries of the applications or General Motors

must submit an affidavit through Hapag Lloyd that it is acting as agent

for the consignees See Buckley Forstall Inc v Gulf European Freight

Association or Combi Line 20 F M C 343 347 48 1977 6

THEREFORE IT IS ORDERED That the Initial Decisions are hereby

affirmed on condition that within thirty 30 days from the date of this

order 1 Hapag Lloyd amends its special docket applications to include

the Atlantic North Europe Conference as an applicant and 2 Hapag

Lloyd further amends its applications to substitute the overseas consignees

for General Motors as intended beneficiaries of the applications or alter

natively General Motors submits an affidavit through Hapag Lloyd that

it is acting as agent for the consignees or is otherwise entitled to receive

the benefits of the applications

IT IS FURTHER ORDERED That if the condition described in the

first ordering paragraph are not met by the 31st day following this order

the Initial Decisions will be vacated and Hapag Lloyd s applications will

be rejected for failing to meet the requirements of the Commission s

regula

tions

By the Commission 7

S BRUCE A DOMBROWSKI

Acting Secretary

5

Because the last shipment covered by these applications was dated August 2 1984 new applications

would be completely time barred Similar procedures designed to preserve timely but otherwise flawed appli

cations have been employed in other cases E

g

Appllca loll ojA IIIIIIIe COlllalller LIle for Ihe Belleftl of

Clark 1111 I Markelllg S A 19 S R R 1257 Initial Decision 1980

6

Although the consignees here are affiliates or subsidiaries of General Motors the analysis remains the

same The consignees apparently are sufficiently separate from General Motors so that the contracts of sale

provided that they pay nearly all the transportation charges on these shipments from their own accounts That

being the case the consignees rather than General Motors should receive the benefit of any waiver Ifthe

circumstances are different and General Motors and the consignees are actually integrated in all significant

respects General Motors should submit a statement to that effect

7Comm issioner Thomas F Moakley dissents and will issue aseparate opinion

27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 855

GENERAL MOTORS CORPORATION

DISSENTING OPINION OF COMMISSIONER THOMAS F MOAKLEY

The majority s decision in these special docket cases is a textbook exam

ple of result oriented decisionmaking at its worst It ignores the clear limits

of the statute under which relief is sought and trods heavily upon a fun

damental principle of transportation law Moreover it does so with conscious

disregard for the facts pertinent to these cases and without consideration

for the decision s broader ramifications on tariff integrity

Hapag Lloyd is seeking in both of these special docket applications

to apply intermodal rates for certain General Motors shipments which moved

from the U S midwest to points in Europe According to the applications

the carrier had agreed in October and November 1983 to reduced per

container rates on auto parts from points in Michigan to points in Europe

at which various General Motors affiliates are located At that time Hapag

Lloyd was offering intermodal service under an independent tariff FMC

No 210 ICC HLCU 210 1

On December 9 1983 the Commission granted intermodal ratemaking

authority to the North Atlantic Continental Freight Conference NACFC

of which Hapag Lloyd was a member On December 10 and 11 1983

the members of the NACFC met to discuss implementation of their new

intermodal authority Member lines were required to submit any rate com

mitments they had with customers at the meeting of December 11 At

that meeting Hapag Lloyd presented a list containing over 150 rates includ

ing seventy seven rates on auto parts but failed to list the nine rates

which are the focus of these special docket applications The NACFC

published all seventy seven of the auto parts rates as independent action

rates for the account of Hapag Lloyd only

The new NACFC tariff was published on December 30 1983 to become

effective on February 1 1984 Hapag Lloyd s

independent tariff FMC No

210 was simultaneously cancelled on February 1 1984 Because the nine

rates in question here had not been presented to the conference by Hapag

Lloyd they were not reflected in the NACFC tariff

Between February 18 1984 and August 2 1984 Hapag Lloyd carried

28 shipments for General Motors consisting of some 152 containers of

auto parts which are the subject of these two cases

With the exception of the two shipments on August 2 1984 each of

the 28 shipments was somehow rated under one of the nine reduced inter

modal rates although none of those rates appeared in the NACFC tariff

which governed both the port to port and intermodal services of Hapag

Lloyd during that time The tariff error was apparently not discovered

I While it is not clear from the applications here whether Hapag L1oyd everfiled these rates in its inde

pendent tariff areview of the Commission s tariff records indicates that the rates in question appeared on

2nd Revised Pages 25 A 25 B and 25C of that tariff effective December 22 1983 There is nothing in

this record to indicate whether any cargo moved under those tariff ratesprior to February I 1984

27 F M C
856 FEDERAL MARITIME COMMISSION

until approximately July 26 1984 at which time Hapag Lloyd issued a

Manifest Corrector for each of the affected shipments up to that date

These Manifest Correctors noted that the shipments should have been

rated as port to port shipments under NACFC s port to port tariff in effect

at that time although it is not clear whether Hapag Lloyd assumed respon

sibility for the through intermodal movement The two shipments which

took place on August 2 appear to have been rated from their inception

as port to port shipments 2

On August I 1984 the NACFC filed on behalf of Hapag Lloyd seven

ofthe nine rates in question to become effective August 7 1984 NACFC

Intermodal Tariff FMC lO ICC NAC 300 Original Pages 518 A 519

A and 520B On August IS 1984 the conference filed the remaining

two rates to become effective August 23 1984 1st Revised Page 520

B All of these rates were independent action rates solely for use by

Hapag Lloyd

Applications for waiver of the NACFC s port oport charges were dated

August 2 and August 20 1984 and received by the Commission on August

15 and August 23 respectively 3

The Administrative Law Judge granted

both applications although the NACFC had not joined Hapag Lloyd in

seeking relief4 and the documentation accompanying the application did

not indicate whether Hapag Lloyd had performed the intermodal services

which were allegedly intended

Upon review the majority of the Commission adopted the initial decision

on condition that the conference join in Hapag Lloyd s application and

that steps be taken to ensure that the waivers accrue to the persons respon

sible for paying the freight bills s

With respect to the question of whether Hapag Lloyd performed the

intended intermodal service the majority has concluded that that fact is

irrelevant to special docket relief

With reference to the particular facts before the Commission

in these proceedings we recognize that if General Motors con

signees did in fact arrange and pay for the movement of their

shipments from Michigan to New York or Baltimore they did

not receive the complete service for which Hapag Lloyd now

seeks to waive a

portion of the freight charges However it is

clear that all concerned parties understood what that service should

have been and that Hapag Lloyd at least performed the port

2

Since the C applications are only for waivers and not refunds I can only lISSume that Hapag Lloyd

charged the lower lntermodal rates for these shIpments and not the rates set forth on the biUs of lading

S One of the numerous curiosities of these cases Is the inclusion in the fllSt application of bills of lacl1ng

and odIer documents relating 10 shipments which apparently moved out of Baltimore on the same dale that

the application was signed

4The requirement that a conference must join with an individual carrier as an indispensable party to

a special docket application involving the conference s tariff is found in 46 CPR s 502 92 a

1

5

The applications were filed for the benefit of General Molors the shipper while the consignees inEurope

were apparently responsible for the freight charges

27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 857

GENERAL MOTORS CORPORATION

to port portion of its original undertaking Majority Decision

p 10

Section 8 e of the Shipping Act of 1984 46 U S c app s l707 e

under which these special docket applications were filed authorizes the

Commission to permit a carrier or conference to refund or waive a portion

of freight charges if

1 there is an error in a tariff of a clerical or administrative

nature or an error due to inadvertence in failing to file a new

tariff Emphasis supplied

This section provides limited relief from the requirements found in sections

8 and 10 of the Act that a carrier may charge only those rates and

charges appearing in its tariffs for the service performed For example

section 1Ob I of the Act 46 U S c app s 1709 b 1 provides that

no common carrier may

I charge demand collect or receive greater less or different

compensation for the transportation of property or for any service

in connection therewith than the rates and charges that are shown

in its tariffs or service contracts

This is not a unique or esoteric principle In fact the requirement that

a common carrier can only charge that rate which is applicable to the

service performed is so fundamental to transportation law that the majority s

decision here may be the first instance since passage of the Interstate

Commerce Act in 1887 that a transportation regulatory agency has delib

erately concluded the opposite 6

Moreover the majority has not limited the effect of its decision to

the facts of this case The order specifically denounces for future special

docket cases the holding of a 1981 decision which applied this fundamental

principle in the context of a special docket proceeding 7

In order to discard the principle that a carrier must have performed

the service for which it seeks to apply a rate the majority has erected

and addressed at length a rather flimsy straw man The order suggests

that in some cases the requirement for the carrier to perform the intended

service will force the carrier to violate the Act by providing a service

without a tariff on file prior to applying for special docket relief This

6lbere are aplethora of cases which hold that acarrier may only charge the rate shown in its tariff for

the service performed See e gLouisville N R R v Maxwell 237 U S 94 59 LEd 853 1915 Baldwin

v Scott County Milling Co 307 U S 478 83 L Ed 1409 1939 United States v Associated Air Transport

Inc et 01 275 F 2d 827 5th Cir 1960 General Motors Corp v Denver Rio Grande Western RR

Co et 01 340 I C C 112 116 1970 The majority cites none in support of its holding to the contrary

and it appears that there is no precedent for such aholding

7

Application of Lykes Bros Steamship Co Inc for the Benefit of Texas Turbo Jet Inc 24 F M C 408

1981 The impact of the majority s ruling on previous special docket cases which have followed the line

of reasoning in Texas Turbo Jet is far from clear Likewise the majority order fails to address the rejection

of this principle as it may impact on port to port shipments where it would seem to have equal application

27 F M C
i

I

858 FEDERAL MARITIME COMMISSION

is a fictitious problem Section 8 e was designed to pennit a carrier to

carry out its intentions and to correct the tariff error after the fact It

was not designed to permit the carrier and the Commission to pretend

that the intended service wasprovided 8

Contrary to the majority s assertions relief under section 8 e in cases

such as this does not turn on the happenstance of having available

a

cargo NOS rate under which the cargo may be carried in the absence

of the intended rate Majority Decision p

9 There is no impediment

whatsoever to a carrier performing the intended service then filing the

intended rate and applying for special docket relief The existence or

lack thereof of a cargo NOS rate is totally irrelevant to this issue 9

Section 8 e as quoted above is designed to permit correction of adminis

trative or clerical errors It is clearly not broad enough to correct operational

errors if in fact one occurred here It is not clear from the record whether

Hapag Lloyd performed the intermodal service for the shipments in question

It is embarassing and irresponsible to say that we don t care

If Hapag Lloyd performed the intermodal service for which it seeks

to apply the intermodal rates in question here relief can be granted without

turning the statute on its head to If Hapag Lloyd performed only a port

to port service relief cannot be granted by this Commission because it

is beyond our authority to do so

By its own terms relief can only be granted under section 8 e where

it will not result in discrimination among shippers ports or carriers If

Hapag Lloyd performed only a port to port service for General Motors

application of something other than the port to port rate will clearly discrimi

nate against other port to port shippers The majority expresses confidence

Majority Decision p

lO note 4 that appropriate notices in both the port

to port tariff and the intermodal tariff of the NACFC will provide adequate

safeguards against such discrimination The decision fails to explain how

ever which shippers might be entitled to take advantage of rates for which

a service might not have been performed Who is similarly situated Will

the reduced rates be made available to any conference port to port shipper

who might have chosen an intermodal service had that shipper known

about the intended rates If so will other conference lines be forced

In addition to the legal obstacles discussed here the application of a rate for a service that was not per

fonned would nonnally raise serious factual questions with respect to the credibility of thecmier s intentions

