DECISIONS OF THE

FEDERAL MARITIME COMMISSION
FEDE RAL MARITIME COMMISSION

Docket No 65 5

PRoPOSED RULE COVERING TIME LIMIT ON THE FILING OF

OVERCHARGE CLAIMS

DecUkd Jwne 7 1966

Proposed rule prohibiting limitation of time within which claims for adjustment

of freight charges may be presented to carrier to less than 2 years after date

of shipment not promuigated as there is no showing that carrier imposed

time limitations have operated in an unlawful fashion under sections 17 22

or 18 b 3 of the Shipping Act 1916 or section 2 of the Intercoastal Ship

ping Act 1933 Carrier imposed time limitations are not to be construed as

inany way atrecting rightof shipper to file claim forreparation under section

22 Shipping Act 1916 within 2 years of accrual of cause of action Com

mission s discontinuance of proceeding is without prejudice to institution of

further pro gs with respect to carrier imposed time limiltations

REPORT

By THE COMMISSION J ohn Harllee Ohairman John S Patterson

Vice Ohai1 lJban Ashton C Barrett James V Day George H

Hearn Oowmis8ioners

The Commission by notice ofproposed rulemaking published in the

Federal Register on March 27 1965 instituted the captioned proceed

ing to determine the legality under various sections of the Shipping

Act 19H the 1916 act and the Intercoastal Shipping Act 1933

1933 act ofprovisions in tariffs of certain common carriers by water

imposing a time lilnit on the filing of daims less than the 2 year period

provided in section 22 of the act The Commission alleged that such

tariffrules appear to be contrary to

1 Section 22 of the 1916 act by establishing a

period for limi

tation of claims other than the 2 year period provided therein

2 Section 18 Ib 3 ofthe 1916 act and section 2 ofthe 1933 act

by allowing the oarrier to retain freight charges greater than those

specified in its tariff

10 F M C 1

299 843 0 68 2
2 FEDERAL MARITIME COMMISSION

3 Section 17 of the 1916 act as constituting an unjust or un

reasonaible practice

0

The Commission stated that it was considering promulgation ofthe

followingrule

Common carrier by water as defined in section 1 of the Shipping Act 1916 a

amended 46 U S C 801shall not by tariff rule or otherwise limit to less tha

2 years after thedate of shipment the time withinwhich claims for adjustmen

of freight charges may be presented

A total of 23 comments were filed by or on behalf of 44 steamship

conferences two inde pendent water carriers and 17 shipper or othe

organizations 1

Comments from the shipper groups were uniformly quite brief A

shipper groups commenting upon the proposed rule favored it main

taining that theCommission was correct thatthe conference provision

limiting the time within which claims might be made violated th

statutes and that practical necessity required that shippers be aIlowed

2 years in which to present claims The specific contentions of th

shipper groups may be summarized as follows

1 The 6 months limitation presently imposed by many carriers is unreasonabl

in that 6 months does not allow enough time to audit freight bills and subm

claims

2 Two years wonld provide ample tIme within which to make the audit an

submit claims Uniformity of time period to file claims against carriers 

desirable

3 The carrier imposed time rules are contrary to section 22 of the Shippin

Act 1916 and to the interests of theshipping public

4 A 6 months tarffrule limitation misleads the Shipping public as to the

actual legal rights

5 The Civil Aeronautics Board CAB and Interstate Commerce Commissio

ICC allow 2 and 3 years time limitation respectively for filing claims wit

carriers

On February 14 1966 correspondence wasreceived from the Assis

ant General Counsel of the General Accounting Office indicating tha

office s support of the proposed rule because of its practice of payin

1Alexander s Department Stores Associated Dry Goods Corp Bloomingdale s Burgel

Cellulose Co Burronghs CoIl Commerce and Industry Asociation of New York

Cyanamid International Eastern Industrial Traffic League Halliburton Co Ingersn

Rand Co P LorilIard Co Inc McGreevey Werring Howell Inc Mark ennenba lru

Co Mersco Wholesale Co Inc Ocean Freight CmsuItants Inc Radio Corp of America

United States Borax Chemical Corp Kirlin Campbell Keating attorneys for th

parties to Agreements Nos 17 59 2744 3863 4189 44090 4610 5700 5850 680 619

6200 7100 7540 7550 7590 7650 7670 7690 7700 7890 7980 8040 80154 880 812

8240 8300 and 8650 LilUck Geary Wheat Adams Charles attorn ys for the partie

to Agreements Nos 14 and 57 Terriberry Rault Carroll Yancey Farrell attorneys f

the parties to Agreements Nos 134 161 5400 and 7780 Graham James Rolph attorney

for the parties to Agreements Nos 93 150 3102 5200 5680 6060 6400 and 8660

Burlingham Underwood Barron Wright White attorneys for the party te Agreeme

No 8210 States Marine Lines and Isthmian Lines

10 F M C
TIME LIMIT ON THE FILING OF OVERCHARGE CLAIMS 3 

freight bills before performing audits on them and the necessity of

allowing a considerable period for cheCking claims for overcharges

The letter further states that Government transportation officers oan

notbe expected as a routine matter to police errors in charges based on

incorrect weight ormeasurement at their source and tariff provisions

requesting claims for adjustment of freight charges based upon such

alleged errors to be submitted in writing before shipment leaves the

custody ofthe carrier are therefore unreasonable

The comments filed by the 44 steamship conferences and two inde

pendent carriers strong y object to the Commission s proposed rule

The various positions expressed in these comments may be summarized

as follows

1 The Commission has no authority to deal with carrier imposed

limitations on the presentation of claims for freight adjustment by

rulemaking The Commission has in effect already so held in its Docket

No 712 Oarrier Imposed Time Limits for Freight Adjustments 4

F MB 29 1952 That case held that absent a

showing on a record

developed pursuant to hearing that such time limitntions had operated

in an unlawful mannerthere was nothing in sections 14 14 a 15 16

17 18 and 22 that would allmv the Commission to outlaw such time

limitations in a

rulemaking proceeding The only section added to the

Shipping Act since that proceeding and included here is section 18 b

3 which does not allow the Commission to regulate in any way the

substance oftariffs or other shipping documents but only their form

2 Section 22 of the Shipping Act 1916 is a pure statute of limita

tions and does not inhibit the contractual freedom of carriers and

shippers to set a period of less than 2 years for the adjustment of

freight claims either through filing of claims with the carrier or in

actions before the Commission or the courts Support for this position

is found in the actions ofthe ICC prior to the amendment ofits statute

specifically forbidding the shortening of the statutory times for filing

claims and bringing actions by carrier rule The Carriage of Goods by

Sea Act COGSA unlike the Shipping Act also specifically forbids

parties from stipulating for a lesser period of time for bringing suit

than that contained in the statute Prior to the passage of COGSA

parties were free to stipulate as to the time for filing claims and

bringing suit

3 In any case there is nothing in section 22 that would prevent a

conference from controllihg the time in which claims may be made

before it rather than before the Commission or the courts Itis further

contended by one party that a failure to file a claim with a conference

within the conference imposed time limit may be pleaded as a defense

here or in a court

10 FMO
4 FEDERAL MARITIME COMMISSION 

4 Section 17 does not permit any regulation of the substantive pr

visions of the bills of lading or tariffs and was directed toward pra

tices relating more directly to the handling of property by termina

The first paragraph of section 17 moreover deals only with rate

fares or charges and not to practices such as the one involved her

5 An attempted rule of the sort the Commission proposed wou

be contrary to internationalla v by running counter to the princip

that the place ofcontracting controls the form and substance of a co

tract and the principle that in maritime contracts the law stipulate

by theparties is to be controlling

6 The proposed rule would preclude a reasonable and necessary i

vestigation of claims Conference tariffs as they now stand requi

claims based upon weight and measurement errors to be made wh

that shipment is still in custody of the carrier This is reasonable b

cause the carrier would have no way of checking upon such allege

errors oncethe cargois removed from its custody As far as other claim

are concerned it places no hardship on shippers to require them to fi

claims withina 6 month period

7 The Commission proposed rule is inconsistent with the require

ments of section 22 because the statute of limitations period containe

in section 22 has been construed as running from the date of freigh

payment while the rule would compute the limitation period as run

ningfrom date ofshipment

Suggestions are made by one party that the Commission propose

rule would be found lessobjectionable ifit were 1 modifiedto exemp

claims based upon alleged errors in weight measurement or descrip

tion of cargo or 2 modified to indicate that it refers only to claim

filed with the Commission

Suggestion is also made by one party that the Commission propose

rule might be workable if limited only to carriers in the offshore do

mestic trades where section 18 a suggests authority for the rule be

cause the Commission is there granted power over the substance a

well as theform ofbills oflading

Oral argument washeard on February 16 1966 at which representa

tives of all but one of those who filed comments on behalf of the con

ference and two independent lines commenting on the proposed rul

appeared Ocean Freight Consultants OFC presented the shippers

position at the argument Subsequent thereto OFC submitted to th

Commission information purporting to substantiate its claim made a

oral argument thnt several conferences were utilizing their sel

imposed time limitations for filing ofclaims to discriminate as betwee

shippers sometimes paying and som etimes rejecting claims filed afte

the expiration of such time limitations

10 FMC
TIME LIMIT ON THE FILING OF OVERCHARGE CLAIMS 5

DISCUSSION AND CoNCLUSIONS

We have examined carefully the contentions of all parties to this

rulemakingproceeding and in the light of such examinations and for

reasons set forth below will not promulgate Our proposed rUle atthe

present time

We wish to make clear however that

our failure to promulgalte a

rule at this time is not to be interpreted to allow carriers in anyway

to limit the right of a shipper olaimmg injury under the 1916 act

or the 1933 act to file a claim for reparation under section 22 of the

Shipping Act with the Commission at any time within 2 years of

accrual of the cause of action which is the basis of such injury and

claim We do not agree witfu the comments of the conferences and car

riers which maintain that the 2 year statute of limit3ltions contained

in section 22 is a pure statute of limitation the purpose of which is

merely to bar the bringing Of stale claims and which can be contracted

away by agreement between shipper and carrier The practice of the

ICe prior to the amendments ofthe statutes under which it operates

providing that daims lagainst carriers and forwarders had to be made

and that actions on such claims had to be brought within certain time

limitations is not instructive for our purposes Carriers and forwarders

were allowed to stipulate as to the time within which aotions could be

brought at times when there wereno tinle limitation provisions in the

specific statutes under which they were regulated 2 Once Congress

had spoken however and had indicated aperiod during which actions

could bebrought either before the Commissi on orthe courts a public

policy with the force of law was estaJblished and such stipulations no

longer had the sanction Of law The SoJwu Ga71is case cited in footnote

2 is particularly instructive in this respect In that case the issue was

the lawfulness of an attempt by afreight forwarder to limit the time

within whioh claims could be filed wiith it The ICC although striking

down the particular tariff rule by which the forwarder imposed such

limitation as unlawful as too indefinite in form upheld the validity

of the principle of a time limitation for the filing ofclaims with for

warders After a discussion ofthe loss and damage cases noted above

the ICC observes thatpart IV of the Interstate Commerce Act which

regulates forwarders unlike parts Iand IIIregulatingrail and water

carriers respectively confers no specific authority upon this Com

2 See on loss and damage clalms Northern Pacific Ry v Wall 241 U S 87 92 1916

St LotUs S F R1J 00 v Keller 90 Ark 308 1909 St Louis DM S F E1J 00 v

Starbird 243 U S 592 1917 Southern Pacifio 00 v Steward 248 U S 446 1918

4da1ns Express 00 v Oook 172 S W 1096 191l5 On oVercbarge claims seeSchou

Gallis 00 V InternationaZ Forwarding 00 268 I C C 591 1947 Sacha v UniversaZ Oar

Loading Distributing 00 78 F SUppa 619 1948

10 F M O
6 FEDERAL MARITIME COMMISSION 

mission to award damages as such in respect of either overcharges 

unlawful rates charged shippers by freight forwarders Also

no periods of limitation are prescribed therein and no reference 

made of record specifically to any other statute which limits the tim

within which claims arising in respect of charges for services subje

to part IVmay be med here or in the courts at 595 8

The ICe th

allowed the forwarder to modify the time limirtation rule to make 

lawfulThe instant proceeding however presents an entirely differe

situation This Commission is empowered by Congress to grant re

aration for any violation of the statutes it administers This was n

the situation with respect to claims for forwarder overcharges befo

the ICe at the time of the Schou Gallis case and has never been tru

with respoot to claims for cargo damage Such claims can only 

brought in a court of law 4

There is also a statute of limitations go

erning the time withinwhich such reparation may be sought emhodie

in our statute itself no reference for the applicaJble time limitatio

need be made to principles of general law or State statutes of lim

tation as was necessary under IOO practice before the amendmen

to theInterstate Commerce Act discussed herein No cases are advance

which hold that a common carrier or other person subject to simil

regulation may by contract change a time limitation for bringing 

claim for reparation which is embodied in a statute of an admi 

trative agency nor will we permit it here

As we have observed above however we will not promulgate o

proposed rule with respect to the time within which claims may 

pleRented to the carriers at this time

As our predecessor agency the Federal Maritime Board noted 

its Docket No 712 Oa rri e1 Imp08ed Time Limit8 101 Freiq7it Adj lMt

ments 4 F MB 29 1952 carrier imposed time limitations like thos

under investigation here cannot be declared unlawful unless there ha

been a

showing that they operated in a fashion contrary to some prov

sion of the statutes we administer The notice of proposed rulemakin

in this proceeding alleged that carrier limitations appeared to be con

trary to sections 22 18 b and 17 of the Shipping Act 1916 and se

tion 2 of the 1933 act

It is of course true that carrier imposed time limitations might b

utilized in such a

way as to prevent shippers from filing or recoverin

reparation pursuant to claims with us for injury caused by violation o

3 The Interstate Commerce Actbas since been amended to provide for actions atlaw f

recovery of ov rcharges made by forwarders See 49 U S C f 1006a

4 J C A 20 11 See also Reynold8 v Chicago M St P P R Co 222 IC C 42 1937

Fuel Sal 8 Corp v Delaware L W R Co 225 I C C 288 289 1937 Oneonta Fruit C

Inc v Delaware HR Corp 269 IC C 188 1947

10 F MO
TIME LIMIT ON THE FILING OF OVERCHARGE CLAIMS 7

our statutes Such effect would as noted above be contrary to the public

policy embodied by Congress in section 22 of the Shipping Act There

is no showing however that the limitations have had such effect

Sections 18 b 3 of the 1916 act and 2 of the 1933 act would not

outlaw carrier imposed time limitations as such The statutory provi

sions merely prohibita carrier from retaining freight charges greater

than those specified in its tariff Acarrier could of course retain such

charges if an action forreparation beforethe Commission werebrought

after 2

years from the time of accrual of the cause of action The car

riers limitations would violate sections 18 h 3 or 2 only if it could

be shown that they had the effect of preventing shippers recovery

based on just claims prior to the expiration of the 2 year period As

noted above there is no indication of such effect in this proceeding

Finally the second paragraph of section 17 of the Shipping Act

1916 under which the carriers limitations were alleged to be invaiid

by ournotice of proposed rulemaking does not relate to the practices

of the type here involved It relates only to practices relating to or

connected with the receiving handling storing or delivering of prop

erty and its application has thus been confined to forwarding and

terminal operations 5

Although there have been allegations from shippers and their repre

sentatives in this proceeding that the carrier limitation periods are

insufficient and lend themselves to discriminatory treatment oot veen

shippers there is no statutory provision in this proceeding which such

conduct would if existent violate Nor moreover does the information

gathered in this proceeding substantiate such allegations As we noted

in Oa1 rier Imposed Time Limits 101 Freight Adjustments supra a

rule like that here involved is not one which of itself carries out the

powers duties and functions of this agency as provided in certain

statutory sections Such a rule can only be promulgated when both of

the factors absent from thisproceeding are present 1 the anegatio

of a violation of a statutory provision under which practices ifproven

to exist would be unlawful und 2 a finding that such practices did

exist 6

This paragraph relates to services performed at the terminal as dh t1ugulshed from

the carrying or transporting of the vessel Los Angel s Bv Products Co v Barber S S

Lines Inc 2 US M C 106 114 1939

8

U pon findings of unlawfulness we are lluthol ized to issue rules under the act pre

scribing action for the future Freight Foru arder InvestigationEtc 6 F M B 327 358

1961 See also California v United States 320 U S 577 582 583 1944 Adistinction

must be mad between a rule of this sort and rules implementing certain statutory provi

sions which Deed no such basis eg the adoption and maintenance of reasonable pro

cedures for promptly and faJrly hearing and considering shippers requests and com

plaints section 15 Shipping Act 1916 as implemented by G O 14 46 CFR l27 the

10 F MC
8 FEDERAL MARITIME COMMISSION

We do not imply that carriers limitations like those which are 

subject of this proceeding might not be prohibited under sections 

the 1916 act or the 1933 act not involved in this proceeding 7

Nor 

we wish to indicate that viol ations of sections 22 18 b 3 or 2 co

not be shown on a detailed record The Conunission does not of cour

prejudice itself by thediscontinuance ofthisproceeding with respect 

the institution of such further proceedings with respect to carri

imposed time limitations on the presenting of c1aims as it may de

proper

An appropriate order will beentered

ORDER

Docket No 65 5

PROPOSED RULE COVElUNG TIME LanT ON THE FILING OF

OVERCHARGE CLAIMS

Notice of proposed rulemaking in the ca ptioned ploeeeding havi

been puiblished in the Federal Register and the Commission havi

received comments from andheard oral argument by interested perso

andhaving this day issued a

report in this proceeding which is here

referred to andincorporated herein by reference

Therefo1 e it is ordered That this proceeding is discontinued

By the Commission

Signed THOMAS LISI

Secretary

policing of obligaUO DS under conference and other ratefixing agreements section 

Shipping Act 1916 as implemented by G O 7 46 CFR 528 An exception does seem 

exist to the requirement that a Commission promulgated rule respecting carrier impo

time limitations have a

finding of unlawful couduct 118 its basis The possibility exists 

noted in Oarrier Impo8ed Time Limit8 for Freight Adju8tments 8up a of promulga

of a rule under section 18 aof the 1916 act which gra llts the Commission power o

the substance as well as the form of bills of lading of carriers in the offshore dome

trades This section however was not included in this proceeding

7

There is for example a poSSibility that such limitations may run afoul of the prov isin

of section 14 making it a misdemeanor for acarrier to unfairly treat orunjustly d

n

nate against any shipper in thlmatter of the adjustment and settlement of claJm

10 F M C
FEDERAL l1ARITIME COMlIISSION

Docket No 66 12

ApPROVED SCOPE OF TRADES COVERED By AGREEMENT 7840 AS

AMENDEDATLAN l IC PASSENGER STEAMSHIP CONFERENCE

Decided Jwne 8 1966

Atlantic Passenger Steamship Conference and its member lines not required to

delete portion of Agreement 7840 dealing with carriage of passengers between

Europe and Canada

CarlS Rowe Edward R Neaher and Lino A Graglia for respond

ents Atlantic Passenger Steamship Conference and its member lines

Donald J Brunner Hearing Counsel

REPORT

By THE COMMISSION John Harllee Chairman John S Patterson

Vice Ohai1fJWn James V Day George H Hearn O1lllTbis

sioners

On lar h 10 1966 we ordered respondents the conference and its

member lines to show cause why their organic agreement governing

Atlantic passenger traffic carried by the lines between ports of Euro

pean Mediterranean and Black Sea countries Morocco Madeira and

the Azores on the one hand and all ports on the east coast of North

America United States Canada and Newfoundland the St Law

rence River the Great Lakes and U S Gulf ports on the other hand

should not be modified to delete that portion covering the carriage of

passengers between Europe on the one hand and Canada and New

foundland on the other 1

The order stated that since the Commission

is without power to affect relationships and to grant immunities to

the antitrust acts pursuant to section 15 of the Shipping Act 1916

Ashton C Barrett Commissioner did not participate

1

As Newfoundland is now a part of Canada the word Canada wlll be used herein

to include it

10 F MC 9
10 FEDERAL MARITIME COMMISSION

with respect to common carriers in foreign to foreign commerce a

since as a matter of policy the scope of approved agreements shou

be coextensive with its jurisdiction it appeared that the portion 

the agreement dealing with the foreign commerce of Canada shou

be deleted The matter of the scope of the agreement was said in th

order notito involve any disputed issues offact requiring an evidentia

hearing

The conference filed affidavits of fact and memoranda of law 

provided for in the order to show cause and Hearing Counsel replied 

We have heard oral argument

POSITIONS OF PARTIES

A The conference maintains that this proceeding is unauthorize

by law and even if so authorized should not be pursued as a matt

of sound administrative discretion Respondents argue

1 The Commission s order to show cause fails to notify responden

of the factual and legal bases therefor The conference alleges th

the order contains no allegation of a violation of a section of th

Shipping Act and does not notify it ofthe matters of fact relied upo

by the Commission in support of the proposed modification

2 The Commission is not authorized to disapprove an agreeme

solely on the ground that it includes Canada within the scope The

has been no finding in this proceeding that an agreement includin

Canada is contrary to section 15 and agreements including Canad

have been specifically approved by the Commission s predecess

agenCIes

3 The modification proposed by the Commission would result 

instability probably leading to rate wars and complete disruptio

of the trade Lower rates and fares at Canadian ports would caus

diversion of traffic from American ports to the detriment of US

commerce and contrary to the public interest Affidavits of fact sub

mitted on behalf of the conference the conference s member line

United States Lines and American Export Isbrandtsen Lines indicat

tho existence of the following factors which show the inseparabilit

of the Canadian and American trades in this conference

a The approved conference agreements between Europe and theUnited State

have always included Canadian ports

b Only three member lines of the conference did notmaintain a

regular servic

to U S ports as well as Canadian ports in 1965 and only one line made no calling

at U S ports

IIRespondents also flIed another memora lldum at the oral argument See p 5 infra

10 F M C
APPROVED SCOPE OF TRADES COVERED BY AGREEMENT 7840 11

c All lines maintain appointed travel agents in the United States which book

a large number of passengers on voyages from Canada

d All conference member lines whether serving U S ports Canadian ports

or both maintain general offices and or agencies in both the United States and

Canada as well as large numbers of travel agents for tpe solicitation and sale

of passenger bookings

e The American S iety of Travel Agents includes Canadian travel agents

within its membership and executive organs

B Hearing Counsel arguethat this proceeding is procedurally valid

as a matter of law and that sound policy requires that the Canadian

portion of the subject agreement be deleted They maintain

1 The order instituting this proceeding clearly sets forth sections

1 and 15 of the Shipping Act as the legal bases for this proceeding

and indicated that the specific issue involved the power to affect

relationships and to grant immunity to the Antitrust Act with respect

to common carriers in foreign to foreign commerce The Com

mission s authority to determine questions of law in a show cause

proceeding has been upheld by the courts and the jurisdictional ques

tion presented here involves no factual issues

2 There are no cases dispositive ofthe issue ofwhether the Commis

sion must approve agreements covering foreign to foreign as well as

foreign to United Statestrades

3 Jurisdictioncannot be conferred on the Commission by agreement

of the parties The Commission has no jurisdiction over Canadian

foreign commerce or carriers engaged therein Lines engaged in such

commerce have no right to participate in conferences which fix or

regulate rates or other vise control competition in trades in our com

merce No longstanding policy requires approval of the foreign to

foreign portion of this agreement The Commission is empowered to

protect our commerce underthe Shipping Act whether one conference

covering both Canadian andAmerican trades or individual conferences

covering these two trades exist Sound regulatory policy requires that

the Canadian portion of the subject agreement be deleted

DISCUSSION AND CONOLUSIONS

It cannot be seriously maintained at this stage of the Commission s

history that the order to show cause by which this proceeding was

instituted was in any way unauthorized by law or procedurally defec

tive The power of the Commission to issue an order to show cause

and the procedural sufficiency of an order substantially the same as

that here in issue were upheld in American Export and sbrandtsen

Lin es v Federal Mariti1ne OOfn1nission 334 F 2d185 9th Oil 1964

Sections 1 and 15 or the Shipping Act are clearly set forth as the legal

10 F M C
12 FEDERAL MARITIME COMMISSION

bases for the order The Commission s

jurisdiction is referred to 

limited to activities by common carriers engaged in the tran

portation by water between the United States and a fo

eign country and the Commission describes itself as without pow

to affect relationships and to grant immunities to the antitrust ac

with respect to common carriers in Ioreign to roreign com

merce The sole question oflaw is whether or not anagreement cove

ing a foreign to foreign trade may be approved by the Commissio

There appeared no disputed issues offact However the order to sho

cause allowed respondents to submit affidavits of such facts as the

thought relevant to the issues and memoranda oflaw They submitte

both The affidavits of fact were not disputed by Hearing Couns

Moreover in the interests of procedural fairness respondents we

allowed to submit at the oral argument an additional reply memora

dum which was not provided for in the order to show cause a

which was presented to the Commission at the argument witho

prior notice 3

On the question ofthe approvability under section 15 of the agre

ment in its present form after careful consideration of the argumen

of the parties we find nothing in the record which constrains us 

depart frOlll the decision of our predecessor the Federal Maritim

Board in lvlaatschappi Zeetransport N V O iange Line et at 

A nchO lLine Lil1 ited et al 5 F MB 714 1959 which we find d

positive ofthe issues raised here in See also States Marine Lines In

v Trans Pacific Freight Oonfe1 ence 7 F MC 204 1962 aff d s

nom Trans Pacific Freight Oonferen c of Japan v F MO 314 F 

928 C A 9 1963 Accordingly we will not order the deletion 

that portion of the agreement covering the carriage of passenge

bebveen Europe and Canada

Accordingly theproceeding is discontinued

Signed THOMAS LISI

SeC1etary

11 Respondents only allegation of harm resulting from the alleged deficiency in the o

is that they are unable to prepare an effective reply and case Ill opposition to the or

The two memoranda filed by respondents contain detailed and cogent arguments on 

cisely those issues raised by the order thus demonstrating their cmplete awarenes

the issues

10 F MC
FEDERAL l1ARITIME COMl1ISSION

No 65 7

IMPOSITION OF SURCHARGE AT UNITED STATES ATLANTIC AND GULF

Poins ON CARGO MOVING BETWEEN SAID PORTS AND LATIN AMERICAN

PORTS

Decided June 29 1966

Under uniform Iual rate contract provision requiring 90 days notice of rate in

crease unless extraordinary conditions impede obstruct ordelay the

obligations of the carrier surcharge on 30 days notice did not violate the

c9ntract where circumstances surrounding a

strike of longshoremen and

sUbsequent port congestion were so unprecendented as not to be foreseeable

by respondent conferences by the exercise of a high degree of diligence

Imposition of the surcharge by respondents did not violate sections 14b 15 16

First 17 or 18 b 5 of the Shipping Act 1916

David Orlin John R Mahoney John G 111cGarrahan and Edmond

Smith for respondent conferences and respondents Grace line and

Roval Netherlands Steamship Company

DQ1Ulld Mcleay and Iiarold E 111esir01o for respondent Delta Steam

shipLines Inc

Phillip G Kraemer for intervener Traffic Board of the North At

lantic Ports Association

Sidney Goldstein General COlillsel F A lJJulhern Attorney and

Arthur L lVinn Jr Samuel H Moerman J Raymond Olark and

James M Henderson for intervener Port of New York Authority

Don A Boyd and F P Desmond Commerce Counsel for intervener

E IduPont de Nemours Co

J E Moody General Counsel Thomas J O Reilly Assistant Gen

eral Counsel and Paul J Fitzpatrick Attorney for intervener Gen

eral Services Administration

Allred K Kestenbaum for witness E R Liggett

Michael O Bernstein and Phillip Weinstein for witnesses of New

York Branch U S Fresh Fruit and Vegetable Association

NormanD Iline Robert J Blachwell and Donald J Brunner for

Hearing Counsel

10 F M C 13
14 FEDERAL MARITIME COMMISSION

REPORT

By THE COMMISSION John Harllee Ohairmanj John S Patters

Vice Ohairmanj James V Day George H Hearn Oomm

sioners

The Commission initiated thisproceeding on April 2 1965 to det

mine the lawfulness of certain 10 percent surcharges imposed by n

steamship conferences operating between Atlantic and Gulf ports 

the United States and the Caribbean Islands excluding Puerto Ri

and the Virgin Islands the north Coast of South America Panam

the west coast of Central America and the west coast ofSouth Am

ica 1The Commission named these conferences as respondents as w

as those independent lines which also imposed a surcharge The p

ceeding contains five issues for determination involving sections 1

15 16 First 17 and 18 b 5 of the Shipping Act 1916 2

name

1 Whether the surcharges wereimposed in violation of sect

14b and the dual rate contracts approved thereunder especia

with respect to the application ofthe term extraordinary con

tion to thelongshore strike

2 Whether the imposition of the surcharges by the responde

conferences is unjustly discriminatory or unfair as between c

riers shippers exp orters importers or ports between exporte

from the United States and their foreign competitors or opera

to the dertiment of the commerce of the United States or is co

trary to the public interest as proscribed by section 15

3 Whether the imposition ofthesurcharges atall U S Atlan

and Gulf ports makes or gives any undue or unreasonable perfe

ence or advantage to any person locality or descripti on oftraf

in any respect whatsoever or subjects any particular person loc

ity or descripti on oftraffic to any undue or unreasonable prej

dice or disadvantage in any respect whatsoever in violati on 

section 16 First

4 Whether the surcharges are rates fares or charges wh

are unjustly discriminatory between shippers orports in vi olation

of section 17 and

5 Whether the surcharges are rates or charges which are 

1The conferences are Atlantic and Gulf West Coast of South America Conferen

Atlantic and Gulf Panama Canal Zone Colon and Panama City Conference U S Atlan

and Gulf Jamaica Conference Leeward and Windward ISlands and Guianas Conferen

East Coast Colombia Conference West Coast South America Northbound Conferen

U S Atlantic and Gulf Haiti Conference Atlantic and Gulf West Coast of Central Ame

and Mexico Conference and US Atlantic and Gulf Santo Domingo Conference

246 U S C 813a 814 815 816 and 817 b 5 respectively

10 F M C
SURCHARGE AT U S ATLANTIC AND GULF PORTS 15

unreasonably high or low as to be detrimental to the commerce of

the United States in violation of section 18 b 5

This proceeding is before us now on exceptions in the Initial Deci

sion of Examiner E Robert Seaver

On March 5 1965 the conferences except theVenezuelan Conference

announced the 10 percent surcharges to he effective April 5 1965 on

all shipments to or from the U S Atlantic and Gulf ports

3

The sur

charge was to expire not later than October 3 On April 2 1965 the

Venezuelan Conference announced its 5 percent surcharge effective

May 3 1965 The Venezuelan Conference had initially decided to adopt

the 10 percent surcharge hut due to the opposition ofthe Venezuelan

Government the conference decided to adopt a 5 percent surcharge

The nonconference carriers adopted a 10 percent surcharge on 30 days

notice but approximately eight nonconference lines did not adopt a

surcharge 4

Toward the end of May the conference decided to terminate the

surcharges as of August 30 1965 and to adopt a permanent rate in

crease in the amount of 6 to 7Y2 percent of normal rates effective

August 30 1965 to cover their added costs resulting from the new

labor contract with longshoremen 5

For many years thesuccessive labor contracts between the steamship

lines and the longshoremen have been entered into for periods of 2

years each Astrike of longshoremen has occurred every time the con

tract expired or nearly every time After the strike of i963 a panel

appointed by the President devised certain guidelines for future

negotiations between labor and management for the longshore con

tract The contract was again due to expire on September 30 1964 so

in order to avoid last minute bargaining negotiations for a new

contract were begun in June 1964 Negotiations were predicated upon

the formula devised by the President s panel Bargaining on behalf

of management was conducted by representatives of the New York

3 In the absence of the authority to suspend rates pendente lite the Commission sought

an injunction against respondents imposition of the surcharges in order to maintain the

status quo until this proceeding could be completed The court refused to enter the injunc

tion but declared that its decision covered only the question whether irreparable harm to

shippers would result if the surcharges were permitted to become effective and was not

to be considered a precedent governing the issues in the instant proceeding Federal