The facts presented here serve to demonstrate this point IfHapq Lloyd s manlement with General MOlors

was lolitimate it Is difficult to believe that the carrier would have forced the shipper to make inland mange

ments for IS2 containen over a period of almost six months

9 However since the mlijority deems the existence of a carlO NOS rate to be significant it Is worth noting

that the NACFC tariff didcontain such a rate applicable from points in Michigan to points in Europe during

this time period NACFC Intennodal Freight Tariff FMC IO ICC NAC 300 Original Page 333 The state

ment by the majority p9 note 3 that it is unlikely that Hapag Lloyd retained an intennodaltariff under

which the shipments of automobile parts could have moved is therefore confusinl at best

lOOn May 28 1985 the conditions set forth inthe majority s decision were met thus correctinlthe other

two deficiencie inthese special docket applications

27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 859

GENERAL MOTORS CORPORATION

to provide a refund on the basis of intermodal rates filed solely for the

account of Hapag Lloyd

In addition if General Motors or the consignees arranged and paid for

inland transportation it is impossible at this point contrary to the majority s

suggestion Majority Decision p

11 to ensure that the cost to them of

transporting these 28 shipments is that to which they had originally agreed

IfHapag Lloyd has not paid the inland carriers their division of the through

rate collection and retention of that entire through rate will result in a

windfall to the carrier and in effect double payment by the shipper or

consignee for the inland transportation I I

The equitable result that the majority was seeking would probably have

been achieved without any adverse side effects had this case been remanded

to the Administrative Law Judge for a finding as to whether Hapag Lloyd

performed an intermodal service for these shipments As indicated earlier

it would be very difficult to believe that Hapag Lloyd s arrangement with

General Motors was legitimate if the carrier did not perform the through

service l2

However the more important point here is that the Commission is not

vested with general equitable powers We are a creature of Congress

charged with administering only those statutes which Congress has entrusted

to us If a particular statute produce an inequitable result that is a problem

that must be addressed by Congress 13 It cannot be corrected by distorting

the statute to fit a particular set of facts or by ignoring the statute entirely

Section 8 e is a remedial statute and we have been directed to administer

its provisions liberally 14 However to suggest that the special docket proce

dure may be used to permit a carrier to correct any operational or service

error and thus to charge a rate for a service that was never performed

and a rate that has never been reflected in any tariff for the service

that was performed is beyond any plausible interpretation of the words

of that section

Finally this decision significantly undermines traditional arguments for

the retention of statutes required the filing of and adherence to tariffs

If a carrier may retroactively file and apply a rate for a particular shipper

11 For avivid demonstration of the complexities involved in trying to unravel this type of factual selling

see Application of United States Lines SA Inc Formerly Moore McCormack Lines Incorporated for the

Benefit of Miles Laboratories Inc Special Docket No 1168 Initial Decision of Seymour Glanzer Adminis

trative Law Judge served March 20 1985

12 Even if the facts demonstrate that Hapag L1oyd performed only a port toport service for these ship

ments there is still a

strong possibility that the shipper could recover damages in an action for breach of

contract brought in an appropriate court One theory of such an action for which some precedent exists is

that the carrier failed to perform the service to which he agreed thus necessitating higher charges under the

applicable conference tariff See Southern Pacific Company v Miller Abattoir Company 454 F 2d 357 3rd

Cir 1972 and generally cases discussed in 83 American Law Reports 245 260267 and in 88 American

Law Reports 2d 1375 1395

See e

g Laning Harris Coal Grain Co v St Louis S F R

R

15 IC C 37 1909 Moore Co

v L N R R 210 I CC 305 1935 and Baldwin v Scott County Milling Co supra note 6

14Nepera Chemical Inc v FMC 662 F 2d 18 D C Cir 1981

27 F M C
860 FEDERAL MARITIME COMMISSION

where the service performed does not match the rate filed the value of

tariffs is certainly brought into question

For all these reasons Idissent from the majority s decision and sincerely

hope that the Commission will take advantage of the earliest opportunity

to reconsider these fundamental questions of transportation law

27 F M C
Federal Maritime Commission

SPECIAL DOCKET NO 1220

APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF

GENERAL MOTORS CORPORATION

Application for permission to waive a total of 220 193 51 of the applicable freight charges

granted

Initial Decision 1 of Charles E Morgan Administrative Law Judge

Partially Adopted May 10 1985

By application filed August 15 1984 as amended 2by letter dated August

16 1984 the applicant Hapag Lloyd AG for the benefit ofGeneral Motors

Corporation GM seeks permission pursuant to Rule 92 a of the Commis

sion s Rules of Practice and Procedure 46 CFR 502 92 a and section

8 e of the Shipping Act 1984 the Act to waive a total of about

220 193 51 of the applicable freight charges on 24 shipments consisting

of a total of 140 containers of auto parts from Romulus Michigan to

Ruesselsheim Germany from Brighton Michigan to Antwerp Belgium

from Romulus to Antwerp from Dearborn Michigan to Rotterdam The

Netherlands and from Romulus to Vienna Austria shipped during the

period from February 18 1984 through August 2 1984

The shipments moved intermodally generally moving from Michigan

via railroad to Baltimore or New York thence via ocean carrier Hapag

Lloyd to the ports of Hamburg Germany or Antwerp Belgium or to

Rotterdam The Netherlands and thence on carriage to the final destinations

of Ruesselsheim Antwerp Rotterdam or Vienna

The shipments were consigned to various subsidiaries or affiliates of

GM namely General Motors Austria Werke Adam Opel AG General

Motors Continental General Motors Nederland BV and General Motors

Continental N V

The applicable rates and charges on the shipments herein are based

on a combination of factors including certain port to port rates of the

North Atlantic Continental Freight Conference Tariff No FMC 9 in items

numbers 732 0015 114 and 732 0030 000 In addition to these port to port

rates applicable charges include a terminal handling charge at U S ports

a container service charge on house to house containerized cargo payable

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

mission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

2

The amendment withdraws the request for relief with respect to the rate of 1 572 from Romulus to

Ruesselsheim and the rate of 1 434 from Romulus to Bochum since new corrective tariffs had not as yet

then been filed Special Docket No 1225 covers these rates

27 F M C 861
862 FEDERAL MARITIME COMMISSION

in Europe as well as U S inland charges and on carriage charges in

Europe

Inasmuch as the port to port tariff contained two separate rates on auto

parts one rate on a measured ton of 40 cubic feet minimum 800 cubic

feet per container and the other rate on a weight ton of 2 240 pounds

on automobile parts new for assembly the calculation of the applicable

port to port rates depends on the lesser cost of the measurement or weight

basis

Such applicable port to port rates from and to all destinations herein

were 117 per ton W prior to March I 1984 129 per ton W after

March I 1984 minimum 40 320 pounds per container or 71 per ton

M prior to March I 1984 78 per ton M after March I 1984 minimum

800 cubic feet per container

The consignees were responsible for the payment of all freight charges

except that the shipper OM was responsible for payment of the U S

terminal handling charge which was 4 50 per ton M or 7 50 per ton

W depending upon how the cargo was rated

Container service charges were 275 Belgian francs or 19 5 Dutch Oorin

gulden or 19 Oerman marks per 1 000 kilos For the purposes of the

waiver herein the European container service charge was estimated at 100

American per container even though the gross weights of the various

containers varied

Inasmuch as this is an application for waiver rather than an application

for refund the precise amounts of the waivers on the shipments need

not be determined What will be authorized to be waived is the total

amount of applicable charges in excess of charges which were paid and

which were based on the precise intermodal through single factor rates

intended and agreed on herein

Further while the authorized waiver or waivers are sought on behalf

of OM in truth they are largely for the benefit of the consignees affiliates

or subsidiaries of OM because the consignees were responsible for all

the applicable freight and miscellaneous charges except for the U S termi

nal handling charges

Hapag Lloyd has charged and collected amounts based on the sought

intermodal rates only and thus it is immaterial moneywise for whom the

waivers may be authorized because Hapag Lloyd will not be authorized

herein to make any refunds

The sought bases of charges are based on the seven intended negotiated

intermodal through one factor rates as follows

Origin Destination Rate

Romulus

Brighton

Romulus

Romulus

Dearborn

Ruesselsheim

Antwerp

Antwerp

Antwerp

Rotterdam

1 772 40ft container

1 4480ft container

1 4010ft container

1 301 20 ft container

1 4310fl container

27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 863

GENERAL MOTORS CORPORATION

Origin Destination Rate

Romulus

Romulus

Vienna

Vienna

1 75420 f1 container

2 037 40f1 container

In the early part of 1983 Hapag Lloyd offered independent intermodal

rates in its North Atlantic service from the East Coast of the United

States to countries in Northern Europe as published in Hapag Lloyd Tariff

FMC No 210

On Friday December 9 1983 the Federal Maritime Commission granted

authority to the North Atlantic Continental Freight Conference NACFC

to offer intermodal rates The conference met the next day Saturday De

cember 10 1983 and scheduled a meeting for Sunday December 11

1983 to discuss conference intermodal rates to be charged The decision

was made to require all member lines to submit to the conference at

the December 11 meeting any rate commitments the member lines had

with customers

NACFC implemented its intermodal authority by filing rates from inland

U S points to become effective February 1 1984 at which time all of

Hapag Lloyd s individual intermodal tariff rates for its North Atlantic service

were canceled replaced by the NACFC intermodal tariff filing

On August 5 1983 OM had requested Hapag Lloyd to quote OM inter

modal rates on various shipments of auto parts By letter dated September

16 1983 Hapag Lloyd had quoted OM competitive rates over the requested

routings which OM accepted on October 24 1983 On November 18

1983 Hapag Lloyd supplemented its rate offerings and made clear its

intent to offer these rates to OM for the period November 1 1983 through

October 31 1984

When the NACFC met on December 11 1983 Hapag Lloyd as a mem

ber line had prepared a list of its intermodal rate commitments including

those with OM

The list was compiled by Hapag Lloyd hurriedly in Hamburg and sent

by telex to the conference meeting Due to clerical oversight the seven

rates here in issue inadvertently were omitted from the telex This error

was made in spite of Hapag Lloyd s intention that these rates also would

become part of the conference s intermodal tariff

As a result of the 24 shipments here in issue involving 140 containers

moved without any intermodal rates on file for Hapag Lloyd

Hapag Lloyd states that granting the application will not result in discrimi

nation among shippers because all shipments will come under the rates

proposed here and intended to have gone into effect months ago Hapag

Lloyd is not aware of any shippers other than OM which have utilized

or will utilize the rates in issue

The revised Appendix A to the application is the summary of the waivers

requested listing the vessel sailing date origin of shipment final destina

tion the intermodal total freight charges as agreed and as paid the total

freight charges applicable on the port to port rate basis plus miscellaneous

27 F M C
864 FEDERAL MARITIME COMMISSION

charges and the differences between the two totals or the amount sought

to be waived

The total sought to be waived as shown on revised Appendix A for

140 containers is 220 193 51

Appendix B to the application shows the detailed calculations upon which

the figures in revised Appendix A are based

For example the last part of Appendix B concerns the shipment dated

August 2 1984 of automobile parts to General Motors Continental N V

at Antwerp Belgium from Romulus Michigan on the vessel STUTIGART

EXPRESS at the applicable port to port rate of 78 per measurement ton

minimum 800 cubic feet on 835 cubic feet or 1 628 25 plus terminal

handling charge of 450 per measurement ton or 93 93 plus U S inland

charge of 598 plus on carriage European charge of 111 plus 100

European container service charge or a

grand total of 2 531 18

The sought through single factor intermodal rate inclusive of all charges

is 1 301 per 20 foot container Thus the waiver sought to be authorized

on this shipment is 2 531 18 less 1301 or 1 230 18

The statutory requirements have been met It is concluded and found

that there was an error of administrative or clerical nature made by Hapag

Lloyd in failing to properly telex the conference NACFC to publish

the seven agreed intended through intermodal single factor rates on auto

mobile parts herein which caused higher freight charges to apply based

on port to port rates plus miscellaneous charges that the intended agreed

intermodal rates were made effective August 7 1984 in NACFC Intermodal

Tariff FMC lO pages 520B SI9 A and 5I8 A which was after the

shipments herein moved and prior to the filing of this application that

the application was timely filed and that so far as the record shows

the authorization of a waiver will not result in discrimination among ship

pers ports or carriers

The applicant Hapag Lloyd is authorized to waive a total of approxi

mately 3 220 193 51 of the applicable freight charges on the shipments

herein Appropriate notices of this matter and of the details of the waiver

shall be published in the pertinent tariffs of the conference the port to

port FMC 9 and intermodal FMC IO

S CHARLES E MORGAN

Administrative Law Judge

3

As noted the waivers are approximate because of approximations in dollars of the equivalent European

money amounts of theEuropean container service charges

27 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1225

APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF

GENERAL MOTORS CORPORATION

Application for permission to waive 7 132 79 of the applicable freight charges granted