Maritime Com n v Atlantic GulJPanama Canal Zone 241 Fed Supp 766 S DN Y

Apr 27 1965

Hereafter discussion relating to the confe rence lines is equally applicable to those

nonconference lines which established a surcharge The Commission named individually

as respondents American Plate Line Atlantic Lines Ltd Azta Line Delta Steamship

Lines Inc Grace Line Ozark Navigation Inc Peruvian State Line Royal Netherlands

Steamship Co Surinam Navigation Co Ltd and Tica Line

5Other conferences affected by the strike adopted rate increases and gave 90 da s

notice with the average effectiv date sometime in May 1965

10 F M C
16 FEDERAL MARITIME COMMISSION

Shipping Association NYSA and the longshoremen were col

tively represented by the International Longshoremen s Assoqia

ILA

NYSA represents 145 American and foreign steamship lines 

contract stevedores in the Port ofNew York NYSA is empowere

negotiate the entire contract for New York and the master contr

which covers the essential items of wages fringe benefits the d rat

of the contract and the hours to be worked for North Atlantic p

from Searsport raine to Hampton Roads Va

In other Atlantic and Gulf port tpe ILA negotiates with o

representatives of steamship ltines HQlWever the master oon r

worke out in New York is usually adopted in these other ports 

cept as to questions peculiar to a local port which are negotia

locally

The NYSA and ILA had not reaohed agreement when the lo

shoremen s cont ract expired on September 30 1964 so the Governm

sought and obtained the 80 day injunction against a strike under 

provisions of the Taft Hartley Act and work was not interrup

when the contract expired Negotiations continued Also a pa

headed by Assistant Secretary of Labor James Reynolds made a se

ofrecommendations in line with those made earlier by the Presi9e

panel On December 16 1964 4 days before the injunction was to 

pire the Reynolds recommendations were accepted by both sides

The NYSA negotiators had previously obtained their prin9ip

approval of the terms that were ultimately agreed upon between 

negotiating groups on December 16 1964 Itremained however 

the terms to be ratified by the rank and file membership of the un

Neither management its bargaining representatives nor the un

representatives doubted that this approval would be forthcoming 

a matter of course after the necessary time had expired to cond

the voting In the meantime the Taft Hartley injunction had exp

on December 20 1964 but contrary to experience in previous stri

the longshoremen had agreed to stay on the job Despitethe confide

of the bargaining representatives the longshoremen refused to ac

the agreement a unique situation in colleotive bargaining in the ste

ship industry

The strike of longshoremen started on Monday January 11 1

in substantially all Atlantic and Gulf ports On January 21 1965 

ILA membership in the Port of New York and some other po

voted again and ratified the same agreement but local disputes wh

were interfering with settlement of the negotiations in certain So

Atlantic and Gulf ports prevented the termination of the strike 

10 F M 
SURCHARGE AT U S ATLANTIC AND GULF PORTS 17

order to cause pressure to be put on these ports to come toa settlement

the ILA invoked an all port no port rule under which the union

refused to return to work at any port until agreement was reached

and the dispute settled at all the ports This came as a complete sur

prise to management because of a permanent injunction ofmany years

standing against the ILA demanding that NYSA bargain for all

Atlantic andGulf ports

At this time President Johnson issued a statement critical of the

failure to terminate the strike and mobilizing Government forces to

attempt to bring the parties to agreement The National Labor Rela

tions Board obtained an injunction against the ILA on the ground

that it wasengaging in an unfair labor practice by the all port tactics

and the court directed the union to return to work in thePort of New

York As a result of this and the President s

appeal the strike ended

in North Atlantic and some of the Gulf ports on February 12 1965

Negotiations over local displites continued for as long as a month in

the other ports the strike being settled on various intervening dates

at the remaining Gulf and Atlantic ports The last of the ports to

settle was Miami Fla where the longshoremen returned to work on

March 13 1965

The combination ofthe strike and lack of anticipation and prepar

ation for the strike by the carriers resulted in congestion of cargoes and

ships at the various ports after the strike that exceeded any such

congestion that had previously been experienced The degree of con

gestion varied from port to port of course In the worst places the

condition was chaotic in other ports the congestion was severe and

in a fewports the congestion wassubstantially less

Incoming cargoes were impeded by export cargoes accumulated on

the piers during the strike Severe demands were made on longshore

men after work commenced because of the backlog Parcels of cargo

were shortloaded out of conformity with the bills of lading The stor

age of cargo was a severe problem This congestion prevented the

orderly loading of cargoes for ease of discharge as the various ports

of call were reached with the result that in many instances cargoes

had to be offloaded to reach deeper stored cargoes destined for the

port and then reloaded Extensive vessel delays were experienced at

thevarious ports in waiting for berths and because ofdelays in loading

and unloading the delay running in some instances in excess of 3

weeks The additional costs incurred as a result of the strike and the

congestionwere quite substantial to the respondents because the trades

included here involve comparatively shori sea runs and more frequent

loading and discharge than in most other trades The congestion grad

10 F M C

299 843 0 68 3
18 FEDERAL MARITIME COMMISSION

ually decreased after a time and came back to normal proportions a

varying times in the respective ports There is some controversy abou

the time of return to normal but the record shows that all wasnorma

by June 15 1965

Carriers are normally able to anticipate the occurrence at a strike

long enough in advance to take action to minimize the resulting ex

penses and losses Ships are quickly loaded and disp tched from the

strike ports Other ships are laid up or sent in for periodic inspection

surveys drydOcking and repairs Crews are dismissed and office help

is sent on annual vacations Carriers adjust sailing schedules so ast

balance the placement of the ships at the strike s end and they plac

ships in other trades They do not charter additional tonnage on th

eve of the strike or dispatch vessels to the area of the labor dispute

The carriers experienced losses during the strike and its aftermat

through lost vessel days resulting from the strike and the port con

gestion shortage of berths increased expense of loading and dis

charging due to the congestion shortage of longshore workers of

loading and reloading improperly stowed cargo and other abnorma

expenses

The shipper testimony established the fact that shippers in thes

trades frequently quote prices 60 days 90 days or even longer in ad

vance ofdelivery ofthe merchandise and that because of one factor o

another shippers cannot in many

instances pass along tothe purchase

increased costs resulting from the surcharges This would he the cas

when goods are sold ci

f or other basis where the seller pays th

freight in the absence of an escalator clause Likewise the difficult

in aJmending import licenses granted by some of the Latin America

countries or changing letters of credit caused shippers to absorb th

increase in some instances The shippers absorbed the surcharges i

other instances because competition required that they do so Severa

shippers testified that it is their practice when they quote a price to 

customer to make good that quotation when costs such as freigh

rates have gone up in the meantime even though they are not legal

bound to do so The record does not establishthe total amount of thos

freight increases that could not be or were not passed along to th

ultimate consumers of the commodities but a fair sampling wa

brought out

As a result of the port congestion and the strike shippers suffere

expenses in addition to the amount of the surcharges In some in

stances they had to pay for additional storage during the time the

commodities were waiting to he loaded and for waiting time o

10 F M C
SURCHARGE AT U S ATLANTIC AND GULF PORTS 19

truckers One or two ofthe shippers believed that they lost businessby

reason of the surcharges but no particular sales were lost outright

Duel rate contract systems are in use by the conferences in all of the

outbound trades The only import trade where dual rate contracts are

employed is that from the east coast of Colombia and only coffee sh p

ments arecovered there

Under article 9 a of the dual rate contract the conferences are

prohibited from making rate changes except as provided by section

18 b 2

In addition this article requires the conferences to give 90 days

notice of rate increases insofar as such increases are under the control

of the carriers Ifthe increase is not acceptable to the contracting

shipper this article permits him to tender notice oftermination ofthe

agreement at least 30 days before the effective date ofthe increase and

the termination shall be effective as of the date of the proposed in

crease unless the conference having received such notice shall elect

to maintain theexisting rates

Article 10 a permits the carriers to suspend the agreement in the

event of war hostilities warlike operations embargoes blockades

regulations of any governmental authority pertaining thereto or any

other official interferences with commercial intercourse arising from

these conditions which affect the operations of the carriers Article

10 b provides that in the event of any of the conditions enumerated

in article 10 a the carriers may increase any rates affected thereby

on not less than 15 days written notice to the shipper The shipper is

allowed to suspend the agreement if an increase is imposed in these

circumstances unless the carrier s notice of increase is rescinded

The article directly involved in this proceeding being the one relied

upon by the respondent conferences as authority for the present rate

increase on l ss than the 90 day notice is article 10 c which provides

In the event of any extraordinary conditions not enumerated in article 10 a

which conditions may unduly impede obstruct or delay the obligations of the

carriers the carriers may in rease any rate or rates affected thereby in order to

meet such conditions Provided however That nothing in this article shall be

construed to limit the provisions of section 18 b of the Shipping Act 1916 in

regard to the notice provisions of rate changes The merchant may not less than

10 days before increases are to become effective notify the carriers that this

agreement shall be suspended insofar as the increases areconcerned as of the

effective date of the increase unless the carriers shall give notice that such in

crease or increases have been rescinded and canceled

The number and size ofthe nonconference carriers are somewhat in

exact but apparently there are some 15 to 18 nonconference lines that

serve one or more of the trade routes The largest of these lines makes

10 1l M C
20 FEDERAL MARITIME COMMISSION

27 calls per year in the Venezuela trade for example as compared t

Grace s 52 calls per year Another comparatively large nonconferenc

line the Peruvian State Line has a total of 20 sailings in these trade

in 1964 as contrasted with 100 for Grace Lines That particular non

conference carrier and some of the others adopted a 10 percent su

charge on 30 days notice like that adopted by the conferences A

executive of one conference line and theconference chairman as muc

as admitted that they consider the nonconference service to be inade

quate although they did t

estify that there wasextensive nonconferenc

competition About 98 percent of the shippers using the conferenc

lines have signed dual rate contracts Ifthe conferences had ceased t

function onApril 5 1965 the nonconference lines thathad not adopte

a

surcharge could not have provided adequate service for all the ship

pers in these trades during the period of the surcharge In this sens

the nonconference service could he deemed to be inadequate eve

though the independent lines undoubtedly could have adequate

served some of the shippers whomight have elected to terminate the

dual rate agreements

Under article 10 c of the contract dual rate shippers wereentitle

to withdraw from the dual rate contract upon the announcement o

the surcharges One out of the 7 000 dual rate shippers in these trade

exercised thatright The parties are in disagreement as to whetherth

oppportunity afforded any relief since there is a question whether non

conference service is adequate to meet the needs ofshippers

DISCUSSION

The Examiner found that there is no showing of prejudice or dis

advantage to any person locality ordescription oftraffic asprohibited

by section 16 First and no showing of unjust discrimination betwee

shippers or between ports as prohibited by section 17 Neither accord

ing to the Examiner willthe record support a

finding that the level o

the surcharge was so unreasonably high as to be detrimental to th

commerce of the United States contrary to section 18 b 5 since th

surcharge did n tqause loss of sales orprevent themovement of cargo

No exceptions were filed to these conclusions and we sustain them

Hearing Counsel however except to the Examiner s

finding tha

the longshoremen s strike and its aftermath were the extraordinary

conditions within the meaning of article 10 e of the dual rat

contract

The Examiner resolved the issue of whether extraordinary cond

tions existed to the factual determination of whether the carriers i

the exercise ofa high degree of diligence in the exercise of busines

10 F M C
SURCHARGE AT U S ATLANTIC AND GULF PORTS 21

judgment should have foreseen or anticipated the conditions upon

which the surcharges arebased Ifthe carriers eould have foreseen the

consequences of the strike through such diligence they would be re

quired to give 90 days notice

Using this test the Examiner found the events involved here could

not have been foreseen by the exercise of thishigh degree ofdiligence

On the contrary he found that during the negotiations ending on

December 16 1964 and thereafter until the longshoremen walked out

on January 11 1965 a decision that a strike was imminent would have

been unwarranted The unprecedented refusal of the union members

to accept the contract the insistence of the union on all ports or none

rule despite the existing court injunction against all port bargaining

and the unprecedented port congestion that followed the strike could

not have been foreseen by the exercise of a high degree ofdiligence as

these factors were outside the control of the carriers The EX3Jminer

therefore concluded that these occurrences constitute extraordinary

conditions within the meaning ofarticle 10 c

justifyingthe imposi

tion ofthe surcharges on 30 days notice

Hearing Counsel contend that emergency rate changes on short

notice are exceptional and disturbing in foreign trade therefore the

provisions of dual rate contracts which grant authority for such

changes should be strictly construed Hearing Couns l

point out that

longshoremen s strikes occur regularly upon the expiration of the con

tract and that congestion occurs after every longshoremen strike al

though in the past strike it appears to have been somewhatmore severe

because of the length of the strike Likewise conditions returned to

normal at the latest in most ports by mid May Consequently Hearing

Counsel contend that the strike and subsequent congestion have not

been shown to be the type ofconditions contemplated by the Commis

sion when it drafted article 10 c Hearing Counsel also argue that

the surcharge was improperly imposed because it was not limited to

the duration of the condition which impaired the obligation of the

carrier but continued afterward into a period of normal operation

Respondents argue that the strike certainly was extraordinary as

the term is generally understood since both the NYSA and ILA ne

gotiators were uniformly confident that the strike would be averted

And the carriers acted upon this assumption to their later disadvan

tage Furthermore respondents assert that the strike itself the disrup

tion of schedules the costs to carriers and the ensuing congestion meet

the test ofextraordinariness as compared withprevious longshoremen s

strikes Respondents also state that they were justified in imposing

a

surcharge which continued to apply after the termination of the

JO F M C
22 FEDERAL MARITIME COMMISSION

congestion because this permitted them to recoup their losses wit

a 10 percent surcharge while a

surcharge limited to the actual perio

of the extraordinary condition would have been considerably highe

and considerwbly more disastrous to shippers 6

Under section 14b the Commission may authorize the use of dua

rate contracts which meet certain standards In The Duxil Rate Oase

8 F M C 16 1964 the Commission approved the contract of the re

spondent conferences 1

In drafting the contract the Commission re

ognized that whilethe dual rate contract bound shippers to patroniz

only conference carriers in exchange for the shipper s promise o

exclusive patronage the carriers should agree to give 90 days notic

of rate increases subject to the proviso in article 10 c which permi

30 days notice of rate increases in the event of extraordinary cond

tions which may unduly impede obstruct or delay the obligation

ofthecarrier

In The D1J Iil Rate Oases 8 F M C 16 1964 the Commission d

scribed the conditions which justify rate increases on short notice 

follows

Rate increa ses necessitated by emergency conditions outside the control of th

carriers are permitted under a separate contract provision which will be d

cussed below 8 F M C at 28

The proposed contracts generally contain provisions which would permit th

suspension of service or rate increases on short notice where a bnormall cond

Uons beyond thecontrol of thecarriers are present 8 F M C 81t47

The approved clause would also permit the continuation of the contract sy

tem at higher rates imposed in compliance with section 18 ib of the Sb ppin

Act in other extraordinary cil cumstance s which unduly impede or delay th

carrier s serVlice 8 F M C at 48

The key words therefore are emergency conditions outside th

control of the carriers abnormal conditions beyond the control o

the carriers and extraordinary circumstances which lUlduly in

pede or delay the carrier s service The criteria are apparent th

condition must be outside orbeyond the carrier s control the conditio

must impede ordelay the carrier s service and there must be an eme

gency an abnormal condition or an extraordinary circumstance Th

language ofarticle 10 c reflects the Commission s intent

In the event of any extraordinary conditions notenumerated in article 10 a

which cond itions may unduly impede obstruct or delay the obligations of th

carriers the carriers may increase any rate or rates affected thereby in ord

to meet such con ditios

e In effect the conferences claim that once rate action was authorized under art lO c

they were free to select any reasonable device surcharge or rate increase to meet th

extraordinary condition

1

Therefore we are not here concerned with the approvsbtlity of the contract rathe

we are interpreting certain language In the contract specifically art lO c

10 F M C
SURCHARGE AT U S ATLANTIC AND GULF PORTS 23

The longshoremen s strike was beyond the control of the carriers

and it unduly impeded and delayed the carrier s service Consequently

we need only be concerned with the question of whether the strike and

its aftermath constitute emergencies abnormal conditions or extraor

dinary conditions

The words emergency abnormal extraordinary are subjective

they presuppose some lack of foresooability 8

Thus the carriers must provide 90 days notice of rate increases to

dual rate shippers if the conditions that give rise to the need for the

increase are normal that is foreseeable by the carriers For ex

ample where such conditions as rising salaries costs of vessels fuel

or increased stevedoring expense require additional freight re enue

then 90 days notice is required because the carrier is expected to an

ticipate these needs This is so because exporters in conducting their

business need the stability afforded by a guarantee of 90 days notice

Indeed this is one ofthe most important inducements to shippers to

commit themselves to an exclusive patronage contract with a confer

ence In this context under the dual rate contract the notice require

ment is highly important Carriers have a strict duty to anticipate the

need for rate increases and give timely notice thereof to dual rate

signatories

The factual question therefore is whether the carriers in the exer

cise of a high degree of diligence should have foreseen or anticipated

the conditions whioh unduly impeded obstructed or delayed the obli

gations ofthecarriers

Apreponderance ofthe evidence establishes that the events involved

here could not have been foreseen by the exercise of this high degree

of diligence During the negotiations ending on December 16 1964

and thereafter until the longshoremen walked out on January 11

1965 a decision that a strike and the ensuing severe congestion were

imminent that the carriers should layoff crews furlough office

workers drydock and layup ships and take other steps to mitigate the

full thrust of the strike would have been unwarranted The un

precendented refusal ofthe union members to accept the contract their

leaders had worked out for them the ensuing intransigence of the

union in insisting on all ports or none rule despite the existinginjunc

tion against all port bargaining and the unprecedented port con

gestion that followed the strike could have not been foreseen by the

a Webster s New COllegiate DIctionary G C Merriam Co 1961

emergency an unforeseen combInation of cIrcumstances

abnormaldevlating from the normal condItion orfrom the norm oraverage markedly

or strangely Irregular

extraordinary beyond or out of the common order or method not ordinary exceed

Ing the common degree measure or condition remarkable

10 F M C
24 FEDERAL MARITIME COMMISSION

exercise of a high degree of diligence Ve therefore conclude that

these occurrences constitute extraordinary conditionswithin the mean

ing of article 10 cjustifying the imposition of the surcharges on

30 days notice

As noted above Hearing Counsel argue that the longshoremen s

strike was not the type ofcondition contemplated hy article lO c and

that the surcharge itself was not a

proper rate hecause it was not

limited to the duration of the impairment ofthe carriers obligation 9

Thus Hearing Counsel assert that since shippers were compelled to

absorb the surcharge because it wasimposed on 30 days notice imposi

tion of the surcharge was contrary to the public interest According to

Hearing Counsel the 90 day notice provision in the dual rate contracts

was an important inducement for shippers to execute such contracts

and should not be readily avoided This is of course true This is the

rationale of the Commission s requirement of 90 days notice in the

dual rate cases

10 But this requirement is subject to article 1 0 c

Therefore if the carriers met the prerequisites of article 10 c

they

were justified in exercising their contractual right to adjust rates on

30 days notice

While Hearing Counsel would invoke the public interest because

some shippers as a business necessity absorbed the surcharge it is clear

that the Commission determined in The Dual Rate Oases that the

overall public interest required some flexibility under the contracts in

extraordinary circumstances Furthermore the Commission permitted

shippers as well to avoid strict adherence to the contract by theexercise

ofthe right to cancel the contract if the rates were increased on short

notice llThe flexibility thus provided was a

recognition by the Com

mission that both carriers and shippers should not be required to

adhere to dual rate contracts under conditions of an abnormal nature

to which neither party agreed or for that matter could have foreseen

Hearing Counsel basically rely on the contention that the strike was

not thetype of condition contemplated by article 10 c We agree that

strikes per se do not automatically invoke the exception of article

9

The GenerallServices Administration although it did notexcept to the Initial Decision

filed a brief to the Examiner and argued orally before the Commission that the 1965 long

shoremen s strike was not an extraordinary circumstance because such strikes have

occurred in 10 of the last 15 years Therefore GSA contends that not only did the

respondents violate the Shipping Act and the terms of the dual rate contract by imposing

ll surcharge on 30 days notice but also that the imposition of the surcharge was not

warranted regardless of notice

10 Sec 14b itself does not require such notice However the Commission added the clause

because of its recognition that many mercantile transactions require rate stability for at

least 90 days

11 In view of the somewhat inferior nonconference service this right was lllusory to

some extent here

1 F M C
SURCHARGE AT U S ATLANTIC AND GULF PORTS 25

10 c IIowever as we found above this strike was indeed extra

ordinary and unforeseeable

Hearing Counsel further aver that the surcharges are in reality

permanent rate increases effectuated on 30 days notice and later ad

justed doWnward to a 6 to 7V2 percent increase over the prestrike

rates Consequently Hearing Counsel claim that the net result was a

permanent rate increase implemented on less than 90 days notice 12

This argument fails to appreciate the true import of article 10 c If

conditions warrant carriers may increase rates This may be done by

increases of regular rates orby surcharges As we have said the car

riers were justified in imposing a surcharge to meet unforeseen addi

tional costs Actually Hearing Counsel do not allege that the present

rates are inordinate Therefore the fact that these rates were later

adjusted does not render the original rate less justifiable Hearing

Counsel also argue that a proper balancing of the equities will reveal

the Examiner s error For instance the Examiner found that carriers

are entitled to adopt rates that are adequate to cover expenses and

return a profit and thatrespondents in the present case would be un

able to recoup a substantial portion of expenses ifthe surcharges were

dis3ppr ved However Hearing Counsel adyocate that while every

one suffered losses as a result of the longshoremens strike and subse

quent congestion shippers suffered additional expenses for trucking

storing etc but unlike the carriers shippers are unable to assess

telpp

r

rycharges to recoup their losses because for business reasons

ship p

rs are frequently unable to pass last mill ute expenses on to their

customers The argument is illusory Of course the Commission rec

ognized the needs ofshippers for long range rate stability On theother

hand the entire regulatory scheme of theShipping Act is based upon

the recognition that carriers are obliged to observe reasonwble non

discriminatory standards but they are also entitled to fair remunera

tion for their services Here there is no indication that the carriers

assessed rates which were other than reasonably compensatory

We also must reject the argument that die surcharge violates the

public interest hecause it remained in effect for a time after the port

congestion ended The conferences here decided to spread the surcharge

over a

longer period than the duration of the congestion in order to

reduce the rate of the surcharge This was a reasonable means of re

couping the losses occasioned by the strike The Commission recently

considered the legality of a surcharge imposed at the Port of Manila

1Hearing Counsel alluded to the actions of other conferences establishing general rate

increases on 90 days notice as support for their argument This is irrelevant since there

was no proof concerning conditions in other trades and since ifrespondents qualify under

art lO c it does not matter what other conferences do

10 F M C
26 FEDERAL MARITIME COMMISSION

because of congestion and delay in unloading cargo there In Sur

charges on 0argo to Manila 8 F M C 395 1965 the Commission

found that the basic purpose behind surcharges such as those in

issue here is to reimburse the carriers for additional costs temporarily

incurred by the performance of their services and which costs the

carriers are notrecovering through their basic freight rates Revenue

to be derived from the suroharge at Manila was found to be a reason

able approximation of the costs incurred in calling at that port In

effect the Commission simply permitted the carriers to recover their

additional expenses That is precisely the situation here the carriers

increased their rates a reasonable amount over a reasonable period to

the extent necessary to recoup their losses

For the aforementioned reasons the surcharges are not contrary

to the dual rate contract or section 14b nor are the suroharges con

trary to thepublic interest orother standards of section 15 Therefore

Hearing Counsels exceptions are overruled

ULTIMATE CONCLUSIONS

Respondents have acted in accordance with the provisions of the

dual rate contract andtheShipping Act 1916 in imposing a surcharge

on 30 days noti Ce This proceedingis hereby discontinued

Signed THOMAS LISI

SeCTetary

10 FMC
FEDERAL MARITIME COMMISSION

No 873

INVESTIGATION OF PASSENGER STEAMSHIP CONFERENCES REGARDING

TRAVEL AGENTS

Decided Jully 14 1966

Provisions of Conference Agreement No 7840 requiring unanimous accord of

the member lines in de iberations to raise or lower the maximum commis

sion rate payable to the lines agents on sales of passenger transportation

unanimity rule found detrimental to the commerce of the United States

nd ic0ntrary to the public interest within the meaning of section 15 of the

Shipping Act 1916 and disapproved

Provision of Conference Agreement No 120 and rules adopted thereunder pro

hibiting the member l1ri agents from selling without prior permission

transportation on competitive nonconference lines tieing rule found un

justly discriminatory as between carriers detrimental to the commerce of

the United States and contrary to the public interest within the meaning of

section 15 of the Shipping Act 1916 and disapproved

Oarl S Rowe Frank B Stone Edward R Neaher Lino A Graglia

anq J 08ep h MaiJPer for Trans Atlantic Passenger Steamship Con

ference and Atlantic Passenger Steamship Conference respondents

Robert J Sisk and Harold S Barron for American Society of

Travel Agents

NormanD Kline and Dono ld J Brunner Hearing Counsel

REPORT ON REMAND

By THE COMlHSSION John Harllee Ohairman Ashton C Barrett

George H Hearn Oommissioners

The proceeding is before us again upon remand from the U S Court

ofAppeals for the District ofColumbia Circuit Aktiebolaget Svenska

Amerika LiJnien Swedish A1TlerWan LiJne et rd v Federal Mari

tinne Oommi g8ion 352 F 2d 756 1965 1

Originally instituted by our

predecessor the Federal Maritime Board the proceeding was the out

Jan 30 1964 decision is reported at 7 F M C 737

1 Unless the context of this report requires otherwise the Court of Appeals for the Dis

trict of Columbia Circuit and Its declBion 1111 Sven8ka will be referred to sImply as the

Court of Appeals and the opinion

27

10 F M C
28 FEDERAL MARITIME COMMISSION

growth of a petition filed with the Board by the American Society o

Travel Agents The Society or ASTA requested the institution o

an investigation into certain activities of two conferences the Trans

AtlanticPassenger Steamship Conference TAPSC and the Atlanti

Passenger Steamship Conference APSC established and governe

by Agreements 120 and 7840 respectively both of which were ap

proved by apredecessor agency under Section 15 of the Shippin

Act 1916 The inquiry thus begun was the first comprehensive invest

gation of the relationship between passenger conferences and trave

agents since the passage oftheShipping Act in 1916

After extensive hearings an initial decision by Examiner E Robe

Seavel and exceptions thereto we heard oral argument and served ou

final decision in February 1964 ThiIe we disapproved several othe

ptactices of respondent conferences they sought judicial review or ou

order only insofar as it disapproved two provisions of their agree

ments 1 The provision of the AtlantiQ Passenger Steamship Con

ference s agreement requiring unanimous vote of the membership t

fix or alter the maximum commission payable to travel agents ap

pointed hy the conferences to sell passenger bookings on conferenc

vessels the unanimity rille and 2 the provision of the TraAt

lantic Passenger Steamship Conference greemel1t which prohibits

traveJ agents appointed by the respondents frani selling passe ge

bookings on competing nonconference steamship lines without prio

per

n ssion from respondents the tieingrule

In tJune of last year the Court of Appeals issued its decision re

versing our disapproval ofthe unanimity and tieil g

rules and remand

ing the proceeding to us 1 to either make supporting fincFngs

which adequately sustain the ultimate finding that tl e unanjrt1it

rule operates to the detriment of the commerce of the United Sta es

or if this cannot be done to vacate that ultimate finding

and approve the rule and 2 to either rriake an adequately supported

ultimate finding I

wl ich warrants disapproval under the statllt

or ifsuch finding can not be made on the record to approve the tieing

rule under section 15 Ve ordered reopening ofthe proceeding on the

remanded issues The reopening was limited to the filing of bdefs

and oral argument by the parties Respondent conferences ASTA

and Hearing Counsel filed opening briefs the conferences and Hear

ing Counsel rei lied all parties rgued orally

Tl e Operation and Ejfect of the Unanimity R1tZe Provisions of Aqree

1nent 7840

The Atlantic Passenger Steamship Conference came into bei11

1946 with the approval under section 15 ofthe Shipping Act ofAgree

10 F IC
INVESTIGATION OF PASSENGER TRAVEL AGENTS 29

nlent No 7840 2

The APSC s current voting membership is identical

with that of the Trans Atlantic Passenger Conference except that

APSC includes American President Lines and does not include Span

ish Line The conference is headquartered in Folkstone England and

six of its member lines serving only Canadian ports do not reilder

passenger service at any port on the U S Atlanticcoast

Article 6 a of Agreement 7840 sets forth the unanirnity l ule and

provides

a Rates of commission and handling foos which l1etnber Lines may pay to

their general agents or subagents shall be established by unanimous agreement

of theMember Lines

Conference meetings including those at which agents commissions

were dealt with were conducted on an informal basis and votes by the

members were neither recorded nor filed with the Commission Prior

to the meetings of the principals a committee of the conference

called theAC Subcommittee which has initial responsibility on com

Inissions and rates meets to consider matters vhich it may present or

recommend to the principals AI ticle 3 d ofAgreement 7840 provides

Conference action shall be by unanimous agreement of the member lines

except as may be otherwise provided herein

his has been construed by the conference to require thaJt all recom

mendations by H A C Sub ommittee must be based upon the unani

mqus accord of its members

ln 950 the maxit num rate of commi ions paYflIble to travel agents

was6 percent The mhwtes of 1arch 8 1 50 show that lack ofunajlim

ity prevEnted the A G Subcommittee from recommending an increase

in comniissions The minutes of 1arch 9 19QO demonstrate that again

lackof unanimity preveJ ltd a recom eridation to increase cammissians

even though nlllines expressed a wiHingness in principle to an in

crease in geny

commission and the majority of the lines

were prepared to increase the commission to 71h l

ercent all classes all

seasons 1 year later onMa ch 1 1951 when caml 1ission weG finally

increased to 71j2 percent the increase exc1uded again against the yiews

of the majority sales mad in the so alled high 01 summer season

On tJhese sales the 6 percent COlTIll1 ission remained in effect

In 00Wber qf 1951 a majority af the lines again attempted to n

crease the c9mmission level but it was not possible to reach unani

mOllS agreem nt andagain the failure to increase commissions W

in the face af a strong majority in favar of applying 71h p

ercent

carhmission to all classes through the yeal

1

Lack of unallirhity pte

iI For the full textof sec 15 see app A

10 l M C
30 FEDERAL MARITIME COMMISSION

eluded any recommendation by the Committee to the principals on

oommissiQn increases and the maltter was deferred for consideration

at the Statutory Meeting in Maroh 1952 At the March 1952 meeting

Uie principals deferred the matter of agents commissions for con

sideration in June or that year by the A C Subcommittee but in June

the Suhcommilttee deferred it again for consideration 3Jt the conference

meeting to be held in October 1952 InOorober whenthe Subcommittee

finally took up the matter of commission levels it was again unable to

make a recommendaJtion to the principals beoause unanimity COuild no

be reached on a proposal to extend the off season basis to bookings fo

seasonal sailings 3

T e record sheds no light on any furtJler conference action on the

level of commissions untilIa7 percent year round commisSion was se

at a special meeting in May 1956 Prior to this the mlatter had bee

discussed 3Jt a

regular February M3Jrch meeting in 1956 but ap

parently no minute waskept on this meeting and none was fiIed with

the Federal M8Iritime Board However the records of United States

Lines amemlber oftheconference reved thaJt atthis meeting one ofth

lines exercised itS veto power undoc ithe unanimIty nile toprevent th

conference from at oncePutting into effect an immediwte adjustmen

in commission to 7 percent all year

Atthe time of the hearing in this proceeding the airlines paid 

10 percent commission on the air portion of foreign inclusive tours

i e selling air tickets in conjunction with a land tour At this sam

time APSC members paid only 7 percent on the water portion ofsuc

tours AttheAPSe meeting in October 1957 Cunard Line complaine

that the steamship lines are seriously handicapped by not gjvIng thi

10 percent tour commission concession The travel agents them

selves pointed out thatthe difference in tour commission levels wa

a factor contributing to the definite tendency to sell air travel I

May 1960 a majority of the principals favored establishment of 

10 percent commission for tours However it wasnot until Decembe

1962 2 years 18lter and after close ofhearings in this proceeding bu

before initial decision that thepercentage level for sea portion oftour

Vas increased to equal that of the airlines

Atthe present time the percentage level ofcommissions for bookin

sea passage is the same as that paidfor booking airtravel 7 percent fo

point to point bookings and 10 percent for tours But as we pointe

out in our previous opinion in this proceeding the effective level o

3 The matter of commissions was on the princlpals agenda for a meetIng In March 

1953 but action was deferred to the Subcommittee meeting to be held In June 1953 T

matter was again deferred by the Subcommittee il1 June In these two Instances the reas

for deferral does not llJppear

10 FM 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 31

commission for sea passage is less because the many unique arrange

ments which must be made when booking sea passage consume three

to four times as much of the agent s time as is spent booking air

travel Many potential travelers the record shows somewhere between

15 and 60 percent come to travel agencies undecided as whetherto go

by air or sea The travel agent is of course in aposition to influence

such a traveler s decision As theExaminer found there is no question

but that there is an economic advantage to the agent in selling

air transportation instead of steamship passage Thus while

we do not mean to imply that the agent in this situation is unmindful

of the traveler s interest he the traveler is nevertheless confronted

with an agent whose economic self interest would make him desire that

the client chose air travel rather than sea travel The record dis

closes no evidence that a

specific traveler has been persuaded to air

travel against his desires or to his disadvantage But this is not sur

prising and such a showing in our view is not necessary to a dis

approval of the unanimity rule Any such testimony by an agent would

inevitably place him in an unfavorable position with his steamship

employers 4

As a

consequence of this dilemma the record reveals

a definite tendency on the part ofagents to push air over sea travel

in such cases

S

Since May of 1956 the agents have actively sought increases in the

general level of commissions They were told by the representatives of

the conference members that the difficulty in securing unanimity of

themembership prevented any increase in commissions

All example of this unhappy dilemma is found in the fOllowing testimony excerpted

from the record

Agent Q Would it be fair to say that primarily In r ommending

whether a patron go by sea or by air you try to find out what he really wants to do

most

A That s

right

Q And not necessarily yourown pecuniary profit

A Well both things are considered

We walk a tightrope let s say We have the profit motive

IS See the following statement by Ralph Edell conference appointed travel agent

Q What is your personal pollcy regarding potential clients who do not manifest

a particular desire to go to Europe either by pla lle Or ship A There is no policy

involved but if it Is easier to sell someone an airline ticket and if it Is a tourwhere

you Ilake moremoney there Is adefinite tendency to sell air travel

Q Is it in fact more difficult and does it take more time to sell a steamship ticket

than an air ticket A We would estimate generally speaking three time as long

overall

In this regard the Examiner stated The record itself does not establish precise

data on the extent of this diversion because it is not the sort of activity one would

volunteer to disclose in detail but it is clear that this practice is prevalent enough to con

stitute a substantial competitive disadvantage for the shlplines and an interference with a

free and objective choice between the two modes of transportatioon by potential travelers