INITIAL DECISION 1 OF CHARLES E MORGAN ADMINISTRATIVE

LAW JUDGE

Partially Adopted May 10 1985

By application filed August 23 1984 the applicant Hapag Lloyd AG

for the benefit of General Motors Corporation GM seeks permission

pursuant to Rule 92 a of the Commission s Rules ofPractice and Procedure

46 CFR 502 92 a and section 8 e of the Shipping Act 1984 the Act

to waive a total of about 7 132 79 of the applicable freight charges on

four shipments consisting of a total of six containers of auto parts from

Romulus Michigan to Ruesselsheim and to Bochum Germany shipped

during the period from February 25 1984 through March 31 1984 bill

of lading dates

This application is a companion to the application in Special Docket

No 1220 Some differences between the two applications are the dates

of filing and the dates corrected tariff matter were made effective Generally

otherwise the circumstances of the two applications are the same or similar

The shipments moved intermodally from Romulus via railroad to Balti

more or New York thence via ocean carrier Hapag Lloyd to the port

of Antwerp Belgium and thence on carriage to the final destinations of

Ruesselsheim and Bochum

The shipments were consigned to Adam Opel AG

The applicable rates and charges on the shipments herein are based

on a combination of factors including certain port to port rates of the

North Atlantic Continental Freight Conference Tariff No FMC 7 in items

numbers 732 0015 114 and 732 0030 000 In addition to these port to port

rates applicable charges include a terminal handling charge at U S ports

a container service charge on house to house containerized cargo payable

in Europe as well as U S inland charges and on carriage charges in

Europe

Inasmuch as the port to port tariff contained two separate rates on auto

parts one rate on a measured ton of 40 cubic feet minimum 800 cubic

feet per container and the other rate on a weight ton of 2 240 pounds

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

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

27 F M C 865
j

866 FEDERAL MARITIME COMMISSION

on automobile parts new for assembly the calculation of the applicable

port to port rates depends on the lesser cost of the measurement or weight

basis

Such applicable port to port rates to both destinations herein were 117

per ton W prior to March 1 1984 129 per ton W after March 1

1984 minimum 40 320 pounds per container or 71 per ton M prior

to March 1 1984 78 per ton M after March 1 1984 minimum 300

cubic feet per container

The consignee was responsible for the payment of all freight charges

except that the shipper GM was responsible for payment of the U S

terminal handling charge which was 4 50 per ton M or 7 50 per ton

W depending upon how the cargo was freighted

Container service charges were 275 Belgian francs per 1 000 kilos For

the purpose of the waiver herein the European container service charge

was estimated at 100 American per container regardless of the gross

weights of the containers except for one container where the estimate

was 80 One of the lighter weight containers was estimated at 100

Inasmuch as this is an application for waiver rather than an application

for refund the precise amounts of the waivers on the shipments need

not be determined What will be authorized to be waived is the total

amount of the applicable charges in excess of charges which were paid

and which were based on the precise intermodal through single factor rates

intended and agreed on herein

Further while the authorized waiver or waivers are sought on behalf

of GM in truth they are largely for the benefit of the consignee Adam

Opel AG which presumably is a subsidiary or affiliate This is so because

the consignee was responsible for all of the applicable freight charges

and miscellaneous charges except for the U S terminal handling charges

Hapag Lloyd has charged and collected amounts based on the sought

intermodal rates only and thus it is immaterial moneywise for whom the

waivers may be authorized because Hapag Lloyd will not be authorized

herein to make any refunds

The sought charges are based on the two intended negotiated intermodal

through one factor rates as follows

Origin Destination Rate

Romulus Ruesselsheim 1 572 20 ft container

Romulus Bochum 1 43420 ft container

As recited in Special Docket No 1220 in the early part of 1983 Hapag

Lloyd offered independent intermodal rates in its North Atlantic service

from the East Coast of the United States to countries in Northern Europe

as published in Hapag Lloyd Tariff FMC No 210

On Friday December 9 1983 the Federal Maritime Commission granted

authority to the North Atlantic Continental Freight Conference NACFC

to offer intermodal rates The Conference met the next day Saturday

27 F M C
APPLICATION OF HAPAG LLOYD AG FOR THE BENEFIT OF 867

GENERAL MOTORS CORPORATION

December 10 1983 and scheduled a meeting for Sunday December II

1983 to discuss Conference intermodal rates to be charged The decision

was made to require all member lines to submit to the Conference on

the December 11 meeting any commitments which the member lines had

with customers

NACFC implemented its intermodal authority by filing rates from inland

U S points to become effective February 1 1984 at which time all of

Hapag Lloyd s intermodal tariff rates for its North Atlantic service were

canceled replaced by the NACFC intermodal tariff filing

On August 5 1983 GM had requested Hapag Lloyd to quote GM inter

modal rates on various shipments of auto parts By letter dated September

16 1983 Hapag Lloyd had quoted GM competitive rates over the requested

routings which GM accepted on October 24 1983 On November 18

1983 Hapag Lloyd supplemented its rate offerings and made clear its

intent to offer those rates to GM for the period November 1 1983 through

October 31 1984

When the NACFC met on December II 1983 Hapag Lloyd as a mem

ber line had prepared a list of its intermodal commitments including

those with GM

The list was compiled by Hapag Lloyd hurriedly in Hamburg Germany

and sent by telex to the Conference meeting Due to clerical oversight

the two rates here in issue inadvertently were omitted from the telex

Hapag Lloyd s intention was that these two rates also would become part

of the Conference s intermodal tariff

As a result the four shipments totalling six containers here in issue

moved without any intermodal rates on file for Hapag Lloyd

Hapag Lloyd states that granting the application will not result in discrimi

nation among shippers because all shipments will come under the rates

proposed here and intended to have gone into effect months ago Hapag

Lloyd is not aware of any other shippers other than GM which have

utilized or will utilize the rates in issue

Appendix A to the application is the summary of the waivers requested

listing the vessel sailing date origin of shipment final destination the

intermodal total freight charges as agreed and paid the total freight charges

applicable on the port to port rate basis plus miscellaneous charges and

the difference between the two totals or the amount sought to be waived

Appendix B to the application shows the detailed calculations upon which

the figures in Appendix A are based

For example the last part of Appendix B concerns the shipment of

four containers from Romulus to Ruesselsheim The last container listed

was one containing 16 800 pounds made on the vessel DUESSELDORF

EXPRESS which sailed from Baltimore March 19 1984 to Antwerp

The applicable port to port rate on this container was 78 per ton M

minimum 800 cubic feet Based on 843 cubic feet this basic charge was

1 643 85 The terminal handling charge U S of 4 50 per ton M was

27 F M C
868 FEDERAL MARITIME COMMISSION

94 84 The U S inland charge was 590 and the on carriage European

charge was 382 The European container service charge was estimated

at 80 American The total applicable charges as calculated for the container

are 2 790 69

The sought through single factor intermodal rate inclusive of all charges

is 1 572 per 20 foot container Thus the waiver sought to be authorized

on this container is 2 79069 less 1 572 or 1 218 69

The statutory requirements have been met It is concluded and found

that there was an error of administrative or clerical nature made by Hapag

Lloyd in failing to properly telex the Conference NACFC to publish

the two agreed intended through intermodal single factor rates on automobile

parts herein which caused higher freight charges to apply based on port

to port rates plus miscellaneous charges that the intermodal intended agreed

rates were made effective August 23 1984 in NACFC Intermodal Tariff

FMC lO page 520B which was after the shipments herein moved and

prior to the filing of this application that the application was timely filed

and that so far as the record shows the authorization of a waiver will

not result in discrimination among shippers ports or carriers

The applicant Hapag Lloyd is authorized to waive a total of approxi

mately2 7 132 79 of the applicable freight charges on the shipments herein

Appropriate notice of this matter and of the details of the waiver shall

be published in the pertinent tariffs of the Conference the port to port

FMC 9 and intermodal FMC lO

S CHARLES E MORGAN

Administrative Law Judge

2

As noted the waivers areapproximate because of approximations in dollars of the Belgian francs amounts

of the European container service charges

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 8434

SHIPPING CONDITIONS IN THE U S ARGENTINA TRADE

ORDER OF DISCONTINUANCE

May 13 1985

This proceeding was instituted on the Petition of AS Ivarans Rederi

Ivarans for issuance of rules to meet alleged conditions unfavorable to

shipping in the United States trades with Argentina pursuant to section

19 Merchant Marine Act of 1920 46 U S C app 876 Ivarans Petition

alleged that certain laws decrees and actions ofthe government ofArgentina

and certain Argentine flag carriers particularly relating to Argentine govern

ment Resolution 619 which restricts the carriage of Argentine export cargoes

to members of a northbound pooling agreement had resulted in conditions

unfavorable to shipping which would preclude Ivarans from competing for

cargoes in the northbound trade Ivarans is not currently a member of

the northbound pooling agreement

The Commission published notice of the Petition in the FEDERAL REG

ISTER inviting public comment 49 FR 40097 October 12 1984 The

Commission also asked the Departments of State and Transportation to

attempt to reach an informal resolution ofthe problem through government

to government initiatives In addition Ivarans itself entered discussions with

the government of Argentina and requested that the Commission defer

consideration ofits Petition while it pursued such discussions

The Commission has now been notified by the Departments of State

and Transportation that they have received assurances from Argentine au

thorities that they are not enforcing and do not intend to enforce Resolu

tion 619 Ivarans has likewise informed the Commission that it has received

assurances directly from Dr Casado Bianco Argentine Undersecretary for

Maritime and River Transport that neither Resolution 619 or other measures

including necessary clearances and export licenses will be used to prevent

it from loading cargo in Argentina

Based on these assurances Ivarans informs the Commission by an April

26 1985 letter from its counsel that it is satisfied that the primary purpose

of its Section 19 petition in regard to the northbound trade has been

achieved and requests that the Commission terminate this proceeding

Because Ivarans will have continued access to the northbound trade from

Argentina to the U S and no further regulatory purpose would therefore

be achieved by continuing this proceeding

27 F M C 869
1

870 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That this proceeding is discontinued

By the Commission

S BRUCE A DOMBROWSKI

Acting Secretary

i

27 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

ORDER DENYING MOTION TO DISMISS AND REMANDING

PROCEEDING

May 23 1985

These consolidated proceedings are before the Commission on a Motion

Addressed To The Commission Under The Shipping Act of 1984 To Dis

miss The Proceeding Motion to Dismiss filed by Respondent Pacific

Maritime Association PMA and Intervenor International Longshoremen

Warehousemen s Union ILWU Complainants California Cartage Co

Inc et al Cal Cartage Ihave filed a Reply to the Motion To Dismiss

and a Motion Addressed To The Commission For Expedited Consideration

Of Their Case On The Merits Motion for Expedition Respondents have

filed a Response to the Reply to the Motion to Dismiss and a Reply

to the Motion For Expedition

BACKGROUND

The complaints in these proceedings alleged that an assessment agreement

Agreement No LM 81 Agreement or LM 81 filed with the Commission

by PMA on September 29 1981 violates the substantive standards of

the Maritime Labor Agreements Act MLAA 94 Stat 1021 formerly

codified in section 15 fifth paragraph of the Shipping Act 1916 1916

Act 46 U S C app 814 Administrative Law Judge Joseph N Ingolia

Presiding Officer issued an Initial Decision on October 26 1982 which

held that LM 81 was not an assessment agreement as defined in the

1 Cal Cartage is the Complainant in Docket No 82 1 Complainants in Docket No 82 10 are

Containerfreight Terminals Company and Hawaiian Pacific Freight Forwarding

27 F M C 871
872 FEDERAL MARITIME COMMISSION

MLAA and dismissed the proceeding for lack of jurisdiction California

Cartage Co et al v Pacific Maritime Assoc 21 SRR 1333 1982 Excep

tions to the Initial Decision were filed by all parties to the proceeding

On exception the Commission reversed the Presiding Officer s

finding

of lack of jurisdiction holding that LM 81 in conjunction with a prior

agreement met the jurisdictional requirements of the MLAA However

the Commission further found that Complainants lacked standing to file

a complaint under the MLAA because they paid no assessments under

the Agreement and generally were not within the protected zone of inter

ests 2 The Commission accordingly dismissed the complaint California

Cartage Co et al v Pacific Maritime Assoc 25 F M C 596 1983

On Petition For Review the U S Court of Appeals reversed the Commis

sion s decision and remanded the case for further proceedings California

Cartage Co v U S 721 F 2d 1199 9th Cir 1983 cert denied 1055

S Ct 110 1984 The Court held that Complainants had standing to file

a complaint under the any person standard of section 22 of the 1916

Act 3 and that this standing had not been abrogated by the MLAA The

Court also found that Complainants could challenge LM 81 under the det

riment to commerce standard contained in the MLAA

Shortly after the Court s decision was issued the Shipping Act of 1984

1984 Act 46 U S C app 1701 1720 was enacted That Act included

several amendments to the MLAA provisions As relevant here the 1984

Act deleted the detriment to commerce standard applicable to assessment

agreements and made the MLAA remedies and regulatory standards exclu

sive in MLAA complaint proceedings 4 It is on the basis of these statutory

changes that PMA and ILWU now seek dismissal of the remanded proceed

ing

POSITIONS OF THE PARTIES

Repondents

The Motion to Dismiss requests an application of the 1984 Act in accord

ance with the Notice issued by the Commission addressing the status of

pending agency proceedings at the time the 1984 Act went into effect s

2

Complainants are off dock container freight stations which do nol utilize LA labor forcontainer handling