10 F MC
32 FEDERAL MARITIME COMMISSION

The Operation and Effect of the Tieing Rule Provision in Agreement

No 120

The Trans Atlantic Passenger Steamship Conference began opera

tion in 1929 with the approyal ofAgreement No 120 by a predecessor

agency The tieing rule has been a part of the agreement since 1933

and has neyer been amended The conference is headquartered in New

York and its membership comprises all of the lines operating regular

passenger yessels in the Trans Atlantictrade and some lines operating

freighters which can accommodat e

up to 12 passengers These lines

carry about 99 percent ofall ofthe passengers trayeling by sea between

the United States and Europe The remainder of the passenger traffic

is handledby nonconference lines operating freighters which can

carry

a limited number of passengers Like the conference lines they must

rely upon the trayel agents for passenger bookings

The tieing rule is found in article E e ofAgreement No 120 which

proyides

e Subagencies selUng tickets tor nonmember lines A subagency shall be

prohibited from selling passage tickets for any steamer not connected with

fleets of the member lines for which it has been duly appointed or from repre

senting inany capacity any steamship company operating such a steamer ifsuch

steamer is operating in any competitive Trans Atlantic trade unless written

permission to do so is first obtained from the member lines oracting or repre

senting itself as agency for or as entitled to do business with any member line it

does not represent py regular appointment This rule shall not prevent any sub

agent from booking forany U S Government Line

The record contains the admission by respondents that the tieing

rule is intended to eliminate nonconference competition Both the con

ference and the agents treat the rule as an absolute prohibition on the

sale of nonconference passenger transportation and agents haye lost

some prospectiyebookings because the rule prevented them frOlTI selling

nonconference passage desired by the trayeling public

DISCUSSION AND CONCLUSIONS

The briefs ofthe parties in this proceeding contain widely differing

interpretations of the Courts opinion remanding this case to us

Respondents on the one hand contend that the remand was for the

limited purpose offindingorspecifying additional factsdemonstrating

that hoth the unanimity rule and the tieing rule yiolate one of the

standards of section 15 According to respondents reading of the deci

sion we are precluded from rearguing questions already

decided by the Court Thus any expansion of our preyious

discussion as to why the already existing facts of record dictate dis

approyal of both rules under section 15 is according to respondents

10 F M C
INVESTIGATION OF PASSENGER TRAVEL AGENTS 33

prohibited by the remand Hearing Counsel and ASTA take precisely

the opposite position

vVe do not find any such restriction in the Courts opinion nor do we

read the opinion as precluding US from expanding and clarifying our

perhaps too brief discussion ofthe law nor even from disagreeing with

the Court where the clear intent of Congress and our own experience

and best judgment dictate From our reading of the opinion we are

sure the Court would welcome such an approach and because we read

the Courts opinion this way nothingneed be said about the powers of

an administrative agency when a proceeding has been remanded to it

by a court

S ction 15 of theShipping Act exempts steamship conferences and

other anticompetitive groups from the antitrust laws when and only

so long as the agreements establishing such groups are approved by us

under that section Oarnation Oompany v Pacific Westbownd Oonfer

ence No 20 Supreme Court 383 U S 213 1966 Section 15 further

provides that

The Commission shall by order after notice and hearing disapprove cancel

or modify any agreement or any modi cation or cancellation thereof whether

or not previously approved by it that it finds to be unjustly discriminatory as

between carriers shippers exporters importers or ports or between exporters

from the United States and their foreign competitors or to operate to the detri

ment of the commerce of t1le United S ates or to be contrary to the public in erest

or to be in violation of this Act and shall approve all other agreements modifica

tions or cancellations

In deciding whether continued approval should be allowed the

unanimity and tieing rules they must be examined in the light of the

four criteria enumerated in section 15 Before applying these criteria

to the individual rules in question a word about ourgeneral powers and

responsibilities under section 15 would seem appropriate

In determining whether to approve initially or to allow continued

approval of an agreement under section 15 we are called upon to recon

cile as best we can two statutory schem embodying somewhat incom

patible policies of our country the antitrust laws designed to foster

free and open competition and the Shipping Act which permits con

certed anticompetitiveactivity whic4 in virtually every instance ifnot

unlawful underthe antitrustlaws is repll oona l1Jt to thebasic philos ophy

behind them Vhile it is valid to say that the congressional policy is

that of encouraging or at least allowing the conference system in the

steamship industry it is less than valid to contend that this represents a

complete and unqualified endorsement of the system One committee of

Congress after a

recently conducted and exhaustive investigation of

monopoly problemsof the steamship industry concluded

10 F M O

299 843 0 68 4
34 FEDERAL MARITIME COMMISSION

The Shipping Act of 1916 constituted a cornerstone of american ma

time policy for almost half a century It rests upon the assumption that t

prosperity of our foreign commerce and the maintenance of a strong and in

pendent merchant marin can best be secured through strictadlpinistrative s

veilllmce of ship ing conferences agreements and operations insistence upon fa

play and equal treatment for shippers large and small protection of cargo a

ports against unfair discrimination and prevention of practices designed 

eliminate or hamper independent carriers The Ocean Freight Industry Repo

of Antitrust Subcommittee House Committee on theJudiciary H Rept No 14

87th Cong 2d sess page 381 often referred to as the Celler report

One needs only a hasty revi of the history of the congression

investigations and agency reorganizations under the Shipping Ac

the most recent of which created the present Commission to conclud

that the experience under the shipping Act has been a good deal le

than satisfactory at

least

from Congress standpoint 6

The task ofreconciling the desire to preserve open competition wit

section 15 s exemption from the antitrust laws which Congress ha

entrusted to us is at best adelicate oneand difficult of discharge wit

precision

The determination to appvove or to allow continued approval of a

agreement requires on the one hand consideration of the public in

terest in the preservation of the competitive philosophy embodied 

the antitrust laws and on the other a consideration of the circum

stances and conditions existing in the particular trade in questio

which the anti competitive agreement seeks to remedy or preven

Thus before we legalize conduct under section 15 whichmight othe

wise be unlawful under the antitrust laws our duty to protect th

public interestrequires that we scrutinize the agreement to mak

sure that the conduct thus legalized does not invade the prohibition

ofthe antitrust laws any more than is necessary to serve the purpose

of the regulatory statute Isbrandtsen 00 v United States 211 F 2

51 57 C A D C 1954 cert denied sub n011V Japan Atlan

Gu

Oonf v U S 347 U S 990

Section 15 s authorization of agreements pooling or apportionin

earnings for instance does not dictate approval simply because suc

an agreement is filed and approval is desired by the parties to th

agreement The parties seeking exemption from the antitrust law

for their agreement must demonstrate that the agreement is require

61n this regard ua history of prior approvals no matter how long may be an indicatio

of nothing more or less than a failure to scrutinize operatiO llS under the particular agre

ment which fatlure mayor may not have been justified In the particular case See Cell

report ch XI the Federal Maritime Board A Study in Desultory egulation ID a

event the difficulties encountered by the member lines under the unanimity rule far ou

weighs any prior approval of it Moreover a prior approval under sec 15 no matter ho

long ago graonted may not be converted into a veRted right of continued approval simp

because the parties to the agreement desire continued approval

10 F M C
INVESTIGATION OF PASSENGER TRAVEL AGENTS 35

by a serious transportation need or in order to secure important pub

lic benefits Otherwise and whatever may have heen the policy of

our predecessors itis our view that thepublic interest in the preserva

tion of competition where possible even in regulated industries is

unduly offended and the agreement is contrary tothat interestwithin

the meaning of section 15 MediterrameOln POtOls IJVVestigation FM C

Docket No 1212 9 F MC 264 Oalifornia Stevedore Ballast 00

Stockton Port District 7 F MC 75 1962 This is equally true

here the agreement in q

estion has received prior approval and

the det erminwtion to be made is whether to allow that approval

to continue unmodified Disapproval of an agreement on this

basis is not grolJnded on any necessary finding that it violates the anti

tr st laws but rather because the anticompetitive activity under th

agreement invades the prohibitions of the antitrust laws more than is

necessary to serve the purposes of the Shipping Act and is therefore

contrary to the public interest 7

The foregoing in ourview constitutes

the basic policy to be applied in determining whether to initially ap

prove or to allow continued approval of any section 15 agreement

With this inmind weproceed to a consideration oftherules in question

The Unanimity Rule

Respondents begin their argument for approval of the unanimity

rule by urging that the proper context for our consideration of the

rule was that framed by the Courts opinion remanding the case

wherein it wasnotedthat

our country has adopted a policy in the international transportation

field of encouraging or at least allowing U S carriers to participate in steam

ship conferences and to be governed by unanimity in respect of matters covered

by conference agreements barring disapproval under the standards prescribed

by see 15

We have already noted that congressional allowance of the confer

ence system was and is conditioned on the subjection of conferences

agreements and operations under such agreements to strict admin

istrative surveillance to insure fair play equality of treatment and

proteotion from discrimination 8 As to the congressional policy of

encouraging or at least permitting carriers to be governed by una

nimity in respect of matters covered by conference agreements the

7

For a similar construction of sec 412 of the Federal Avlatlon Act which was modeled

after sec 15 see LocaZ Cartage Agreement 15 C A B 815 1952 North Atlantic Tourist

Commission Case 15 C A B 225 1952 Six Carrier Mutual Aid Pact 29 C A B 168

1959

8

See also in this regard the Alexander report H Doc No 805 63d Cons2d sess 1914

vol 4 p 418 where the Committee stated its bellef that the disadvantages and

abuses connected with steamship cOnferences are Inherent and can only be ellmi

nated by effective Government control

10 F M C
36 FEDERAL MARITIME COMMISSION

Court of Appeals on remand to us footnoted a statement made by th

then Chairman of the Civil Aeronautics Board in an article entitle

the Future ofthe International Carrier ap aring in Flight Foru

7 September 1964 wherein hesaid

IA A International Air l

ransport Association an organization sOllewh

similar to the conferences presently before usj wiH eontinue to be the m

chinery for developing fares and rates This will be true whether or n

the unanimity voting rule continues to apply as it has in the past This ru

originally adopted and insisted upon by the United States to protect each ca

rier s right of individual action admittedly has its deficiencies However I a

inclined to conclude these are less than those which would stem from a form 

majority vote BracketedmaterialtheCowrt s

Unanimity in respect of matters under agreements of internation

air carriers may well be the policy of the United States but we d

not find such to be the policy which governs water oarriers under se

tion 15 agreements Additionally it would appear that it was not a

unqualified unanimity which received this country s encourageme

for air carriers For in JAT Oonferenee Resolution 6 C AB 63

1946 the proceeding in which the Civil Aeronautics Board a

proved the lATA resolution authorizing international air carriers 

fix rates in concert and the one apparently discussed in the stateme

quoted above the Board after observing that unanimity was nece

sary to insure preservation of the American air carrier s

right 

individual action said at page 645

Itis further understood that it is not intended that a rate established b

a conference agreement thereafter can be changed only by unani oUs aetio

Sueh a requirement would enable a single cartier to freeze the rate structur

and would create anintolerruble si buation

Moreover the CAB apparently reserved unto itself the power t

disapprove any rate fixed by agreement under the lATA resolution 

Our problems under the Shipping Act would appear quite differe

from those of the Civil Aeronautics Board under the Federal Aviatio

Act 1958 Steamship conferences are not required to submit the

individual rates and fares to us for our approval Indeed it was no

until 1961 that conferences were by statute required to file their rate

with us Thatever may have prompted a policy of encouraging o

allowing unanimity in international air transportation such is not 

our view the policy of this country in international transportation b

sea In the Senate report which accompanied H R 6775 the bill whic

9 We note with interest that the maximum levels of agents commissions paid by airline

which are also apparently fixed by unanimous vote appear to be subject to aPIroval by t

CAB which has made it quite clear on any number of occasions that it will not appro

a rate or commission resoluti m which isnot limited in duration to ua reasonable periOd 

time North AtZamtic Tourist Oommission Oase 16 C A B 225 1952

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 37

beoame Public Law 87 346 a recent comprehensiye amendment to the

Shipping Act the Senate eXplained its failure to enact legislation on

voting requirements in section 15 agreements in the following way

And a third matter which it seems to us should be handled by Commission

rule orregulation is one which is not limited to the question of duabrate contracts

butrather Commission approval of section 15 agreelllents For some time shippers

and shipper groups have been urging Congess to amend seCtion 15 so that no

conference agreement could be approv ed which on rate matters required more

than a majority vote of the voting carriers Because of thewidely varying needs

and membership of the many conferences serving ports of the United States

and because of the detailed studies which should be made before any such

decision were reached we think it would be most unwis e to legislatively mandate

an answer S Rept No 860 87th Cong 1st sess at p 15

Thus far from encouraging unanimity for steamship conferences

Congress has expressed doubt as to its worth in the conference system

and has left resolution of the question to us to be settled by rule or

regulation if we determine it necessary to resolye the issue on an

industrywide hasis

The remainder ofrespondents argument for approval ofthe unani

mity rule may be summarized as follows 1 The rule is merely the

procedur by which thelevel of comm ssions is fixed and in the absence

of a

finding that the particular leyel is unreasonably low or detri

mental to commerce the procedure may not be disapproyed 2 the

fact that the wishes of the majority may be blocked temporarily or

in an extreme case eyen permanently is not a sufficient reason to

disapproye the rule under section 15 3 our own statements in our

preyious report in this proceeding lead inevitably to the conclusion

that economic factors entirely beyond the control of respondents

and notthe tmanimity rule account for the trend away from sea trayel

and 4 no otherbasis exists fordisapproyal

ASTAon the otherhand contends that the rule has oausoo detriment

to commerce and injury to the public interest represents an excessive

and unwarr nted invasion of antitrust principles and since no justifi

cation or need for its continuation has been shown should be and was

properly disapproved Hearing Counsel in a somewhat similar vein

contend that the unanimity rule should be disapproved as contrary to

the public interest and detrimental to the commerce of the United

States because it has frustrated or delayed all attempts by the majority

to raise commission levels thereby keeping the steamship lines at a

competitive disadvantage vis a vis the airlines and because it en

cOUlages the travel agents economic self interest at the expense of

the agents duty to the public

vVhile it may be correct in one restricted sense to say that the rule

10 F M C
38 FEDERAL MARITIME COMMISSION

is merely the procedure by which a given maximum level of com

missions is fixed it is entirely incorr tto conclude that the particula

level fixed must be found unlawful before the procedure itself c

be ordered modified Indealing with the unanimity rule itself we a

faced with a consi9 eration as to what degree we will permit the r

spondends to go in rigidifying orcircumscribing the flexibility ofthe

operations under an anticompetitive agreement a far different su

stantive determination than one as to whether a given rate far

charge or commission fixed under a particular procedure is itse

valid underthelaw The former goes to whatconditions in furtheranc

of the purposes and policies of the act we will impose upon the co

tinued enjoyment of antitrust immunity under an approved section 

agreement The latter goes to whether or not a given rate etc fix

under the procedures we authorize under such an agreement ru

counter to the statute s prohibition against rates etc which are det

mental to our commerce The one is not dependent upon the other

Allthe recordneed show is that the rule itself has resulted in activ

unlawful under tion 15 Indeed the record clearly shows that th

rule as implemented contrary to the considered business judgment 

nearly all ofthe conference members has worked to the detriment 

the commerce oftheUnited States

As heretofore noted the booking of sea passage takes three to fo

times longer than air passage for an agent to handle consequently t

effective rate of commission on sea travel is much lower than on a

passage The recognitionby the member lines ofthe diversion from s

to air caused Iby the lower rate of commission on sea bookings has lon

led the majority ofthe lines to attempt to solve the diversion proble

by trying to increase the levels of commissions paid to their trav

agents As Cunard Line stated in its letter ofFebruary 15 1951 urgi

an increase in the commission

Evidence is mounting to confirm our belief that the higher rate of commiss

paid by the Airlines on TransAtlantic bookings is strongly influencing age

toward increasing their business for Air Services and we feel that the steams

lines can only continue to disregard this fact to theirdetriment

The unanimity rule clearly has had an effect inconsistent with t

desires of most of the steamship lines to meet the air challenge T

lack ofunanimity has on several occasions prevented the conferenc

subcommittee which has the initial responsibility for commission

from even reporting thepositions ofthemember lines to the principa

respondents assertions to the contrary notwithstanding

The subcommittee minutes for the meeting of October 1951 sh

that although therewas amajority in favor of a commission increa

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 39

it wasnotpossible to reach unanimous agreement and thematter was

deferred for consideration at the statutory meeting in March 1952

Again in June 1952 the subcommittee deferred the matter of commis

sions for consideration at the meeting ofprincipals in October 1952

The subcommittee a third time deferred the matter of agents commis

sions inJune 1953

While it may be true as an abstract proposition that any matter could

be placed on the agenda by a member line and that the matter of com

missions washeld always in mind by the principals the facts remain

that there is no instance in the record of action taken by the principals

without strong concurrence by the subcommittee and that the present

agents commission is below the level advocated by a majority of the

conference lines as longago as March 1950

Ifthe subcommittee is as unimportant as petitioners claim one is

inclined to question the application of the unanimity rule to its deliber

ations and the necessity for unanimous accord by its members before

any recommendation can be made to the principals Moreover it is of

no significance that the principals have at times taken positions opposed

to those of the subcommittee for these have been in the nature of a

watering down of actions favored by at least a majority of the Iines

Nor is it any answer to say that had the lines really wanted to raise the

commission they could have eliminated the unanimity rule because

elimination ofthat rule itself required unanimous vote under the con

ference agreement

Respondents references to conference consideration of commission

levels in virtually every year covered hy the Commission s

investiga

tion are not impressive There appear to be few years iIwhich the

matter of commissions wasin any real sense considered due no doubt

to the stultifying effect of the unanimity rule and the necessity for

subcommittee approval as a condition precedent to conference action

Infact the conference minutes indicate only six instances in which the

principals considered the problem of commission levels since March

1950 inutes of meeting March 1951 March 1952 minutes of

meeting ay 1956 minutes ofmeeting March 5 1953 minutes ofmeet

ing October 1953 minutes of meeting of May 3 1960 Moreover the

meeting of Octooor 1953 related to an interpretation of the previousJy

set commissionlevel in reference to prepaid commissions

The effect of the rule on the deliberations of the principals is thus

clearly shown by the many instances in which the rule defeated the

subcornmitt ee s referral of or pr ve ted it f om making recommeJda

tion to the principals on the matter ofcommission

Respondents contention th3Jt the recorq fails to sh w a s

ngl

example ofthe unanimity rule frustrating a desire ofit majority of the

10 F M C
40 FEDERAL MARITIME COMMISSION

lines as authoritatively expressed by the principals is not accura

The principals meeting ofMay 3 1960 shows such an instance Mo

over the principals meeting of February March 1956 shows a case 

which the principals were unable to act because of the action of o

line As has been noted there is no conference minute on the matt

of commissions for thismeeting Determining the effect of the unanim

ity rule upon aotions of the principals as we pointed out has be

rendered difficult because of the conference s failure to keep comple

minutes of its meetings and to filethem with us Votes of the principa

wereneither taken recorded nor filed with the Commission althoug

the approved agreement of the conference required it to furnish t

Commission with full records of its activities 1o The conference s ow

failure to keep and provide the requisite records has caused whatev

evidentiary sketchiness exists in this proceeding as to the effect 

the unanimity rule and the responsibility for that failure cannot 

shifted to the Commission

The unanimity rule blocked attempts by a majority of the lin

to change the general commission level for at least 6 years and t

tour commission level for over2112 years The general commission lev

wastill below the 7112 percent advoc3Jted by a majority of the lines 

years before 1963 the last year Of record in this proceeding Since t

increase to 7 percent in 1956 the record shows several attempts 

increase the commission level The logical inference to be drawn fro

all of this may well be that the present level of commission is st

because oftheunanimity rule frozen at a level undesired by a majori

ofthe conference members The fact however that the record does n

affirmatively show whether or not a majority of the conference me

bers would decide not to raise the commission level is irrelevant Ift

rule has been shown to operate to the detriment ofthe commerce of t

United States to wait until there is evidence that it again operates 

that fashion before therule is outlawed would be to suggest that illeg

actions cannot be disapproved once they may have ceased This 

ing would destroy the purpose of regulation

The evidence of the blocking of the desires of a majority of t

member lines to achieve their goal present in this proceeding js 

sufficient reason for declaring the unanimity rule detrimental to t

commerce of theUnited States

Conference procedures must be reasonably adapted to the goal 

conference activity namely the voluntary effectuation of the desir

10 Art 9j

of exhibit 2 provides that copies of all minutes and true and comple

memoranda record of all agreed action which is not recorded by minute shall be furnish

promptly to the governmental agency charged with the administration of sec 15 of t

U S Shipping Act 1916

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 41

of the member lines in achieving the concerted action which they

within the limitsofthe law feel is appropriate An essential factor in

achieving this goal is of course sufficient flexibility under the con

ference agreement to alter action which the members may have once

found desirable but later appears to thwart their desires At one

time 6 perecnt appeared to the members of the conference to be an

appropriate maximum commission level to be paidto their agents For

at least some 6 years however this no longer seemed to be the case so

far as a majority of these lines were concerned The level was finally

raised to 7 percent Itwasstill below the level advocated hy a majority

ofthe lines 13 years before and may well be as noted above below the

level which they now desire

Outlawing of unanimous voting requirements because they failed

voluntarily to effectuate the desires of the conference members has

often occurred llApredecessor of this very Commission had occasion

to examine an agreement which contained a unanimous voting require

ment which enabled one party to prevent changes in port differentials

desired by the other parties Such effect of the unanimity rule was

there said to defeat the purpose ofthe conferencethe carrying out of

the voluntary action of its members V hen a rate or rule is once

adopted and one party consistently and selfishly refuses to cast its

consenting vote which would remove or change that rule or rate the

conference to all intents and purposes ceases to be voluntary 12 The

agreement with its unanimity provision vas thus declared unlawful

as being unfair as between carriers and detrimental to the commerce

ofthe United States

Such results moreover have not been limited to situations where

the desired freezing effect was caused by a veto In Status of Oar

loaders and Unloaders 2 US M C 761 774 1946 a voting rule pro

viding that no change shall be made affecting rates unless agreed

to by not less than 75 percent of water carrier members was declared

unlawful as unfair as between such oarriers and other members and

detrimental to commerce

In the instant Proceeding evidence exists of both veto usage and

blocking of the desires of astrong majority of the member lines for

Ilany years Such results are dearly deterimental to the commerce

ofthe United States as inimical to the very nature of the conference as

a voluntaryassocil3tion and unfair as between the majority of carriers

IIWe have already observed that a sister agency has had occasion to review the freezing

of the rate structure caused by a UIlanlmlty rule and has condemned such freezing as an

lntolerable situation 1ATA Oonference Resolution supra at 645

U

Port DifferentiaZ Investigation 1 U S S B 61 72 1925

10 F M C
42 FEDERAL MARITIME COMMISSION

which desired the change and those fewwhO blacked it 13 Far these re

sans the unanimity rule must be declared unlawful under sectian 

There are mareaver additional reasans why the unanimity ru

must be disappraved The unanimity rule has resulted in maximu

level af commissions which places the booking of steamship travel a

campetitive disadvantagewith airlinetravel The recard clearly shaw

cantrary to respandents cantentian it is nat ecanomic factars entire

beyand their contral that have caused this campetitive disadvanta

but the unanimity rule itself

There are twO ecanomic factars appearing in the recard 1 T

speed and seating capa ity af the new jet aircraft which result 

reduced travel time and added canvenience extensive advertising 

airlines and certain Other factors linherent in air tlave1 and 2 th

addiltiomlJl time which must be spent by the travel agent to book s

passage the recard shows that ittakes three to faur times as lang 

book sea passage as it daes to book air passage The former is adm

tedly nat the fault of the unanimity rule bUit the latter is an econam

factaI which the substantiall evidence Of Tecard indicates that but f

the unanimity rule cauld have been avercome by respandents them

sehTes The Purely superficial equilibrium between cammissians f

booking air and sea passage hath now stand 7

percent for pain t

paint boakings and 10 percent far tours wauld the reoord indicate

have been replaced by the majarity af conference lines by a

high

percentage level of cammissions far sea passage which at the ve

least wauld have reduced the disparity jn the respective effectiv

levels afcammissians And again the recard befare us indieates th

untilthismuch is dane the ecanomic Sel1f interestaftravel agents w

serve to faster the definite tendency to 11 air passage aver sea pa

sagea situatiQn dearly cantrary to the public s inteFest in the Shi

ping Act s declared purpase af encouraging and developing 

a merchant marine adequate to meet the requirements of the cammer

Of the United States with fareign cauntries Thus Our r

spansibility far pratecting that interest requires that we not gra

cantinued appraval to anticompetitive conduot which tends to redu

the effectiveness Of our merchant marine Otherwise we would fa

in auIduty Of strict administrative surveillance aver canferences 

insure 1 The continued prosperity of hat portian af auI fareig

caminerce placed in Our charge and 2 themaintenance af a

stran

and independent merchant mar ine Moreover the traveling public h

13 The fact that the rerord is unclear as to whether or not the same carriers consisten

blocked the desires of the majority isDot important What is important is that thereWilt

a consistent freezing of commiStJions at a level which was always contrary to the wish

of some majority

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 43

a

right when selecting a mode of tranSportation to deal with an agent

as free as possible from any motivation to influence that choice becallse

ofeconomic self interest in booking airtravel Since the unanimity rule

creates the situation which tends to foster airline bookings at the ex

pense ofpotential steamship bookings it is detTimental to the commerce

of the United States within the meaning of section 15

Significantly respondents do not here on remand urge a

single

statutory aim or purpose which is fostered or served by the unanimity

rule nor do they point to a

single important public benefit which is

securedby the rule 14

The Court noted in footnote 7 of its opinion that the Examiner

found that in view of the sman minority ofAmerican flag lines in the

conference the unanimity rule was ofsubstantial value to the Ameri

can flag lines preventing travel agents from playing one line against

anYther This is apparently so because when aN lines partrcipwte in

the selection of rates of commission no line is in a position to say that

it is f

avoring agents more than another Initial Decision of Ex

aminer Seaver at p

40 Taken at face value this statement is at best

confusing Itwould seem obvious that all lines can participate in the

selection of rates of commission whetherunanimity or a simple ma

jority is required to set the rate It would seem equally obvious that

whether or not unanimity is required any individual line may if it

chooses to do so tell an agent that it voted in favor of an increase

thus indicating that it is favoring the agents more than another

which presumably voted against the increase We find this reasoning

somewhat less than persuasive and far short of constituting a

showing

that the rule is required by some serious transportation need or neces

sary to secure important public benefits

The impact of the unanimity rule is clear from the record which

shows that since the 7 percent commission level finally adopted in

1956 no further increases were m3lde at least as of 1963 the last year

ofrecord here and thatthe level of commissions in that yewr was lower

than that actively sought by the majority ofthe lines 13 years earlier

The unanimity rule has prevented a majority of the members of

ASPC from raising the levels of travel agents commission and has

periodically worked to freeze commissions at levels which are effec

tively lower than commissions paid by airlines to travel agents when

1 Nothing demonstrates that the unanimity rule Is necessary to preserve orencourage

the right of American flag carriers to tnke Independent action as was the case of unanimity

onder lATA see pp 1218 supra Indeed lack of unanimity In lATA leaves the Individual

carrier free to Initiate Its own rates lATA Traffic Conference Resolutions 6 C A B 639

645 while under the conference agreement here lack of unanimity serves to freeze the

lpvel of commi Rions and does not permit the Individual carrier to Initiate Its own In

creases in commissions Morpover the rule places the power of potential veto In the hands

of each member six of whom do not even serve American ports

10 F M C
44 F DER L ITlME COMMISSION

boo ing air passage Thi dlsparity in the effective level of commissio

for QqQ irig air and sea paSsage fosters a tendency on the part Of t

travel agent to push the sale of air travel which in turn deprives t

undecided traveler of his right to deal with an agent free of a

motivation based on economic self interest We find this situation d

rimental to the waterborne foreign commerce of the United States 

that it fosters the d lin in travel by sea and contrary to the pub

interest in the maintenanc of a sound and independent mercha

marine

Moreover from the substantial evidence of record it is rea onable 

conclu e

that but for the unanimity Tule the majority of the memb

lines ofASPC would have lncreased agents commissions and it is re

sonable to conclude from the record before us that an increase wou

have enhanced the competitive position of the steamship lines H

there been a

showing that the rule wasrequired by some serious tran

portation need or necessa ry to secure an important public benefit 

in furtherance of some purpose orpolicy ofthe statute wemight ha

required more before disapproving the rule IS But in view of o

responsibilities under section 15 disapproval ofthe rule is required 

order to protectthe public interest against an unwarranted invasion 

the prohibitions of the antitrust laws since it has not been shown 

be necessary in furtherance of any valid regulatory purpose und

the Shipping Act

Because ofits effect noted above theuse ofthe rule must be outlaw

in deliberations by any group having final or recommendatory pow

over levels of commissionsto travel ag nts Accordingly article 6 a 

AgreementNo 7840 must be modified to remove th unanimity requi

ment and article 3 d must be modified to show that it does not app

to any deliberations by recommending or enacting bodies on levels 

agents commissions

The Tieing Rule

Respondents insist that continued approval must be given the tiei

rule since section 15 will not allow disapproval merely because it ru

counter to antitrust principles or has llot been shown necessary 

protect respondents from outside competition the only hases wh

may be advanced on the record in thisproceeding arguerespondents

The record in this proceeding shows that approximately 99 perce

of all Trans Atlantic steamship passengers are carried by conferen

lines In 1960 not an unusual year approximately 80 percent of 

Trans Atlantic passenger steamship hookings made in this count

other than on cruises were sold by appointed agents Both the agen

15 Meditcrranemt Pools Tnvest gation SUp 3 See also SixCqrder Mutual Aid Pact su

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 45 

and respondents treat the tieing rule as an absolute prohibition against

l he sale ofnonconference passage The only vessels whose operators are

n

ot members ofthe conference are freighters vhich can carry a limited

number ofpassengers These lines like the conference lines a re depend

ent upon travel agents for the sale of ocean transportation Thus as a

onsequence of the tieing rule the travel agents have been prevented

from performing their function of selling ocean transportatiQn pas

sengers have been denied the services of travel agents precluded from

booking passage upon the means by which they preferi ed to travel and

the nonconference lines have been denied access to channels which

control some 80 percent of all Trans Atlantic passenger business The

fact thatthere areconference freighte capable ofcarrying passengers

who wish to travel to Europe is unimportant here

The important questions here are should prospective passengers be

denied the right to utilize the valuable services of agents in fulfilling

their desires to travel on nonconference vessels should agents be denied

the right to book them by the means oftheir choice and should noncon

ference lines be denied the use of agents upon whom they like the con

ference lines must depend for the sale of ocean transportation The

answerto these questions must be no

Respondents admit that the purpose ofthe tieing rule is to eliminate

outside competition and that purpose has obviously been achieved 16

vVhether or not the rule resulted in reducing nonconference competi

tion to its present minimal amount it is plain that it keeps it there

The tieing rule imposes restraints upon three groups not parties to

the conference agreement the agents the nonconference carriers and

the traveling public The record here demonstrates that these re

straints have operated against the best interests of all three of these

groups Once this was shown it was incumbent upon the conferences

to bring forth such facts as would demonstrate that the tieing rule was

required by a serious transportation heed necessary to secure impor

tant public benefits or in furtherance of a valid regulatory purpose

oftheShipping Act

No convincing arguments were advanced Respondents in the light

of their almost complete monopolization of the trade could hardly

make the claim that the rule is necessary to protect the conference

from outsidecompetition andhas in fact admitted that itis not

16 The Supreme Court has indicated that restraints on thir4 partie are to be viewed

with extreme distrust It bas been beld that the Freedom allowed conference members to

agree upon terms of competition subject to Board approval is limited to the freedom to

agree upon terms regulating competition among tbemselvef and tbat Congress

struck the balance by allowing conference arrangements passing muster under 15 16 and

17 limiting competition among the conference members while tla y outlawing conference

practices designed to destroy the competition of independeont carriers Federa Maritime