As such they are not subject 10 assessments under the Agreement Similarly they are not shippers carriers

orports the entitles speifically mentioned in section 15 fifth paragraph of the 1916 Act After reviewing

the 1916 Act and its legislative history the Commission determined that Congress did not intend that a nego

tiated Jabor agreement subject to the MLAA be challengable by complainants on the basis of its competitive

effects

Section 22 46 U S C app 821 provides inpertinent part

Any person may file with the Federal Maritime Commission asworn complaint setting forth

any violation ofthis Act

See section 5d of tbe 1984 Act 46 U S C app 1704d at footnote 7infra

sOn May IS 1984 the Commission issued a Notice in the Federal Register advising thaI proceedings

pending at the time the 1984 Act went into effect would be decided under the 1984 Act and not under the

1916 Act Application of Shipping Act of 1984 to Formal Proceedings Pending Before Federal Maritime

Commission 49 Fed Reg 21798 1984 The Notice further stated that exceptions to this policy would be

considered under the general rule established in Bradley v Richmond School Board 416 U S 696 1974

27 F M C
CALIFORNIA CARTAGE COMPANY INC V PACIFIC MARI iiME 873

ASSOCIATION

It is argued that no manifest injustice would result in an application

of the new Act because no matured right such as reparations has accrued

to Complainants under the 1916 Act and that any relief they would obtain

would be prospective in effect i e disapproval or modification of LM

81 No statutory provision or legislative history of the 1984 Act is said

to be contrary to this result because the savings provisions in the 1984

Act section 20 e 2 A 6 was made inapplicable to MLAA cases by oper

ation of the assessment agreement provision section 5 d 7 Respondents

argue that section 5 d indicates a retroactive application of the amended

MLAA provisions and that the Commission s

interpretation of the savings

provisions section 20 e 2 cannot operate to remove immunity retro

actively distinguish assessment agreements from other agreement cases

under the 1916 Act or apply to any cases other than pending suits for

past damages for unapproved agreements

It is further argued that an application of the substantive assessment

agreement provisions of the 1984 Act requires dismissal of this proceeding

The detriment to commerce standard was intentionally omitted from

the 1984 Act and therefore allegedly removed the basis for the Complain

ants standing to challenge LM 81 Respondents argue that Complainants

are therefore precluded from arguing any other grounds now including

discrimination because their cause of action was limited to a detriment

to commerce theory by the decision ofthe Court of Appeals

Finally Respondents contend that Complainants cannot avail themselves

of the any person standing standard of section II a

8

of the 1984

Act because section 5 d specifically excludes its application to assessment

agreement cases It is argued that this change from the 1916 Act close

Bradley stands for the proposition that cases are to be determined according to the law as it exists at the

time a final decision is issued unless applying achange in the law during a

proceeding results in a manifest

injustice to a

party

Section 20 e 2 A 46 U S c

app 1719 e 2 A provides

2 This Act and the amendments made by it shall not affect any suitA filed before the date

of enactment of this Act

7

Section 5 d of the 1984 Act 46 U S C app 1704d provides

d ASSESSMENT AGREEMENTS Assessment agreements shall be filed with the Commission

and become effective on filing The Commission shall thereafter upon complaint filed within 2

years of the date of the agreement disapprove cancel or modify any such agreement or charge

or assessment pursuant thereto that it finds after notice and hearing to be unjustly discriminatory

or unfair as between carriers shippers or ports The Commission shall issue its fmal decision in

any such proceeding within I

year of the date of filing of the complaint To the extent that an

assessment or charge is found in the proceeding to be unjustly discriminatory or unfair as between

carriers shippers or ports the Commission shall remedy the unjust discrimination or unfairness for

the period of time between the filing of the complaint and the final decision by means of assessment

adjustments These adjustments shall be implemented by prospective credits or debits to future as

sessments or charges except in the case of acomplainant who has ceased activities subject to the

assessment or charge in which case reparation may be awarded Except for this subsection and

section 7a of this Act this Act the Shipping Act 1916 and the Intercoastal Shipping Act 1933

do not apply to assessment agreements

8

Section lI a 46 U S c

app 1710aprovides

Any person may file with the Commission a sworn complaint alleging a violation of this Act

other than section 6 gand may seek reparation for any injury caused to the complainant by that

violation

27 F M C
1

874 FEDERAL MARITIME COMMISSION

in time to the Court of Appeals decision evinces a clear intent to overrule

the Court s decision Respondents conclude that the Court s

finding that

the any person standard was an alternative basis for standing for Com

plainants is no longer relevant

Complainants

Complainants argue that the savings provisions of the 1984 Act section

20 e 2 A preserves its rights to prosecute its complaint to completion

It states that the Commission s

interpretation of the savings provision in

its May 15 1984 Notice which provides that this provision applies only

to pending antitrust suits should not apply here because this case is the

only one that can ever challenge LM 81 Dismissal of this case allegedly

could result in the final and unchallengeable approval of a potentially

unlawful agreement It is argued that the MLAA as it read prior to the

1984 Act must apply to conduct occurring before the Act became effective

Once Complainants have standing they argue all standards and remedies

under the 1916 Act are available including disapproval of LM 81 and

reparations

Because the Court of Appeals ruled in their favor Complainants also

maintain that they retain their standing to sue even if the 1984 Act s

substantive standards apply However Complainants further argue that it

would be a manifest injustice to apply the 1984 Act because of its

final antitrust immunization of LM 81 and the resulting deprivation of

a

remedy to non participating third parties relying on Complainants chal

lenge here

Alternatively Complainants argue that they have standing under the 1984

as any person even if the detriment to commerce standard is now

found to be inapplicable They note that the Court of Appeals found the

any person criteria is an alternative and accordingly argue that they

may challenge LM81 under the MLAA or any other relevant provision

of the 1984 Act The any person standard of section l1 a allegedly

is carried forward in assessment agreement cases under the 1984 Act be

cause section 5 d does not limit standing and therefore Complainants

may raise any violation of the 1984 Act They urge that this result be

permitted in light of the broad antitrust immunity provided by the 1984

Act To do otherwise they argue deprives injured non parties to such

agreements ofany forum to challenge them

Finally Complainants reason that the language of section 5 d does not

preclude the application of section 11 a to assessment agreement cases

because such a

reading would render other critical provisions of the 1984

Act such as discovery rulemaking and the effective date also inapplicable

The relevant language of section 5 d according to Complainants was

only intended to apply to the substantive standards and procedural remedies

stated in other sections of the 1984 Act

27 F M C
CALIFORNIA CARTAGE COMPANY INC V PACIFIC MARITIME 875

ASSOCIATION

DISCUSSION

The 1984 Act and its legislative history require a determination that

Complainants have neither standing nor a cause of action to pursue in

these proceedings under the 1984 Act The detriment to commerce stand

ard is not included in section 5 d of the 1984 Act and the any person

standing provision of section ll a is not applicable to assessment agreement

cases Accordingly both the bases of standing and the substantive cause

of action found available to Complainants by the Court of Appeals have

been removed by the 1984 Act The timing ofthis change and its legislative

history 9 indicate an intention to overrule the Court s decision in this case

at least as it operates prospectively

The savings provisions of section 20 e 2 A have previously been inter

preted by the Commission as having no application to pending administrative

cases

lO Complainants standing and statutory cause of action therefore ap

pears to be extinguished under the 1984 Act and their attempt to expand

their case is now rejectable as a matter of the law of the case here l1

Under the Bradley rule 12 however an exception to the application of

the 1984 Act to pending administrative cases is recognized where dismissal

of a proceeding would result in manifest injustice to Complainants

One accepted method of making this determination is to ascertain whether

any right or claim has matured or become vested under the 1916 Act

that would be retroactively taken away from the Complainants by application

of the 1984 Act I3

Section 15 of the 1916 Act contained two basic remedies with regard

to MLAA complaint cases disapproval or modification of the agreement

and assessment adjustments Neither of these remedies could now be af

forded Complainants First if LM 8I were now found to be detrimental

to commerce the Commission could notretroactively disapprove or modify

the Agreement 14 Additionally the Commission could not prospectively dis

approve or modify LM 81 because to do so would be to enter an order

of future effect that is inconsistent with current law at the time the order

is issued IS Therefore even if Complainants rights to have LM 81 dis

approved or modified had theoretically matured on the basis of the

record before the Commission under the 1916 Act supervening legal consid

erations preclude that remedy now

Second a

reading of section 15 of the 1916 Act indicates that assessment

adjustments were only available to remedy unjust discrimination in assess

9

See H R Rep No 600 98th Cong 2d Sess 30 1984

10 See footnote 5

IISee California Cartage Co v U S supra 721 F 2d at 1205 1206

12 See footnote 5

See Indianapolis power Light Co v I C

C

687 F2d 1098 7th Cir 1982

OSee National Ass n of Recycling Industries Inc v American Mail Line Ltd 720 F 2d 618 620 9th

Cir 1983

Ziffrion v U

S

318 U S 73 1943 See also Sea Land Service Inc v

I C

C

738 F2d 1311 1314

15 DC Cir 1984 Central Freight Lines Inc v U S 669 F 2d 1063 1069 5thCir 1982

27 F M C
876 FEDERAL MARITIME COMMISSION

ment agreements 16 Therefore because the Court of Appeals has already

found that Complainants could not advance such a cause of action 17 this

remedy at no time vested or matured with respect to their complaint

However the Court s analysis of the 1916 Act would appear to require

that the Commission also examine section 22 to determine whether any

potential right or remedy had accrued to Complainants that was not incon

sistent with section 158 The fundamental right to obtain reparations under

section 22 of the 1916 Act does not appear inconsistent with section

15 with regard to affording a remedy for an assessment agreement found

to operate to the detriment of commerce Section 15 contains specific

remedies for agreements found to be unlawfully discriminatory While these

displace the reparations authority of section 22 because they are inconsist

ent therewith the same can not be said of reparations for an unlawful

detriment to commerce Section 15 does not apply an express remedy

for an assessment agreement found detrimental to commerce Accordingly

reparations must be held to be a viable remedy for such unlawful agreements

under the statutory scheme ofthe 1916 Act in this narrow context

Finally the Commission finds that complainants right to a decision

on the merits of their case and on their request for reparations had suffi

ciently matured or vested so as to preclude its dispossession by

application of the 1984 Act Although no decision on the merits was

issued before the 1984 Act was passed the record was complete and

but for a finding of no standing by the Commission such a decision

would have issued Depriving Complainants of a decision on the merits

and their potential reparations now as a result of a threshold decision

on their standing to sue that has been overturned on appeal would appear

to constitute manifest injustice An award of reparations for conduct

that occurred prior to the effective date of the 1984 Act would not affect

future conduct nor carry forward provisions of the 1916 Act that are incon

sistent with the 1984 Act Accordingly the Commission will deny Respond

ents Motion to Dismiss

THEREFORE IT IS ORDERED That the Motion to Dismiss of Respond

ents Pacific Maritime Association and International Longshoremen

Warehousemen s Union is denied and

I Section 15 fifth paragraph of the 1916 Act provides inpeninent pan

To the extent that any assessment orcharge is found in such a complaint proceeding to be unjustly

discriminatory or unfair as between carriers shippers or pons the Commission shall remedy the

unjust discrimination or urifalrness for the period of time between the filing of the complaint and

the fmal decision by means of assessment adjustments emphasis added

17 California Cartage Co v U

S

supra 721 F 2d at 1205

18111 this remanded proceeding it is appropriate that the rights and remedies available to Complainants

under the 1916 Act be determined according to the statutory construction methodology utilized by the Coun

of Appeals See Rlos Phlneda v U S Dept of Justice 1N

s

720 F 2d 529 8th Cir 1983 City of Cleve

land Ohio v F P

C

561 F 2d 344 DC Cir 1977

27 F M C
CALIFORNIA CARTAGE COMPANY INC V PACIFIC MARITIME 877

ASSOCIATION

IT IS FURTIIER ORDERED That the Motion for Expedition of Com

plainants California Cartage Company Inc et aI is denied 9 and

IT IS FURTHER ORDERED That this proceeding is remanded to the

presiding Administrative Law Judge for further proceedings consistent with

this Order and

IT IS FURTIIER ORDERED That the remanded proceeding shall be

decided upon the present evidentiary record supplemented by any memo

randa of law the parties may file on the remanded issue of whether Com

plainants are entitled to an award of reparations for injuries sustained by

them as a result of a detriment to commerce caused by Agreement

No LM 81 from its implementation date until June 18 1984 and if

so in what amount and

FINALLY IT IS ORDERED That an Initial Decision on Remand be

issued within 120 days of the date of this Order

By the Commission

S BRUCE A DOMBROSKI

Acting Secretary

I The Motion for Expedition argues that because this proceeding is now three years old and the MLAA

provision requiring afinal decision within one year of the filing of their complaints has been carried forward

into the 1984 Act expedited consideration on the merits is appropriate in this remanded proceeding Com

plainants request an abbreviated schedule for the issuance of an initial decision exceptions replies to excep

tions and a final Commission decision Respondents Reply agrees that if their Motion to Dismiss is denied

the case should be given expedited consideration Respondents suggest however that an initial decision be

dispensed with and the Commission issue afinal decision on the present record after allowing the parties

to brief the detriment to commerce issue Alternatively Respondents state that if an initial decision is

deemed necessary it should be confined to only the detriment to commerce issue on the present record

with the standard clearly defined in any Commission remand order They further suggest that the inquiry

be limited to the period of time between the filing of Agreement No LM 81 and the date of the 1984 Act

took effect

Respondents alternative procedure appears to be the most appropriate and has been adopted except to the

extent it would preclude the presiding Administrative Law Judge from making a full determination of what

constitutes a detriment to commerce

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 8

EAST COAST COLOMBIA CONFERENCE ET AL

v

AGROPECUARIA Y MARITIMA SANTA ROSA LTDA

NOTICE

June 3 1985

Notice is given that no appeal has been taken to the April 25 1985

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

the Commission could determine to review has expired No such determina

tion has been made and accordingly the dismissal has become administra

tively final

S BRUCE A DOMBROWSKI

Acting Secretary

070

7 J t
FEDERAL MARITIME COMMISSION

DOCKET NO 83 8

EAST COAST COLOMBIA CONFERENCE ET AL

v

AGROPECUARIA Y MARITIMA SANTA ROSA LTDA

COMPLAINT DISMISSED WITH PREJUDICE

Finalized June 3 1985

Complainants and respondent have filed a motion asking that the com

plaint be dismissed with prejudice The reasons for the motion are explained

below

On January 31 1983 complainants a Conference and three of its member

lines filed a complaint alleging that respondent Agromar had violated sec

tions 16 Second 17 18 b 1 and 3 of the Shipping Act 1916 by

allegedly carrying cargo and doing other things without always having

a tariff on file with the commission As the case progressed and complain

ants obtained more information through the Commission s discovery proc

esses it appeared that complainants were alleging that Agromar had not

only operated without a tariff from December 1980 through August 1981

between certain ports but that Agromar had also made unjustly discrimina

tory contracts and allowed shippers to pay freight at other than the rates

on file during the period December 1980 through June 1982 Complainants

also asked for money damages

Agromar denied any wrongdoing and defended its contracts with shippers

contending that it is permissible to be a contract and common carrier

at the same time At worst Agromar stated that it may have committed

some technical violations without intending to violate law and that it cor

rected its mistakes and defective tariff filings Alleged deviations from

its tariff on certain shipments however were not explained by Agromar

Rather than proceed into lengthy evidentiary hearings in an effort to

litigate the various issues in mid July 1983 both complainants and respond

ent moved that the proceeding be stayed to allow them to consummate

a settlement agreement which would require the assistance of the Commis

sion specifically by means of a Commission instituted investigation See

Proceeding Stayed July 21 1983 I granted the motion d However

on February 10 1984 the Commission declined to begin a formal investiga

tion Instead the Commission referred the matter to the Bureau of Hearing

Counsel with instructions to enter into informal negotiations leading to

possible compromise under 46 CFR 505 4 Later in April of 1984 com

7FMC sno
880 FEDERAL MARITIME COMMISSION

plainants furnished Hearing Counsel with materials which complainants be

lieved to be relevant to their allegations of violations as the Commission s

February 10 Order permitted See Order cited at 7

Because of the apparent inaction toward settlement between Hearing

Counsel and Agromar I issued rulings designed to precipitate some action

either by way of settlement or by proceeding to hearing and a decision

on the merits of the complaint See rulings served November 20 December

31 1984 and February 8 1985 However before it became necessary

to lift the stay and proceed to hearing Hearing Counsel and respondent

Agromar completed their negotiations and executed two compromise agree

ments dated October 29 1984 and March 15 1985 The two agreements

appear to follow the standard form set forth in the Commission s

regulations

See Appendix A following 46 CFR 505 7 In brief without admitting

that it committed any of the alleged violations Agromar agrees to pay

the Commission the aggregate total of 12 500 in compromise of all civil

penalties arising out of violations of sections 14 Fourth 16 Second 17

18 b 1 and 18 b 3 of the Shipping Act 1916 that were alleged to

have occurred at various periods between December 1 1980 and June

30 1982 The agreements represent the Commission s and Agromar s desire

to settle the matters in controversy and to avoid the delays and expenses

which would accompany agency litigation concerning the penalty claims

The above agreements have apparently persuaded complainants that fur

ther pursuit of their complaint into the same matters will be unnecessary

Accordingly complainants as well as respondent are seeking to have their

complaint dismissed with prejudice Under the circumstances there is no

doctrine of law which I am aware which would require private complainants

to continue to litigate

Accordingly the motion is granted and the complaint is dismissed with

prejudice

S NORMAN D KLINE

Administrative Law Judge

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 32

KUEHNE AND NAGEL INC

v

BARBER BLUE SEA LINE AND NEDLLOYD LINES

NOTICE

June 4 1985

Notice is given that no appeal has been taken to the April 29 1985

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

the Commission could determine to review has expired No such determina

tion has been made and accordingly the dismissal has become administra

tively final

8 BRUCE A DOMBROWSKI

Acting Secretary

27 F M C 881
FEDERAL MARITIME COMMISSION

DOCKET NO 83 32

KUEHNE AND NAGEL INC

v

BARBER BLUE SEA LINE AND NEDLLOYD LINES

SETTLEMENT APPROVED

Finalized June 4 1985

This proceeding was remanded to me for further hearing by the Commis

sion for the purpose of determining whether four shipments of rock crushing

plants could be considered mobile rock crushing plants within the meaning

of Item 1255 of the 8900 Rate Agreement Freight Tariff No 8 FMC

No 8

During the testimony of a witness on respondents case in chief at the

hearing held on April 25 1985 the parties determined that the case should

be settled and they entered into stipulations on the record 1 whereby the

respondents agreed to pay the complainant the sum of 18 334 54 the

exact amount alleged to constitute the over charges on the four shipments

and the complainant agreed to waive any entitlement to interest2

I indicated

that the settlement appeared to be satisfactory to me but that final approval

must await appropriate Commission action following the issuance of my

written order of approval

The background facts and issues involved in this proceeding have been

fully developed in my initial Decision of October 1 1984 and the Order

or Remand served March 28 1985 and will not be repeated except to

the extent needed for clairity

The complaint was filed on July 28 1983 It alleged that there were

four shipments of mobile rock crushing plants from Baltimore Maryland

to Damman Saudi Arabia made in August and September 1981 that

Barber Blue Sea Line carried two of those shipments and overcharged

complainant s assignor in the amount of 13 734 45 and the Nedlloyd Lines

carried the other two shipments and overcharged complainant s assignor

in the amount of 4 600 09 all in violation of section 18 b 3 of the

Shipping Act 1916 46 U S C 817 b 3

I A written paraphrase of the stipulation was presented to me after the record of hearing was closed The

paraphrase was lodged with the Secretary forfiling inthe docket

2

A complainant may elect to waive interest on its claim Consolidated International Corporation v

Concordia Line 18 F M C 180 181 182 n3 1975

882 27 F M C
KUEHNE AND NAGEL INC V BARBER BLUE SEA LINE AND 883

NEDLLOYD LINES

The rolro portions of the shipments were rated as mobile rock crushing

plants under Item 1255 of the aforesaid tariff while all other portions

were rated as stationary rock crushing plants under Item 765 of that

tariff Item 1255 carried a rate of 122 25 W M while Item 765 carried

a higher rate of 13125 Kuehne and Nagel argued that the entirety of

four shipments should be rated as mobile plants The respondents argued

that by giving the shipper the benefit of the doubt the shipments were

properly rated partly as mobile and partly as stationary plants rather than

as stationary plants in their entirety I found that the plants were mobile

and should have been rated as Item 1255 shipments The Commission

found that there was insufficient evidence to determine which tariff item

applied but did confirm that all of the shipments must be rated under

a single item of the tariff

As indicated while respondents witness was testifying it became mani

fest to them for the first time that an ambiguity in the 8900 Rate Agree

ment Tariff could be perceived and that a shipper might possibly rely

on that ambiguity to conclude that only the Item 1255 rate was applicable

Accordingly and in order to avoid any further expenses of litigation

the parties agreed to the settlement and asked that it be approved

DISCUSSION

In determining whether settlements should be approved it is well settled

that the law encourages settlements and that every presumption is indulged

in that favors their correctness fairness and validity However as an added

ingredient in section l8 b 3 cases the Commission insists upon striking

a balance between the policy favoring settlement against the possibility

of discriminatory rating practices which might result if settlements are

approved in the absence of a finding of violation Thus in such cases

the Commission follows the policy that parties should have the opportunity

to settle disputes but to prevent abuse it must be established that the

settlement is a bona fide attempt to terminate the controversy and not

a device to obtain transportation at other than the applicable rates and

charges or otherwise circumvent the requirements of the Shipping Act

Organic Chemicals v Atlanttrafik Express Service 18 SRR 1536a 1979

Ellenville Handle Works Inc v Far Eastern Shipping Company 23 F MC

708 1981 Celanese Corporation Inc v The Prudential Steamship Com

pany 23 F M C 1 1980

Clearly this has been a vigorously contested proceeding Following the

service of the complaint and the answer there were motions for summary

judgment a hearing on a stipulated record exceptions to the initial decision

and a partial oral hearing on remand There existed a genuine dispute

which absent a settlement promised to involve a continuation of the evi

dentiary hearing briefing and the filing of exceptions after another initial

decision The parties have carefully considered the potential expense of

protracted litigation and the difficulties of sustaining the burden of persua

27 EM C
884 FEDERAL MARITIME COMMISSION

sion and have decided to dispose of their differences in a rational and

non discriminatory manner

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

the controversy and that it is not a device to obtain transportation at

other than applicable rates and charges or otherwise circumvent the require

ments ofthe Shipping Acts

Accordingly it is ordered that the settlement be approved It is further

ordered that within ten days after this order becomes final the parties

furnish the Secretary with evidence that the settlement has been accom

plished

S SEYMOUR GLANZER

Administrative Law Judge

27 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 846

THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

v

NEW YORK SHIPPING ASSOCIATION ET AL

DOCKET NO 848

PUERTO RICO MARITIME SHIPPING AUTHORITY AND PUERTO

RICO MARINE MANAGEMENT INC

v

NEW YORK SHIPPING ASSOCIATION INC

ORDER DISCONTINUING PROCEEDING

JUNE 5 1985

On February 27 1985 the Federal Maritime Commission Commission

or FMC issued a Report and Adoption With Modifications of Initial Deci

sion and an implementing Order February Report and Order in these

proceedings The Commission found that an assessment agreement LM

86 used by the New York Shipping Association Inc NYSA and Inter

national Longshoremen s Association AFL CIO ILA to fund longshore

men s benefits was unfair and unjustly discriminatory under the Mari

time Labor Agreements Act of 1980 MLAA Pub L No 96325 and

ordered the agreement modified to remove the unfairness and unjust dis

crimination It also directed that assessment adjustments be made in favor

of Puerto Rico Maritime Shipping Authority Puerto Rico Marine Manage

ment Inc pRMSNPRMMI to compensate PRMSNPRMMI to the extent

it was assessed under LM 86 rather than the modified assessment agreement

the Commission prescribed

On April 29 1985 pursuant to the February Order NYSA and ILA

filed with the Commission a modified assessment agreement April Assess

ment Agreement and a statement of assessment adjustments April Assess

ment Adjustments to be granted PRMSNPRMML NYSA and ILA also

as required in the February Report and Order set forth the means of

phasing out the excepted man hour assessment treatment for trans

27 F M C RR5
886 FEDERAL MARITIME COMMISSION

shipped cargoes

1 In addition they sought an extension of time until July

I 1985 for implementation of the April Assessment Agreement and for

submission of applications to defer imposition of the man hour tonnage

assessment on transshipped cargo beyond September 30 1986 On April

29 1985 Massachusetts Port Authority Massport sought an extension

of the transition period for phasing out the excepted treatment for Boston

transshipment cargoes from September 30 1986 to September 30 1987

By order served May 13 1985 the Commission extended until July

I 1985 the time for filing requests for extensions of the phasing out

period from any party and until July 31 1985 the time for responses

to such requests By orders served May 13 and May 21 1985 the Commis

sion also extended until May 28 1985 the time for replies to issues raised

by the April Assessment Agreement the petition for extension ofthe effec

tive date of that Agreement to July I 1985 and the document entitled

PRMSA s Assessment Adjustment

On May 22 1985 NYSAlILA submitted a new assessment agreement

May Assessment Agreement made effective by its terms on July I 1985

which is appended to a Settlement Agreement joined in by all of the

private parties engaged in the litigation in these proceedings 2

The Settlement Agreement is made in consideration of the assessment

adjustment to be provided to PRMSA and the mutual promises herein

contained It provides that all assessment litigation before the

FMC and the courts is hereby settled and that At such time as notice

is received that the FMC deems the matters in issue in these proceed

ings have been concluded by virtue of this Agreement all court proceed

ings brought to challenge the Commission s actions herein will be terminated

Section 3 a

3

In addition the Settlement Agreement provides for an assessment adjust

ment credit in favor of PRMSA pursuant to our February Report and

Order of 4667 000 for the period February 27 1984 through June 30

1985 made available immediately upon execution of the Agreement Section

1 The Settlement Agreement also provides for the adoption of the ap

pended May Assessment Agreement and guarantees the Puerto Rican trade

1 Section 17 of the April Assessment Agreement provides for the deferral of the tonnage portion of the

assessment on transshipped cargoes until September 30 1986 one of the options permined by the Commis

sion See February Repon and Order pages 8889

2The Settlement Agreement was signed by NYSA lLA PRMSA PRMMl The Pon Authority of New