Board v Isbrandtsen 00 356 US 481 491 492 3 1958

10 F M C
46 FEDERAL MARITIME COMMISSION 

The conference accordingly attempts to justify the tieing rule 

stating that it is necessary to maintain conference stability In co

trast to this bold assertion however the Caribbean cruise trade op

ates efficiently without either rule or conference While conditions 

the Caribbean cruise trade may indeed be somewhat different t

absence of both conference and rule therein is enough to show th

neither is self evidently necessaryfor trade stability

Respondents finally point to the services performed for the age

as cause for continued approval of the rule Although it is true th

the conference does perform services for the agents through its bon

ing and other selective activities these services are paid for by t

agents through annual fees Any additional promotional services p

formed by lines are made on a line by line basis and ordinarily requ

matching contributions by the agents In light of the facts that ma

of these services are performed on an individual line basis rath

than as a conference activity the services are paid for by the agen

and the agents are not the lines employees but deal at arm s

leng

with them as well as the airlines the conference although entit

to exercise some control over agents activities has made no show

that it is entitled to maintain a complete foreclosure over agents se

ices for nonconference lines 17

The tying rule of the TAPSC operates to the detriment of th

relevant portions of the commerce of the United States inasmuch 

itis an unjustified restraint upon the activities oftravel agents wh

prevents them from selling ocean transportation It is detrimen

to the interest of the agents one part of our commerce because 

denies them the right to book passengers who desire to travel by n

conference vessels by the means they desire and thus live up to th

duty as agents It is detrimental to the interests of the nonconferen

carriers another part of our commerce because itdenies them the 

of agents upon whom they like the conference lines must depe

for the sale of ocean transportation Lastly it is detrimental to 

interests of the traveling public still another part of our commer

in that itdenies prospective passengers the rightto utilize the valua

services of agents in fulfilling their desires to travel on nonconferen

vessels Nothing has been brought forward which in spite of the

detrimental consequences could justifY the rule Therefore it m

be disapproved under section 15 as operating to the detriment of 

commerce ofthe United States

1 Of interest In this regard Is the recommendation of theAntitrust Subcommittee of 

House Judiciary Commtttee appearing at p 388 of the Celler report The Federal M

time Commission should prohibit confereuces from regulating the activities of age

Passenger conferences should not be permitted by the Commls81on to regulate the bu81

activities of theirticket agents

10 F i
INVESTIGATION OF PASSENGER TRAVEL AGENTS 47

Additionally the tying rule is unjustly discriminatory as between

carriers withinthe meaning of section 15

InPacific Ooast Ettropean Oonf Payment of Brokerage 5 F M B

225 1957 our predecessor the Federal Maritime Board declared

unlawful under section 15 of the Shipping Act as unjustly dis

criminatory as between carriers aprovision which had the effect of

prohibiting payment of brokerage by conference lines to any for

warder broker who served nonconference lines The nonconference

lines depended upon the forwarder brokers for the majority of their

cargoes and the conference lines carried most ofthe cargo in the trade

The purpose of the prohibition was admitted to be the reduction or

elimination of nonconference competition The Board concluded that

the provision in question would foreclose a nonconference line from

obtaining cargoes through forwarders in this trade and shippers who

desire to ship nonconference in this trade would be deprived of the

services of freightforwarders Ittherefore found the provision to be

prima facie unjustly discriminatory as between carriers and shippers

and struck it down as it found nothing in the record which would

justify it

Here the admitted intent of the tying rule is to eliminate nonconfer

ence competition Agents have lost prospective bookings because the

tying rule prevented them from making nonconference bookings de

sired by the traveling public And nonconference lines have been

denied even access to channels ontrolling 80 percent of the busiiless

We think the reasoning in the Pacific Ooast case is persuasive and

we find the tying rule to be unjustly discriminatory as between carriers

Itrequires disapproval under section 15

Finally the tieing rule is contrary to the public interest because t

invades the prohibitions of the antitrust laws more than is necessary to

serve the purposes of the regulatory statute and there has been no

showing that the rule is required by a serious transportation need or

is necessary to secure important public benefits

9n tle basis of the foregoing we conch de that the unanimity rule

and the tieing rule are detrimental to the commerce of the United

States and contrary to the puhlic interest that the unanimity ule is

un air as between oarriers and that the tieing rule is unjustly dis

criminatory as betwee carriers within the meaning of section 15

and both rules should be disapproved under that section

An appropriate order will be entered

10 liM O
48 FEDERAL MARITIME COMMISSION

VICE CHAIRMAN JOHN S PATTERSON dissenting

INTRODUCTION

The Commission has been directed by the U S Court ofAppeals 

the District of Columbia Circuit either to lnake supporting findin

which adequately sustain the ultimate findings that the unanimity r

and the tieing rule in an agreement of a conference of common carri

by water operate to the detriment of the commerce ofthe United Stat

or if no such finding can be made on the record approve the agreem

COIltaining these two rules

The majority s reportresponds to the Court s order by deciding t

the direction to make supporting findings does not require support

facts but permits supporting rationalizations which expand a

darify aperhaps too brief discussion and even disagreeing w

the Court where our own experience andbest judgment dicta

Two introductory commentsareneeded First Ibelieve that findin

have always been understood to refer to the end product of look

oyer locating or finding andthen assembling in summary for rn par

ular facts thought to be most relevant from arecord of miscellane

verbal testimony and written information collected by anExamine

an agency proceeding 18 Ina

way our task is very simple once the fa

are assembled All we have to do is marshal the facts into findings 

then show how the findings conform to or vary from what the stat

requires by means ofreasoning that will appeal to everyone includ

the Courts as convincing Idoubt if the Court of Appeals expec

nything more complicated than this and certainly not substitution 

a

long discussion for aperhaps too brief one Second my reading 

Judge Washington s opinion on behalf of the Court of Appeals 

closes nothing with which to agree or disagree contrary to 

majority s assumption We are not required to argue with the Co

of Appeals but only to state our own case as reasonably as poss

The judge simply gave examples to illustrate why he had conclu

that statutory requirements had not been linked with asserted fa

and expressed the difficulties he was having in understanding 

report and then gave us the opportunity to remove his doubts 

findings based on facts not arguments

The majority presents in the name of facts conjecture and opin

taken from the record e gthe considered business judgmen

nearly all the conference members Conjecture and opinion do 

become factby being asserted by witnesses orby attorneys and recor

in docketed papers Imight agree th3lt fostering atendency as sh

18 Morgan v United States 298 U 8 468 480 1936 Possibly informed speculatio

rate cases and established rules of law orethics are acceptable as facts but there i