York and New Jersey the Maryland Pon Administration MPA Masspon and Sea Land Service Inc MPA

however preserves its right to challenge before the Commission any future competitive situation which reo

sults from this settlement agreement

3

The Senlement Agreement also states The parties hereto waive and release any and all claims which

they have asserted or may have asserted against each other or any other named party in connection with

the aforementioned litigation relating to the assessment formula for the funding of the costs of longshore

fringe benefits in the Pori of New York and New Jersey Section 3 b Each of the parties

hereto agrees to take no action whatsoever to ovenurn or nullify this settlement andor the annexed NYSA

LA Assessment Agreement Section S c

27 F M C
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY V 887

NEW YORK SHIPPING ASSOCIATION ET AL

of substantial preservation of the treatment accorded it therein during the

1983 1986 and 19861989 contract periods Section 2

Finally the Settlement Agreement states that it shall not be deemed

an admission of liability by any party nor an expression of opinion

by any party as to the correctness or legality of this agreement of the

annexed NYSA ILA Assessment Agreement of the NYSA ILA Assessment

Agreement No LM 86 or the February 27 1985 Report and Order of

the Federal Maritime Commission in Docket Nos 846and 848 Section

4

The May Assessment Agreement which revokes and replaces the April

Assessment Agreement provides for a tonnage assessment of 5 85 per

assessment ton and a man hour assessment for excepted cargo of 5 50

per man hour Transshippedrelayed containers are assessed 25 00 for each

loading or unloading from a vessel in the Port of New YorkNew Jersey

House Containers i

e those not stuffedstripped on the pier are assessed

a 65 00 rate and empty containers a 40 00 rate House Containers and

Empty Containers in the Puerto Rican trade are assessed 15 00 Pier

containers i e those stuffedstripped on the piers containers not con

signed to the Port which are restowed on the same vessel and house

containers including house containers in the Puerto Rican trade which

originate at or are destined to points in the continental United States exclud

ing Alaska more than 260 highway miles from the center of the Port

are not subject to a container unit assessment The NYSA ILA Contract

Board is empowered to alter the assessment levels to grant special assess

ment for specific cargoes and to alleviate peculiar and isolated hardships

for specific carriers trades or commodities

On May 23 1985 PRMSAPRMMI advised that in light of the May

Assessment and Settlement Agreements no further comment from PRMSA

and PRMMI is required in respect of these proceedings

Because the May Assessment and Settlement Agreements supersede the

April Assessment Agreement and Assessment Adjustments we need not

make detailed findings on whether or not the earlier documents complied

with the February Report and Order in all respects The Commission found

LM 86 unlawful and ordered assessment adjustments made in favor of

PRMSAPRMMI Such adjustments have been made pursuant to the Feb

ruary 27 1985 Report and Order of the Federal Maritime Commission

and PRMSAPRMMI NYSA and ILA agree that the amount of assessment

adjustments due PRMSAPRMMI is 4 667 000 Assessment credits have

already been extended in that amount against future assessments Insofar

as the future is concerned the May Assessment Agreement which replaces

both LM 86 and the April Assessment Agreement has been agreed to

by all parties and fully resolves all outstanding differences as between

them

Prior to the MLAA settlement agreements with respect to assessments

for longshoremen s benefits required approval pursuant to section 15 Ship

27 F M C
888 FEDERAL MARITIME COMMISSION

ping Act 1916 46 U S C app 814 See e g New York Shipping Ass n

v FMC 571 F 2d 1231 12361237 1239 1240 D C Cir 1978 New

York Shipping Ass n v FMC 628 F 2d 253 255 257 D C Cir 1980

This is no longer the case Under the MLAA assessment agreements are

not subject to an affirmative act of approval by the Commission but

become effective by operation of law and can only be challenged on

private party complaint and not on the Commission s own motion See

S Rep No 854 96th Cong 2nd Sess 13 14 1980 S Rep No 3

98th Cong 1st Sess 25 1983 Shipping Act of 1984 section 5 d 46

U S C app 1704 d

The May Assessment Agreement is an assessment agreement within the

meaning of the MLAA and will become effective by its terms by operation

of law on July 1 1985 Similarly so much of the Settlement Agreement

as provides for the continued differentiated assessment treatment for the

Puerto Rican trade is an assessment agreement within the meaning of

the MLAA and became effective when filed with the Commission on

May 22 1983 4

THEREFORE IT IS ORDERED That all pending petitions motions

and requests with respect to the April 29th filings are dismissed as moot

and

IT IS FURTHER ORDERED That these proceedings are discontinued

By the Commission

S BRUCE A DOMBROWSKI

Acting Secretary

4

Accordingly the Commission need not and does not make any determination as to the merits of these

Agreements

W 27 P

C
FEDERAL MARITIME COMMISSION

DOCKET NO 841

EXPORTRAN INC

v

TEXAS GULF IBERIA NAVIGATION COMPANY INCORPORATED

NOTICE

June 20 1985

Notice is given that the time within which the Commission could deter

mine to review the May 15 1985 discontinuance of the complaint in

this proceeding has expired No such determination has been made and

accordingly the discontinuance has become administratively final

S BRUCE A DOMBROWSKI

Acting Secretary

27 F M r RRQ
FEDERAL MARITIME COMMISSION

DOCKET NO 841

EXPORTRAN INC

v

TEXAS GULF IBERIA NAVIGATION COMPANY INCORPORATED

COMPLAINANT S MOTION TO WITHDRAW COMPLAINT GRANTED

Finalized June 20 1985

On May 3 1985 Exportran Inc the complainant in this proceeding

filed a Motion to Withdraw Complaint regarding this proceeding The com

plaint seeks relief from Texas Gulf Iberia Navigation Co Inc TGlN

for violations of the Commission s General Order 4 and section 44 of

the Shipping Act 1916

In support ofits Motion the complainant states that

During the course of the proceeding counsel and Exportran

through negotiations with the relevant parties obtained the release

of all goods and documents of title which had been withheld

as the result of misrepresentations by TGlN which thereby moots

the counts contained in Paragraph IV of the Complaint

The complainant also states that an action including the same issues involved

in this proceeding was recently concluded in the District Court for the

District of Columbia and that by final order entered on April 22 1985

the judge awarded 31 885 00 to Exportran Further the complainant notes

that TGlN has not been operational as a licensed freight forwarder since

May 27 1984 when its license was revoked for failure to maintain a

bond

It is clear from all of the above and the entire record that the issues

raised in this proceeding are moot Consequently the complainant s Motion

to Withdraw Complaint is hereby granted and the proceeding is discon

tinued

8 JOSEPH N INGOLIA

Administrative Law Judge

Ron 27 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1206

APPLICATION OF SEA LAND SERVICE INC FOR THE BENEFIT

OF PAGE JONES INC AS AGENT FOR SONY MAGNETIC

PRODUCTS INC

SPECIAL DOCKET NO 1238

APPLICATION OF PACIFIC WESTBOUND CONFERENCE AND SEA

LAND SERVICE INC FOR THE BENEFIT OF TONE FORWARDING

AS AGENT FOR MEARL CORPORATION

Application for permission in Special Docket No 1206 to waive a portion of freight charges

in the amount of 1 296 00 granted

Application for permission in Special Docket No 1238 to waive a portion of freight charges

in the amount of 11 977 70 granted

An application for waiver under section 18b 3 of the Shipping Act is appropriate where

the application for waiver was filed within 180 days of the sailing date of the vessel

even though the shipments were tendered to the carrier for inland movement more

than 180 days prior to filing of application

Claudia E Stone for Sea Land Service Inc

REPORT AND ORDER PARTIALLY ADOPTING INITIAL DECISIONS

June 26 1985

By the Commission James J Carey Vice Chairman Thomas F Moak

ley Edward J Philbin and Robert Setrakian Commissioners

On January 8 985 Administrative Law Judge Seymour G anzer pre

siding Officer issued an Initia Decision JD in Special Docket No

206 denying Sea Land Servicer Incs Sea Land application submitted

pursuant to section 8 b 3 of the Shipping Act 1916 1916 Act 46

VS C app 817 to waive collection of certain freight charges on the

ground that the 180 day limitation contained in section 18 b 3 precluded

the Commission from granting the relief requested l

Similarly on February

13 1985 the Presiding Officer issued an JD in Special Docket No 1238

denying another Sea Land application on the same ground The proceedings

are before the Commission upon Exceptions to the J Ds filed by Sea

Land

BACKGROUND

A Special Docket No 1206

I

In all material respects section 8 e of the Shipping Act of 1984 46 V S C app 1707 e is the same

as section 18 b 3 of the 1916 Act

27 F M C RQl
1

1

892 FEDERAL MARITIME COMMISSION

On October 21 1983 Sea Land officials instructed Sea Land s tariff

publication office to file a reduced rate on magnetic tape applicable to

all Continental ports of 130 per 2240 pounds subject to a 40 320 pound

minimuJ Il per container Rule 3 of the applicable tariff Sea Land Tariff

No 417 FMC No 280 provides that The rate or charges to be assessed

are those in effect the day origin carrier receives the cargo Ist Revised

Page 14

On January 13 1984 Sea Land received a shipment of magnetic tape

from Sony Magnetic Products Inc at Dothan Alabama for transportation

via Jacksonville Florida to Le Havre France A second shipment of mag

netic tape was received by Sea Land 011 February 13 1984 From Dothan

each shipment was carried to Jacksonville by motor carrier where it was

placed aboard the Sea Land vessel LEADER The first shipment moved

on voyage 71E which sailed for Rotterdam on January 15 1984 The

second was moved on voyage 72E which sailed on February 14 1984

Through an error the 130 rate was not published in the applicable section

of the tariff at the time the shipments were tendered to the motor carrier

As a result the then applicable rate for magnetic tapes of 166 per 2240

pounds subject to a 40 320 pound minimum per container was assessed

onthe shipments

On July 12 1984 Sea Land filed a special docket application on behalf

of Sony Magnetic Products Inc to waive collection of a total of 1296

due on the two shipments The Presiding Officer concluded that the second

shipment met all the requirements of section 18b 3 of the 1916 Act

and granted permission to waive 648 However the application as to

the first shipment was denied by the Presiding Officer on the ground

that the 180 day limitation in section 18b 3 precluded the Commission

from authorizing a tariff notice making the reduced rate effective from

January 13 1984 a date more than 180 days prior to the filing of the

application 2

B Special Docket No 1238

Upon the request of Sea Land a member of the Pacific Westbound

Conference pWC PWC agreed to establish a Special Rate applicable

to paints and pigments of 160 per ton of 1 000 kilos subject to

a minimum of 18 5 kilotons per 4O foot container or 17 5 kilotons per

35 foot container covering intermodal transportation from East Coast ports

through West Coast ports to the Far East pwC Westbound Intermodal

Tariff No PWC 708 A FMC 20 Rule 3 of the tariff provides that

For cargo received by the carrier at CY CFS the applicable rates and

charges are those in effect on the date of such receipt 13th Revised

Page 34

z

Section 18 bX3 provides in relevant part That application for refund or waiver must be filed

with the Commission within one hundred and eighty days from the date of shipment

27 F M C
APPLICATION OF SEA LAND SERVICE INC FOR THE BENEFIT 893

OF PAGE JONES INC AS AGENT FOR SONY

On March 9 1984 a shipment of paints and pigments shipped by Mearl

Corporation was received by Sea Land at its container yard at Elizabeth

New Jersey From Elizabeth it was carried overland to Seattle where it

was loaded on board the Sea Land vessel PATROIT on March 23 1984

for transportation to Kowloon Hong Kong Due to an error the Special

Rate omitted pigments at the time the shipment was tendered to Sea

Land at Elizabeth On September 18 1985 Sea Land filed a special docket

application on behalf of Tone Forwarding as agent for Mearl Corporation

to waive collection of 11 977 70 due on the shipment described above

The Presiding Officer denied the application as untimely filed for the same

reasons stated above in connection with Special Docket No 1206

DISCUSSION

Section 18 b 3 requires that applications for refund or waiver of other

wise applicable freight charges must be filed with the Commission within

one hundred and eighty days from the date of shipment The date

of shipment is defined in Rule 92 of the Commission s Rules of Practice

and Procedure 46 CPR 502 92 a 3 as the date of sailing of the

vessel from the port at which the cargo was loaded In both Special

Docket Nos 1206 and 1238 the application was filed within 180 days

of the date the vessel sailed Thus Sea Land argues that it has complied

with statue of limitation requirement of section 18 b 3 as interpreted in

Commission Rule 92

The Presiding Officer acknowledges that the applications were filed within

180 days of the sailing date of the vessel Nonetheless he believes that

relief is barred He reasons in each instance that because the date of

the carrier s

receipt of the cargo is by its own tariff the date on which

the rate for the assessment of charges became fixed the Commission would

have to authorize a tariff notice making the reduced rate effective from

the date the cargo was received which is more than 180 days prior to

the filing of the application The Presiding Officer reads the Commission s

decision in Special Docket No 1102 Application of United States Atlantic

GulfJamaica and Hispaniola Steamship Freight Association and Sea

land Service Inc for the Benefit of United Brands for Chiquita International

Trading Co 26 F M C 605 1984 as precluding such an authorization 3

The facts of Special Docket No 1102 were as follows Sea Land sought

permission to refund 6 18150 in freight charges on 38 shipments of pine

apples The shipments departed Elizabeth New Jersey on April 9 April

30 May 7 and May 14 1983 for Raina Dominican Republic Only

five of the 38 shipments those departing on May 14 1983 occurred

within 180 days of the filing of the application for refund The Commission

3

But seeApplication of Lykes Bros Steamship CoInc for the Benefit of Caterpillar Overseas Special

Docket No 1229 F M C administratively final November 5 1984 where in asimilar situation the Admin

istrative Law Judge authorized anotice making the reduced rate effective more than 180 days before the

filing of the application

27 F M C
1

1

894 FEDERAL MARITIME COMMISSION

refused to allow the intended rate to reblte back beyond the 180

days prior to the filing of the application to a date when the rate should

have been filed In reaching this conclusion the Commission observed

the 180 days is a precise term that is not amenable to a variety of

interpretations 27 F M C at 136 It noted however that while the

Commission in other cases had calculated the 180 days liberally in order

to grant relief to shippers eg Sea Land Service Inc for the Benefit

of G F Tujague Inc F M C 22 S R R 619 1984 there

is no dispute or uncertainty over that calculation here 27 F M C at

136

In Special Docket No 1102 the Commission counted the 180 days

from the date the vessel sailed as required by Rule 92 of the Commission s

Rules of Practice and Procedure The application was denied as the ship

ments moving on voyages which sailed more than 180 days prior to the

filing of the application The shipments here moved on voyages which

sailed within the 180 day period Thus there is a critical factual distinction

between the subject applications and those at issue in Special Docket No

1102 No party in Special Docket No 1102 contended that the 180 days

ran from the date the cargo was received fOl carriage by the carrier and

the Commission did not address the issue Accordingly Special Docket

No 102 is inapposite

We conclude that nothing prevents the Commission from authorizing

a reduced rate to be effective more than 180 days before the application

was filed provided the application was filed within 180 days of the sailing

date Because the Presiding Officer found that the applications met all

other conditions as set out in section 18 3 the Commission will approve

the applications

THEREFORE IT IS ORDERED That the Exceptions of Sea Land Serv

ice Inc are granted and

IT IS FURTIlER ORDERED That except to the extent noted above

the Initial Decisions served in these proceedings are adopted by the Commis

sion and

IT IS FURlHER ORDERED That Sea Land Service Inc shall waive

collection of ocean freight charges in the amount of 648 00 due it from

Sony Magnetic Products Inc in connection with a shipment of Magnetic

tape it transported from Dothan Alabama via Jacksonville Florida to

LeHavre France on January 16 1984 and

IT IS FURTHER ORDERED That Sea Land Service Inc shall waive

collection of ocean freight charges in the amount of 11 971 70 due it

from Tone Forwarding as agent for Mearl Corporation in connection with

a shipment of pigments it transported from Elizabeth New Jersey via

Seattle Washington to Kowloon Hong Kong on March 23 1984 and

IT IS FURTIlER ORDERED That in connection with Special Docket

No 1206 Sea Land Service Inc shall publish the foHowing notice within

27 F M C
APPLICATION OF SEA LAND SERVICE INC FOR THE BENEFIT 895

OF PAGE JONES INC AS AGENT FOR SONY

thirty 30 days from the service of this Report and Order and an appropriate

place in its tariff

Notice is hereby given as required by the decision in Special

Docket No 1206 that effective January 13 1984 and continuing

through April 30 1984 inclusive the rate on Magnetic Tape is 130 00 per 2240 lbs minimum 40 320 lbs per container

This notice is effective for purposes of refund or waiver of freight

charges on any shipment of the goods described which may have

been shipped during the specified time and

IT IS FURTHER ORDERED That in connection with Special Docket

No 1238 Sea Land Service Inc shall publish the following notice within

thirty 30 days from the service of this Report and Order in an appropriate

place in its tariff

Notice is hereby given as required by the decision in Special

Docket No 1238 that effective March 9 1984 and continuing

through April 25 1984 inclusive the rate on Pigments is 160

per ton of 1000 kilos minimum 18 5 Kilotons per 40 foot con

tainer of 17 5 kilotons per 35 foot container This notice is effec

tive for purposes of refund or waiver of freight charges on any

shipment of the goods described which may have been shipped

during the specified time and

IT IS FURTHER ORDERED That Sea Land Service Inc shall furnish

the Secretary with evidence of each waiver along with copies of the above

described tariff notices within five days of the date charges are waived

and

IT IS FURTHER ORDERED That these proceedings are discontinued

By the Commission

S BRUCE A DOMBROWSKI

Acting Secretary

27 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1206

APPLICATION OF SEA LAND SERVICE INC FOR THE BENEFIT

OF PAGE JONES INC AS AGENT FOR SONY MAGNETIC

PRODUCTS INC

Application to waive collection of portions of freight charges granted for one shipment

denied for another

Frank A Fleischer for applicant Sea Land Service Inc

INITIAL DECISION t OF SEYMOUR GLANZER ADMINISTRATIVE

LAW JUDGE

Partially Adopted June 26 1985

By application filed July 12 1984 as supplemented Sea Land Service

Inc seeks permission to waive collection of ocean freight charges in the

respective amounts of 648 00 each due it from Sony Magnetic Products

the shipper in connection with two intermodal shipments of Magnetic Tape

from Dothan Alabama via Jacksonville Florida to LeHavre France 2

The shipments weighing 38 883 pounds and 31 447 pounds respectively

were loaded into containers by the shipper and were received by Sea

Land at Dothan on January 13 1984 and February 13 1984 respectively

From Dothan each shipment was taken to Jacksonville by motor carrier

and loaded aboard the Leader which sailed for Rotterdam on January

16 1984 V 71E and February 14 1984 V 72E

Sea Land publishes an intermodal tariff from inland United States points

via South Atlantic ports to points in Continental Europe and the United

Kingdom Until February 1 1984 Intermodal Freight Tariff No 417 3

was in effect On February 1 1984 Tariff No 417 was canceled and

was replaced by Intermodal Freight Tariff No 456 4As pertinent Tariff

No 417 subdivided the destination ports by section Section 2 of the

tariff included ports located in Germany The Netherlands and Belgium

while Section 3 included ports in France s There was a rate for Magnetic

Tape from Dothan to named ports in Section 26 and a rate to LeHavre

I This decision will become the decision of the Commission in the absence of exceptions thereto or review

thereof by the Commission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

2

In Europe the shipments were transferred at Rotterdam The Netherlands from the Sea Land Leader

Voyages 71E and 72E to thePanarea Voyages 166S and 173S which carried them to LeHavre

ICC SEAU 417 F M C No 280

e4 ICeSEAU 456 F M C No 313

Tariff No 417 6th rev p 11 effective October 14 1983

6

Id p 23C

896 27 F M C
APPLICATION OF SEA LAND SERVICE INC FOR THE BENEFIT 897

OF PAGE JONES INC AS AGENT FOR SONY

in Section 37 Rule No 3 of Tariff No 417 the so called effective date

of the rate rule provided that The rate or charges to be assessed are

those in effect the day origin carrier receives the cargo

8

On October 21 1983 the responsible Sea Land officials instructed Sea

Land s Tariff Publication office to file a reduced rate applicable to all

Continental ports of 130 per 2 240 pounds W minimum 40 320 pounds

per container 9 Due to inadvertent clerical error the reduced rate was pub

lished in Section 2 only lO The failure to publish in Section 3 left the

rate to LeHavre at 166 W minimum 40 320 pounds per container ll

The Magnetic Tape rates in effect when Tariff No 417 was canceled

were carried forward to Tariff No 456 Thus effective February I 1984

the rate to LeHavre remained at 166 12

The error was not discovered until both shipments had taken place

When it was discovered it was corrected by publication of the I30 rate

in Tariff No 456 13

The invoices sent to the shipper were based on the applicable rate of

166 Intermodal freight charges at that rate amounted to 2 988 00 for

each shipment I4 Had the 130 rate been in effect the charges would

have been 2 340 00 each The shipper forwarder paid the lesser amount

for both shipments 15

The application states that Sea Land will make any adjustment in freight

forwarder compensation required and that approval of the application will

have no effect on the intermodal division of revenue Sea Land states

that there were no other shipments of the same or similar commodity

during the relevant time period

DISCUSSION

The first of the two shipments the one which was received at Dothan

on January 13 1984 and sailed from Jacksonville on January 16 1984

does not meet all the standards for approval under section 18 b 3 of

the Shipping Act 1916 46 D S C 817 b 3

16 and the Commission rules

implementing that statute 46 CFR 502 92 a The second shipment the

one which was received on February 13 1984 and sailed the following

dayoes meet the criteria for approval

7Id p25 A I

81d 1st rev p14

The 130 rate was scheduled to go into effect thirty days after a

preliminary reduced rate of 114 70

was made effective

10 Tariff No 417 14th rev p

23C

11 Thirteenth rev R 25 A I

12 Tariff No 456 1st rev p 54 In Tariff No 456 the rates to French ports appear inSection 2

131d 2nd rev p54 effective March I 1984

14 Other charges are not in issue

15 During negotiations in October 1983 Sea Land had agreed to the lowerrate

161n all material respects relevant to this application section 8 e of the Shipping Act 1984 46 V S C

app 1707 e is the same as section 18 b 3 of the 1916 Act Thus the conclusion which follows would

be the same under either Act

27 F M C
898 FEDERAL MARITIME COMMISSION

j

The criteria are set forth in the four provisos of section 18b 3 Under

the first proviso it must appear that there was a qualifying error in failing

to file a tariff provision and that the refund or waiver will not result

in discrimination among shippers 17 under the second proviso it must be

shown that the carrier filed a new tariff setting forth the rate on which

the waiver or refund is based prior to filing the application under the

third proviso the carrier must agree that if the application is granted

it will publish an appropriate tariff notice or take other steps as required

which give notice of the rate on which the refund or waiver is based

and that it will make additional refunds or waivers as prescribed and

under the fourth proviso the application for refund or waiver must be

filed within 180 days from the date of shipment

Clearly the second shipment meets all of the requirements of the four

provisos the failure to file the reduced rate in Section 3 of Tariff No

417 was due to inadvertent error on the part of Sea Land and because

there were no other shipments of the same or similar commodity during

the relevant time period approval of the application is not likely to result

in discrimination among shippers IS and in any event the order which

follows protects against discrimination a corrective tariff setting forth the

rate on which the waiver is based was timely filed before the application

under the regulation 46 CPR 502 92 a by filing the application Sea

Land has agreed to take those steps which the Commission may require

as a condition for granting relief and the application was filed within

180 days of the date of shipment sailing date

The circumstances of the first shipment are more complex At first glance

it might appear that the requirements of the four provisos have been met

but on close analysis and with due deference to the Commission s decision

in Special Docket No 1102 Application of United States Atlantic Gulf

Jamaica and Hispaniola Steamship Freight Association and Sea Land Serv

ice Inc for the Benefit of United Brands for Chiquita International Trading

Co Order Denying Petition for Reconsideration 22 SRR 1266 1984

it becomes manifest that the standards for approval have not been fulfilled

The rationale follows

It is evident that the application was filed on the 178th day after the

date the Leader sailed from Jacksonville It is also clear that the application

was filed on the 181 st day after the shipment was received at Dothan

the date of receipt being the date on which the rate for the assessment

of charges became fixed pursuant to Rule 3 of Tariff No 417 What

all this means is that in order to grant relief the Commission must not

only authorize Sea Land to publish a tariff notice makiilg the 130 rate

effective as of January 16 1984 it must authorize a notice making the

Under section 8 e of the Shipping Act 1984 it must also appear hat the refund or waiver does not

result indiscrimination among ports or carriers

18 There is no indication thar there could be any discrimination among carriers orports

27 F M C
APPLICATION OF SEA LAND SERVICE INC FOR THE BENEFIT 899

OF PAGE JONES INC AS AGENT FOR SONY

rate effective as of January 13 1984 The latter authorization is proscribed

by the teaching ofSpecial Docket No 1102 supra

In construing the 180 day jurisdictional requirement of section 18 b 3

the Commission held that the rate upon which such refund or waiver

would be based 180 days is a precise term that is not amenable to

a variety of interpretations Special Docket No 1102 22 SRR at 1267

Simply put the Commission enunciated the principal that the 180 day

deadline may not be extended there being no support for any construction

of the fourth proviso which would allow for a result in any case which

evades or ignores the 180 days requirement Id In order for permission

to be given for Sea Land to waive collection of monies due for the ship

ment it would be essential for the required tariff notice to be backdated

181 days to include the period beginning January 13 1984 because of

Rule 3 The precedent established by Special Docket No 1102 cannot

be disregarded The precise problem presented here was addressed in the

Appendix to Special Docket No 1186 Application of Pacific Westbound

Conference and Mitsui O SK Lines Ltd for the Benefit of Mitsubishi

International Corp 22 SRR 1290 1297 ID 1984 administratively final

December 7 1984 and it was expressly indicated that relief could not

be granted pursuant to the standard established by Special Docket No

1102 19

CONCLUSION AND ORDER

The application for permission to waive collection of portions of freight

charges is denied as to the shipment of Magnetic Tape which was received

at Dothan Alabama on January 13 1984 and is granted as to the shipment

of Magnetic Tape which was received there on February 13 1984 It

is ordered

1 Sea Land Service Inc shall waive collection of ocean freight charges

in the amount of 648 00 due it from Sony Magnetic Products Inc in

connection with a shipment of Magnetic Tape it transported from Dothan

Alabama via Jacksonville Florida to LeHavre France on February 14

1984

2 Sea Land Service Inc shall publish the following notice at page

54 of Sea Land Service Inc Intermodal Freight TariffNo 456 ICC SEAU

456 F M C No 313

Notice is hereby given as required by the decision in Special

Docket No 1206 that effective January 14 1984 and continuing

through April 30 1984 inclusive for purposes of refund or waiv

er The rate shown at page 23 C of the tariff known as Sea

Land Service Inc Intermodal Freight Tariff No 417 ICC SEAU

Cf Special Docket No 1195 Application of Sea Land Service Inc for the Benefit of Hansa Pacific

Inc and Whitworth Holdings Limited JD served January 7 1985 p4 n 8 holding that where the effective

date of the rate rule provided that the rate to be charged is the rate in effect on the date received or the

date in effect when theship sails whatever is lower the problem encountered here is not presented

27 F M C
900 FEDERAL MARITIME COMMISSION

417 F M C No 280 for ITEM NO 8912050 MBF Magnetic

Tape From Dothan AL Minimum 40 320 lbs per container

to European Ports in Section 2 is 130 00 W Such rate is subject

to all other applicable rules regulations terms and conditions

of the said rate and said tariff

3 Sea Land Service Inc shall take such measures as are necessary

to collect the balance of freight charges due in connection with the shipment

received at Dothan Alabama on January 13 1984

4 Sea Land Service Inc shall determine whether an adjustment in bro

kerage or compensation due brokers or freight forwarders is required in

the light of this decision and shall take such measures as are necessary

to effectuate such adjustment

5 The waiver and other provisions of this order shall be effectuated

within thirty days of service of notice by the Commission authorizing

the same and Sea Land Service Inc shall within five days thereafter

a notify the Commission of the date and manner of effectuation of the

waiver and b file with the Commission affidavits of compliance with

paragraphs 1 2 3 4 and 5 a of this order

S SEYMOUR GLANZER

AdministrativeLaw Judge

27 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 1238

APPLICATION OF PACIFIC WESTBOUND CONFERENCE AND SEA

LAND SERVICE INC FOR THE BENEFIT OF TONE FORWARDING

AS AGENT FOR THE MEARL CORPORATION

Application to waive collection of portions of freight charges denied

Theresa M Nardi for applicant Sea Land Service Inc

Patricia Petzar for applicant Pacific Westbound Conference

INITIAL DECISION 1 OF SEYMOUR GLANZER ADMINISTRATIVE

LAW JUDGE

Partially Adopted June 26 1985

By application filed September 18 1984 Sea Land Service Inc seeks

permission to waive collection of 11 977 70 of freight charges due it

from Tone Forwarding as Agent for the Mearl Corporation the shipper

in connection with an intermodal shipment of paints and pigments received

by Sea Land at its Elizabeth New Jersey container yard CY on March

9 1984 and carried overland to Seattle Washington where it was loaded

aboard the Sea Land Patriot which sailed from Seattle for Kowloon Hong

Kong on March 23 1984 Pacific Westbound Conference PWC joins

in the application

The cargo consisting of paint weighing 6 688 pound and measuring

215 cubic feet and pigment weighing 36 107 pounds and measuring 1819

cubic feet was carried in a single 40 container from origin to destination

Sea Land is a member of PWC and as pertinent participates in that

Conference s tariff PWC Westbound Intermodal Tariff No PWC 708 A

FMC 20 Tariff

At Sea Land s

request on February 15 1984 PWC agreed to establish

a Special Rate of 160 00 per ton of 1 000 kilos W minimum 18 5

kilotons per 40 container or minimum 17 5 kilotons per 35 container

for both paints and pigments destined for Hong Kong However due to

inadvertent clerical error the Special Rate was published only for paints 2

As a result the applicable rate for pigments was 280 00 per cubic meter3

plus a container handling charge of 5 00 W for paints and 5 00 M

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

mission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2Tariff 16th rev p 539 Item No 4740000 60 effective February 22 1984

3Id 14th rev p534 Item No 472 0000 05 The pigment portion was erroneously rated at 210 00 but

the concomitant billing error does not affect any calculations made inthe disposition of this application

27 F M C 901
902 FEDERAL MARITIME COMMISSION

for pigments 4At the applicable rates the charges for the shipment amount

ed to 15 180 68 5 Had the error not occurred the charges would have

amounted to 3 202 98 6 The shipper paid 2 970 00 This means that the

shipper still owes 232 98 for the shipment even at the lower rate after

allowance is made for the 11 977 70 to be waived 7

A corrected tariff reflecting PWC s February 15 1984 determination

was filed effective April 25 1984 8

The application states that there were no other shipments of the same

or similar commodity during the relevant time period and that any necessary

freight forwarder compensation adjustment will be made upon approval

DISCUSSION

The shipment does not meet all the standards for approval under section

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

9

and the Commis

sion rules implementing that statute 46 CPR 502 92 a The problem with

this application is the same as the one encountered in Special Docket

No 1206 Application of Sea Land Service Inc for the Benefit of Page

Jones as Agent for Sony Magnetic Products Inc 1 0 served January

18 1985 and is governed by the same rationale

The criteria are set forth in the four provisos of section 18 b 3 Under

the first proviso it must appear that there was a qualifying error in failing

to file a tariff provision and that the refund or waiver will not result

in discrimination among shippers 10 under the second proviso it must be

shown that the carrier filed a new tariff setting forth the rate on which

the waiver or refund is based prior to filing the application under the

third proviso the carrier must agree that if the application is granted

it will publish an appropriate tariff notice or take other steps as required

which give notice of the rate on which the refund or waiver is based

and that it will make additional refunds or waivers as prescribed and

under the fourth proviso the application for refund or waiver must be

filed within 180 days from the date of shipment

The shipment seems to meet all of the requirements of the four provisos

the failure to file the special rate for Item No 472 0000 05 was due

to inadvertent error on the part of PWC and because there were no other

shipments of the same or similar commodity during the relevant time period

Old p163 Rule No 25

The breakdown is PaintS485 44 PigmenlS I4 422 52 Conlalner ChargcsS272 72

6Thc breakdown is PainIS485 44 Pigment S2 620 48 ConIainer Charges 97 06 based on a rate

of 500 W for both paints and pigmenlS Under Ihc tariffs mixing rule ocean frcighl charges may be as

sessed proportionally on actual weight 2nd rev p172 Rule 35

7

The breakdown is Ocean Freight SlI 802 04 Container Charge 175 66

8

Tariff 15th rev p 534 Item No 472 0000 25

9

In all material respects relevant to his application section 8 e of the Shipping Act 1984 46 U S C

App 1707 e is he same as section 18 b3 of the 1916 Act Thus the conclusion which follows would

be thesame under either Act

lOUnder section 8 e of the Shipping Act 1984 it must also appear hat he refund or waiver docs not

result indiscrimination among ports orcarriers

27 F M C
APPLICAnON OF PACIFIC WESTBOUND CONFERENCE AND 903

SEA LAND SERVICE INC

approval of the application is not likely to result in discrimination among

shippers II and in any event were an order granting the application to

issue it would protect against discrimination among shippers a corrective

tariff setting forth the rate on which the waiver is based was timely filed

before the application under the regulation 46 CFR 502 92 a by filing

the application Sea Land has agreed to take those steps which the Commis

sion may require as a condition for granting relief and the application

was filed within 180 days of the date of shipment sailing date

Thus it might appear that the requirements of the four provisos have

been met But on close analysis and with due deference to the Commission s

decision in Special Docket No 1102 Application of United States Atlantic

Gulf Jamaica and Hispaniola Steamship Freight Association and Sea

Land Service Inc for the Benefit of United Brands for Chiquita Inter

national Trading Co it becomes manifest that the standards for approval

have not been fulfilled The rationale follows

It is evident that the application was filed on the 179th day after the

date the Patriot sailed from Seattle It is also clear that the application

was filed on the 193rd day after the shipment was received at Elizabeth

the date of receipt being the date on which the rate for the assessment

of charges became fixed pursuant to Rule 3 of the Tariff 12 What all

this means is that in order to grant relief the Commission must not only

authorize PWC to publish a tariff notice making the pigment rate effective

as of March 23 1984 it must authorize a notice making the rate effective

as of March 9 1984 The latter authorization is proscribed by the teaching

of Special Docket No 1102 supra

In construing the 180 day jurisdictional requirement of section 18 b 3

the Commission held that the rate upon which such refund or waiver

would be based 180 days is a precise term that is not amenable to

a variety of interpretations Special Docket No 1102 22 SRR at 1267

Simply put the Commission enunciated the principal that the 180 day

deadline may not be extended there being no support for any construction

of the fourth proviso which would allow for a result in any case which

evades or ignores the 180 days requirement Id In order for permission

to be given for Sea Land to waive collection of monies due for the ship

ment it would be essential for the required tariff notice to be backdated

193 days to include the period beginning March 9 1984 because of Rule

3 The precedent established by Special Docket No 1102 cannot be dis

regarded The precise problem presented here was addressed in the Appendix

to Special Docket No 1186 Application of Pacific Westbound Conference

and Mitsui O S K Lines Ltd for the Benefit of Mitsubishi International

Corp 22 SRR 1290 1297 LD 1984 administratively final December

IIThere is no indication that there could be any discrimination among carriers or ports

12 As pertinent Rule No 3 of the Tariff the effective date of the rate rule provides that For cargo

received by the carrier at CY CFS the applicable rates and charges are those in effect on the date of such

receipt Tariff 13th rev p

34

27 F M C
904 FEDERAL MARITIME COMMISSION

7 1984 and it was expressly indicated that relief could not be granted

pursuant to the standard established by Special Docket No 1102

CONCLUSION AND ORDER

The application for permission to waive collection of portions of freight

charges is denied It is ordered

1 Sea Land Service Inc shall take such measures as are necessary

to collect the balance of freight charges due in connection with the shipment

of paints and pigments it carried from Elizabeth New Jersey via Seattle

Washington to Kowloon Hong Kong

2 Sea Land Service Inc shall determine whether an adjustment in bro

kerage or compensation due brokers or freight forwarders is required in

the light of this decision and shall take such measures as are necessary

to effectuate such adjustment

3 This order shall be effectuated within thirty days of service of notice

by the Commission authorizing the same and Sea Land Service Inc shall

within five days thereafter a notify the Commission of the date and

manner of effectuation and b file with the Commission an affidavit of

compliance with paragraphs 1 2 and 3 a of this order

S SEYMOUR GLANZER

Administrative Law Judge

ISBN 0 16 049908 9

27 F M C