need here forthis type of finding

10 F 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 49 

by the record is possible and thit preventing ofchanges has occurred

Ido not agree there are record facts to sustain the ultimate finding

there is discrimination between carriers or the public interest suffers

or there is detriment to commerce just because selfish tendencies are

fostered or water carriers have lost sales nd the prevented changes

are the real causes Ifthere are any facts in the 2 618 pag s Of tran

script and 141 exhibits of the type Iconsider needed to connect the

rules with the selfislmess and the losses and with discrimination or

detriments to commerce or contrariety with public interest such facts

have escaped my review Ido not agree that the alleged harm to some

elements of commerce without more evidence is a detriment to com

merce nor that such harm is automaitically against the public interest

By my dissent in our first review Of this proceeding Iconcluded on

the record before methat approval should he given pursuant to sec

tion 15 of the Shipping Act 1916 as amended Act to the carriers

agreements containing the unanimity voting rule in connection with

regulating the level of travel agents commissions and the rule re

quiring agency contracts to contain an dblig ation to sell only passen

ger tickets issued by the conference carriers and prohibiting sale of

passengertickets issued by competing carriers

The reasons for my renewed dissent are

1 Instead of making supporting findings of factual evidence

from the reoord the majority has only developed supporting

rationalizations based on conjecture and opinion In my opinion

the Court sinstructions have notbeen complied with

2 The rationalizations do not supply the evidence and reason

ing needed to relate record information to nonconformity with

standards of disapproval of agreements in the second paragraph

ofsection 15 ofthe act

DISCUSSION

1 LackOf evidentiary findings

There is just as much lack of evidence now as when we made the

decision in the same Docket No 873 reported in 7 FMC 737 1964

There is still no proofin the form ofevidence summarized in findings

thatthe agreements may beTound

a to be unjustly discriminatory orunfair as between carriers

shippers exporters importers or ports or between exporters

from the United States and their foreign competitors

h to operate to the detriment of the commerce Of the United

States

c to hecontrary to the public interest Or

d to be in violation ofthe act

W F M C

299 843 0 68 5
50 FEDERAL MARITIME COMMISSION

It has been conceded the reopened proceeding was limited to t

filing ofbriefs and oral argument by the parties i e no new eviden

wasgathered by the Examiner As a result ofexamining the old pape

and listening to new arguments the majority has developed a ne

rationale

2 The rationale of the majority as I

interpret it is as follow

a The unanimity rule has prevented changed commissio

percentages and such results are clearly detrimental to t

commerce of the United States as inimical to the very nature 

the conference as a

voluntary association and unfair as betwe

the majority of carriers which desired the change and those fe

who blocked it

b The unanimity rule has resulud in a level of commisSio

which places the booking of steamship travel at a competitiv

disadvantage with airline travel and the record shows the ru

not economic factors cause the disadvantage

c Until commission levels are raised the economic self intere

of travel agents will serve to foster the definite tendency to s

air passage over sea passage contrary to the public s intere

of encouraging and developing the merchant marine

d The tieing rule is detrimental to commerce and contrary 

public interest because it prevents 1 Travel agents from pe

forming their nmction of selling ocean transportation 2 pa

sengers from obtaining services of agents if the agents are pr

cluded from booking passage by the passengers preferred mea

of travel and 3 nonconference carriers from laving access 

channels which control some 80 percent of all Trans Atlant

passenger lbusiness Harm to the three elements of commerce 

equivalent to detriment to foreign commerce and against pub

interest

The rationalizations of the majority are ju tifie lby what a

thought to be the results in relation to the four section 15 tests referre

to by the Court of Appeals The resulting rules may be plausible an

reasonable as 1tated and abstractly considered might be very goo

policy but they achieve the status of an order changing responaent

rights only if th y

are associated with facts showing the results real

will occur Ifthe rules prohibiting unanimity or tieing obligations a

intended section 4 of the Administrative Procedure Act must be fo

lowed Reference is made to my dissent in this same docket for m

arguments indicating the claimed results are by no means certain an

may be just the opposite of what is claimed

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 51

Summarized my arguments werethat

1 The unanimity rule controlling commissions resulted in no

proven detriment to commerce because a Passenger diversion

may have other causes and b the percentage levels are only

a transitory economic factor subject to competitive change by

airlines

2 The tieing rule resulted in no proven detriment to commerce

caused by lack of competitive necessity for the rule evidenced by

either a Denial of competing services ofnonconference carriers

or h harmful effects on other oarriers or c restraint on travel

agents in violationofantitrustprinciples

3 I agreed that certain rules concerning prior approval of

business decisions of travel agents were against public policy

There was no doubt in my mind that the unanimity and tieing rules

had prevented changes and had prevented certain ticket selling serv

ices but this result only showed the rules had been successful in doing

what they were intended to do not that they wereunlawful by virtue of

the mere factof success Imight have been wrong Judge Washington s

speculations and examples may be wrong too The different viewpoints

must be resolved with more facts not longer discussion Idont want

to rely on my own experience or best judgment unless supported by

basic facts Ineed the facts and must weigh them before Ican rely

on my own experience in solving a problem with which Ihave never

beforebeen confronted

Certainly no one should nor do Iexpect a reviewing court to sus

tain my reasoning and ultimate conclusions without supporting facts

just because as a presidentially appointed Commissioner contributing

competence and expertise in the carrying out of my

duties I

say new

standards of conduct are proper and that rules embodying those stand

ards shall be applied to invalidate the agreement provisions based

solely on the dictates of my own experience and judgment supported

only by conjecture and opinion from a record

Ihold that record deficiencies may not be replaced by such conjec

ture supported findings as the unanimity rule is a

detriment to com

merce because it is effective in preventing increased commissions

What is needed but totally lacking in this particular ca se is record

support sufficient to make findings of fact which show how the con

ference s rule blocking orpreventing change in commission percentages

is incompatible with prohihitions against detriments to commerce as

a result of specified facts rather than opinions speculations or conjec

ture substantiated by a rationalizing process The Comn1ission may

not rely merely on the evidence of the blocking of the desires of a

10 F M C
52 FEDERAL MARITIME COMMISSION

majority of the member lines to achieve their goal present in th

proceeding without intervening factual detail as sufficient reason f

the flat conclusion that the unanimity rule is detrimental to the com

merce of the United States A court has recently condemned th

sort of reasoning U S Atlantic Gulf Australia New Zealand Oo

ferenee v FMO and USA 364 F 2d 696 1966

The deficiencies in using a

rationalizing process to meet the requir

ments of the U S Court of Appeals for the District of Columbia o

remand are the same as those pointed out to the Securities and E

change Commission SEe on remand by this same Court ofAppea

in Chenery Corp v Securities amil Exchange Cornmission 80 U

App D C 365 154 F 2d 6 1946 reversed Secwrities Comm n 

CheneT1J Corp 332 U S 194 1947 The issues were also before th

Court ofAppeals for the second time An order holding certain fina

cial transactionsunlawful and approving a plan of reorganization of 

holding company had been issued by the Commission On petitio

for review the Court of Appeals held the order invalid 75 tJ S Ap

D C 374 128 F 2d 303 1942 On appeal the Supreme Court su

sequently held as the Court of Appeals had held that the Comm

sion s order on this record could not be sustained for want of su

porting facts showing public harm and directed the Court to reman

the case to the Commission for further proceedings not inconsiste

with its opinion id p

8 Secwrities Comm n v Chenery OOlrp 3

U S 80 1943 This action is what happened here except for the S

preme Court appeal On rehearing before the Commission no new 

additional evidence was adduced The SEC reexamined the problem

recast its rationale reached the same result and likewise reaffirmed i

former order The case again was appealed and the same Court 

Appeals stated referring to its prior review and with exact relevanc

here we had then as we have now a case in which there is not on

jot or tittle of evidence tending to contradict petitioner s declare

purpose Ifthemajority s report is subjected to another review

the Court will have the same problem described by Justice Groner 

follows in reversing the order a second time

Certainly a reasoned conclusion must be based on evidence and may not 

pitched alone on unresolved doubts nor upon weaknesses or selfishness whi

the Commission believes is inherent inhuman nature The construction advanc

by the Commission would permit it to exercise a

power of disapproval free 

judicial review and the notice and hearing required by thestatute would becom

an empty form The Commission free of the inhibitions imposed by the particul

facts would be left to roam thewidest pOSSible area of authority influenced an

impelled only by its own doubts

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 53

Thus considered it is apparent that the Commission has made its present

order without reliance upon such evidence or findings as would warrant our

affirmance

In laying down as it does a rule of fiat unassociated with the facts in this

case the Commission has strayed from the course laid out and charted by the

opinion of the Supreme Court and accordingly wemust refuse to give it effect

154 F 2d 6 1946 at p ll

The Ohenery case was decided before the enactment of theAdminis

trative Procedure Act on June 11 1946 and we now have the latter

act defining even more precisely our decision making responsihilities

and separating our adjudication and rulema ing procedures

The rationalizing problems and the rulemaking effect were the same

as here

1 no new evidence

2 unresolved doubts

3 human weakness and selfishness is relied on in the new

rationale

4 there is no showing how the conduct would be detrimental

to public interest and

5 There is a laying down of rules of fiat unassociated with

the facts in this case

The Supreme Court reversed the Court of Appeals but did not

invalidate these five elements of deficiency The Supreme Court de

cided there were facts showing violation of fiduciary obligations

through purchase of company securities by management during reor

ganization sufficient to sustain the order The character of the conflict

ing interests created by the program of stock purchases while plans

for reorganization of a

large multistate utility system wereunder con

sideration ws thought to influence adversely accomplishment of the

objectives of the Public Utility Holding Company Act of 1935 where

control by m

anagement whose influence permeated down to the lowest

tier of operating companies was present Conflict of interest as an

ethical principle wasused as a basis of ecision Ethical principles are

frequently based on philosophy and become accepted through changes

in public attitudes Consequently the principles are not susceptible of

proof by evidence usually gathered in agency adjudications The SEC

used such principles as findings to support its conclusions so the

Supreme Court was probably justified in not going behind the SEC

reasoning and insisting on evidence in this particular instance The

Supreme Court found the deficiencies of the first SEC decision had

been overcome What we have to overcome by adverse facts is a

long

history ofoperations under the conferences unanimity and tieing rules

10 FlLC
54 FEDERAL MARITIME COMMISSION

without complaint of harm to carriers or disadvantage to the publi

We may not rely on ethical considerations We have to show with ne

facts howtimes have changed

The standards of the Court of Appeals are still valid and th

majority sreport does not accomplish what the SEe report com

plished when it substantiated its order using the presence of confl

of interest

The deficiency tests apply as follows

1 The lackof new evidence is admitted

2 When we say ocean carriers are at a competitive disa

vantage because of commission levels or the public has a

right 

deal with agents free of motivation to influence choice of air 

water carriers we have only begun the analyzing process Th

propositions only point the way to further inquiry to remo

doubts Unresolved are the questions of what carriers have be

harmed by airline competition caused by passenger agent activi

and how badly and whether commission levels are the real cau

ofharm Reference was made to congressional doubt about ho

to proceed The majority refers to a lack of evidence that a

sp

cific traveler has been persuaded to air travel against his desir

or to his disadvantage vVhat influence does changing passeng

preference have on the disadvantage rather than competition

Have any travel agents disclosed a motivation to disfavor wat

carriers What are the consequences of any deviation from th

agents duties to their water carrier principals by such motives

The real objection was said to be the disparity in the effectiv

level of commissions This objection means the issue is neitherth

rule nor how the level got where it is The rule may just as eas

increase the disparity and ifthe rule diminishes the disparity wh

proofis there the airlines won t

retaliatewith higher commissions

What effect do all these potential shifts have The question 

asked whether prospective passengers should be denied the rig

to utilize the valuable services of agents in fulfilling their desir

to travel on nonconference vessels and is answered no as thoug

theanswer is so obvious as to prove all that is necessary The que

tion should be whether the denial of the right to utilize the val

able services of agents to fulfill desires totravel on nonconferenc

vessels is a detriment to commerce or contrary to public interes

vVe need factsto find out and to resolve doubts and not just a

ye

or no answer

Offsetting the claimed denial of rights of agents to serve and th

traveling public to receive is a claim by the carriers to full loyalty o

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 55

agents to the carriers as principals without conflicting interests to

serve competitors Where is the balance to be struck Until we have

more facts to show a direct relation between voting and between ex

clusive agency and detriments to commerce we ought not to use specu

lation and personal or fictitious experience or yes or no answers

to alter respondents rights to managerial control over their business

assured by the unanimity and exclusive agency rules Speculations and

personal or fictitious experience do not resolve doubts by being asserted

in thename ofour own experience andbest judgment

3 Human weakness and selfishness appear in the form of an

attribution of the economic self jnterest of travel agents to

foster the definite tendency to sell air passage over sea passage

There is no proof but only the assumption based on personal ex

perience about human greed and a desire to protect people from

avaricious influences

4 An explanation of how conduct is related to detriments

to commerce is not supplied by the speculative results said to have

constituted detriments In place of explanation we have a state

ment that it is clearly contrary to the public s interest in the

purpose ofthe act to develop the merchant marine to let anything

foster the definite tendency to sell air passage but we are not

told how this result is achieved Ithas t be assumed that any

thing that helps airlines hurts the mer hant marine but for all

Iknow it may be a part of the public s interest not to hurt air

lines by helping the merchant marine Neither one interest or

the other is to be protected or harmed as far as the public is con

cerned The same tendency to foster is also said to be detri

mental to the commerce but it is equally vague as to why detri

ment to commerce is linked with either the airlines or the merchant

marine Other reasons for a lack of connection to public interest

and detriments are discussed in items 2 and 3 above

5 Atleast four rules have been laid down unassociated with

facts as a result ofthe majority s

reasoning Item 2c for example

refers to the public s right to deal with an agent free from moti

vation to influence choices Itis to be concluded from the major

ity s rhetoric that the public s right to freedom from motivations

influencing choices will be examined into and the right is a

matter of general applicability and future effect For the present

proceeding however there are no facts proving the assumed

motivation nor its effect on travelers rights to choose This state

ment and items 2 a b and d if they won t stand up as findings

supported by facts require proof and public comment if they

are to become rules instead

10 F M C
56 FEDERAL MARITIME COMMISSION

CONCLUSION

In conclusion Ifind it extraordinarily difficult to reason from th

record now after the Court s remand as Idid before it was remande

without more facts I conclude that the record lacks the facts from

which the findings could be formulated in order to determine if th

findings support the conclusions advanced by the majority opinio

Lacking the needed facts Ihold the conclusions expressed by th

majority to be in error

The public reading our respective reports and struggling to unde

stand whatwe have done with this record in deciding why a conferenc

of carriers should have adopted an agreement requiring a unanimou

vote before any change is made in the commissions each carrier mu

allow to be taken out of the price of a passenger ticket or requirin

an agent to represent his principal only and not a

competitor migh

well wish we would say either a lot more or a little less A lot mo

rnight supply facts from the record showing exactly how such agree

ments discriminate orharm the public or commerce A lot less wou

be a relief if all that is really possible is a statement of position or o

ethical principles But no one is to be pared and the public is to g

a restated rationalization of a position in the form of an unneede

justification based on personal experience rather than on a recor

Since the proceeding is before us on remand by a court and w

very likely go back again the majority might at least have been ale

about abstracting some facts which bolster a position facilitate jud

cial review and improve chances of success in litigation But when a

that is done is to offer a statement of why the agreements are bad fo

the public because of uncontroverted principles about our genera

powers and responsibilities under section 15 speculations about com

petition between airlines and water carriers in relation to the declin

in ocean travel unproven motives and assumed rights ofpassengers t

buy tickets of competing principals from an agent of both the tas

of meeting the Coult s requirements and hence obtaining court sup

port of our reasons inducing understanding is made difficult indeed

One would expect more facts ella

blinga decision without the stra

of complete reliance on personally perceived intangibles to tell u

whether the decision is the right one Or the wrong One

Iffor no other reason than that section 15 oftheAct authorizes th

Commission to disapproved agreements only if any Of the four con

ditions exist in fact and shall approve all Other agreements th

agreements beforeus should beapproved

10 F M C
INVESTIGATION OF PASSENGER TRAVEL AGENTS 57

Iconclude

1 That findings of fact supporting a DiScriininati O and un

fairness b detriments to commerce c oontrariety with puhlic in

terest or d violation of law required by section 15 of the Act in

relation to agreements of the respondents have not been proven and

may not be made on the has is of the record in this proceeding and

2 that the agreements authorizingunanimous approval ofoommis

sions to be paid to travel agents and obligating travel agents not to

act as a

gents for oompetirig carriers must be approved

COMMISSIONER JAMES v DAY dissenting

Consonant with the decision ofthe Court of Appeals thismatter has

been reviewed for the purpose of making cerl ain findings respecting

the illegality of the Unanimity and tieing rules or lacking this to

approve them Iwould maintain the latter course

Inmy opinion the record does not support disapproval The evid nce

is lacking Conjectureis notenough

With regard to the unanimity rule Iwouid note that oonference

agreements are not unfair as between carriers orotherwise detrimental

merely hecause of unanimous vote procedures maintained by the con

ference in the absence of sufficient evidence concerning the actual re

sults of operations under such voting rules See Maatsdhappij

Zeetransport N V Oranje Line v AnchoT Line Ltd 5 F iB

713 1959 The lawfulness of oonference voting rules whether requir

ing unanimous two thirds three fourths or majority approval must

be determined on the basis of evidence introduced at a hearing as to

their use in practice and not on the basis of organizational proce

dure etc See Pai

fic OOfLst Ewropean Oonference Agreement Agree

ments N08 5200 JffL 5200 2 3 USMC 11 1948 The record here

is lacking in support ofthemajority position Indeed there is evidence

of the value ofthe longstanding unanimity rule to conference carriers

Examiner sdecision at pp 40 and 65

There is also evidence that frustration of the desires of a maj Ority

of the conference carriers is not the real factor which places the lines

at acompetitive disadvantage Other economic factors are the control

ling cause e g

the speed ofairline service itself Thus the majority

opinion s claim that the agents commission level fosters a tendency

for agents to sell air over sea travel is hardly compelling Indeed the

proof is lacking that ocean carrier business has been diverted in any

real sense because of agent commission levels Aside from this one can

hardly rest on the assumption that a rule permitting a majority of

cOIlference members to raise the sea commission as high as they might

10 F M C
58 FEDERAL MARITIME COMMISSION

actually decide would make any real and lasting difference Any

such raising would hardly be expected to oorrect the cited competi

tive disadvantage and the possibility is present that air commissions

could be raised in return

With respect to the traveling public there is likewise inadequat

proofthat any cognizablerights ofprospective travelers were actually

violated because of conference agents advocating air travel over se

travel Iamnot persuaded that such advocating as may have been don

actually resulted in any substantial diversion of people to air agains

their best interests and judgment The majority opinion would in thi

instance attempt toinsure the existence of only liner agents who hav

no proclivities proclivities which in thiscase would also be advers

to the interests of their principals As the Examiner noted Exam

iner s dooision atp

70 correction of an advocacy of airby ship agent

in this instance is better left to the managerial discretion of the ocea

carriers in their dealings withtheir agents

As regardsthe tieingrule again conjecture inferences and assump

tionscannot here substitute for record proof

There is inadequate proof that passengers have been denied the us

of travel agents in obtaining passage pursuant to their choice Th

record shows that 99 percent of all Trans Atlantic steamship passen

gers go conference and that the only vessels whose operators are no

members of the conference are freighters which can carry a limite

number of passengers The record also indicates that there are bot

conference and nonconference travel agents The evidence is no

persuasive that the percentage ofpassengers ahle and wishing to trave

nonconference were significantly injured because ofany lack ofoppo

tunity to deal with agents where the passengers preferred not bookin

passage directly with a particular line

Neither is the evidence persuasive as to any cognizably harmf

effect of the tieing rule on nonconference operators There are non

conference agents No nonconference carrier intervened in this ca

to complain against the rule

Nor is the tieingrule unduly restrictive on the agents in my opinio

The record indicates there are some services performed by the carrie

for their agentsa justification for restricting agents services 

return

Further the carriers believe the tieing rule is necessary to prote

conference stability Iam not persuaded that the conference assertio

of need is invalidated merely by the majority s reference to the Carib

bean cruise trade where no conference exists and conditions ma

indeed be somewhat different

10 F M 
INVESTIGATION OF PASSENGER TRAVEL AGENTS 59

The majority assert that the tieing rule is unjustly discriminatory

as between carriers within the meaning of section 15 citing Pacific

Coast European Conf Payment of Brokeraqe 5 F M B 225 1957

In that case the Maritime Board outlawed a provision in the absence

of justification therefor which prohibited payment of brokerage by

conference lines to any forwarder broker who served nonconference

lines Of the two nonconference carriers in the trade one depended

upon forwarder brokers for all cargo and the other for 80 percent or

its cargo Both nonconference carriers appeared in the case The Board

concluded that all forwarder brokers in the trade would refuse to

serve the nonconference lines and these nonconference carriers would

be foreclosed from obtaining their cargo through brokers or for

warders Here there appear distinctions e g

there remain non

conference agents who can serve nonconference carriers and no non

conference carrier has intervened to assert its dependent need of

agents now subject to thetieingrule

Finally and in essence Iam not persuaded that the opinion and

rea oning or the majority reveals a ufficient record basis for dis

approval or the unanimity or the tieing rule as being contrary to the

standards ofsection 15

10 F M O
FEDERAL MARITIME COMMISSION

NO 873

INVESTIGATION OF PASSENGER STEAMSHIP CONFERENCES

REGARDING TRAVEL AGENTS

ORDER

This proceeding having been Ternanded hy the COurt O fApp

for the District of Columbia Circuirtand l

riefs and oralargum

haringbeen made by the parties the CommisSiOnon this date issu

report thisproceeding which is hereby referred to and incoI lporaited

herein by reference

Therefore It1s Ordered That

1 All prOvisiOns Of COnference Agreement NO 7840 requ

unanimO us acoord of the member lines in dellberations by any gr

having final 01 recommenda

tory POwer over levels of cOmmission

travel agents including article 6 a and article 3 d be modifie

remOve the requirement of unanimity in such deliberatiOns and

2 Artide E e of Conference Agreement NO 120 and the r

adOpted thereundeT prohibiting the member lines agents frOm seH

without priOr

permission transportation O n

competitive noncdnfer

lines beeliminated

By the CommissiO n

Signed THOMAS LISI

Secreta

10 F 

60
FEDERAL MARITIME COMMISSION

Docket No 6627

THE PERSIAN GULF OUTWARD FREIGHT CONFERENCE AGREEMENT

7700 EsTABLISHMENT OF A RATE STRUCTURE PROVIDING FOR

HIGHER RATE LEVELS FOR SERVICE VIA AMERICAN FLAG VESSELS

VERSUS FOREIGN FLAG VESSELS

Deaided July 1 1966

Two level rate structure based upon vessel flag notauthorized by basic conference

agreement Agreement 7700 Two level rates stricken from conference tariff

and carriage under such rates forbidden prior to approval under section 15

Shipping Act 1916 of two level rate structure

Elmer O Maddy and William Peter Kosmas for respondents Per

sian Gulf Outward Freight Conference and its member lines Central

Gulf Steamship Corp and Isthmian Lines Inc

Donald J Brunner and Noman D Kline Hearing Counsel

REPORT

By THE COMMISSION John Harllee Ohairrnanj John S Patterson

Vice Ohairman George H Hearn Oommissioner

The Commission instituted the subject proceeding by order served

April 19 1966 requiring the Persian Gulf Outward Freight Confer

ence Agreement 7700 the Conference and its member lines to show

cause why their two level rate structure based upon vessel registry

hould not be declared unlawful and such two level rates ordered

3tricken from the Conference s tariff

STATEMENT OF FACTS

By Agreement o 7700 approved May 28 1946 the basic confer

ence agreement of the Persian Gulf Outward Freight Conference the

two members of the Conference Isthmian Lines Inc and Central

Gulf Lines both American flagship lines derive their authority to act

CommlssIoners Ashton C Barrett and James V Day did not participate

10 F M C

61
62 FEDERAL MARITIME COMMISSION

and function as a conference in the trade from the U S Atlantic and

Gulf ports to ports in the Persian Gulf and adj acent waters in the

range west of Karachi and northeast of Aden but excluding Aden

and Karachi

On March 10 1966 the Conference filed with the Commission revi

sions to its Freight Tariff No 8 FM C No 1 effective March 11 1966

affecting the rates on certain specified commodities The revisions

establish for each of the commodities concerned one rate if shipped

via U S flag vessel and another lower rate ifshipped viaforeign flag

vessel No commodities have been added or removed from the tariff

no rates have been increased and there is no requirement that any

shipper be signatory to any contract in order to avail itself of the

revised rates As indicated in the Commission s order the tariff revi

sions are not an implementation oftheConference s approved dual rate

system 1

Article 1 of Agreement 7700 which the Conference alleges is the

authority for establishing the two level rate system provides that

This agreement coyers the establishment and maintenance of agreed rates

charges and practices for or in connection with transportation of cargo by mem

bers of this Conference 2

The show cause order stated the legal basis for the institution of this

proceeding as follows

It appears that the above quoted language of Agreement No 7700 article 1

does not encompass the authority to establish a two level rate structure which

provides for higher rates on cargo transported inAmerican flag vessels than fo

cargo transported in foreign flag vessels and that the establishment of such rates

introduces an entire new scheme of ratemaking and discrimination notembodied

in the basic agreement requiring specific approval pursuant to section 15 of the

Shipping Act 1916

The conference has not submitted to the Commission a request for the mod

fication of its organic agreement to specifically set forth therein the authority

required to establish and maintain the two level rate structure at issue pursuant

to Section 15 Shipping Act 1916 which rate structure is being effectuated by the

member lines

Section 15 provides in partthat

Any agreement and any modification or cancellation of any agreement not ap

proved or disapproved by the Commission shall be unlawful and agreements

modifications and cancellations shall be lawfulonly when and as long as approved

by theCommission before approval or after disapproval it shall be unlawful to

carry out in whole or in part directly or indirectly any such agreement

modification orcancellation

1 This paragraph aDd the one preceding it have been taken verbatim from respondents

Reply to Order To Show Cause 2 3 and constitute the entire section captioned Statemen

of Facts

S respondents Reply to Order To Show Cause 1314

10 F M C
AGREEMENT 770 O ESTABLISHMENT OF A RATE STRUCTURE 63

It therefore appears that the publication and effectuation of the

two level rate structure herein at issue by the member lines of the

Persian Gulf Outward Freight Conference may constitute the carry

ing out of an unfi1ed unapproved agreement in violation of the terms

of section 15

Amemorandum of law captioned Reply to Order To Show Cause

was filed by respondents and a

reply to this Reply was filed by

Hearing Counsel 3 Ve have heard oral argument

POSITIONS OF THE PARTIES

A The Conference maintains that the show cause form of investi

gation in this proceeding is unauthorized by the Shipping Act the

Administrative Procedure Act and the Commission s own rules of

practice and procedure and that even if authorized it could not

terminate in a determination of the unlet wfu1ness of the two level

rate structure because such structure is authorized by the present

terms of Conference Agreement 7700 More specifically the Confer

ence alleges

1 The Commission is empowered to issue cease and desist orders

but only upon findings pursuant to full evidentiary hearing The use

of the show cause order in this proceeding is an attempt to declare the

system here under investigation unlawful and prohibit its use lith

out providing the required opportunity for hearing and is an unjusti

fied attempt to place the burden of provingthe legality of the systehl

upon respondents

2 Even if the proceeding were properly instituted the two level

rate systenl is authorized by the basic Conference agreement nd can

not here be declared unlawful The two level rate system is a routine

rate change which does not require Commission approval prior to its

effective date It is similar to a system ofproject rates which does not

require separate Commission approval where the basic Conference

agreement has a provision like that for rate establishment in Agree

ment 7700 The two level rate system is necessitated because without

it the Conference is unable 0

compete successfully ith the 8900

Group another conference in the same trade operating foreign flag

vessels exclusively for the carriage of commercial cargo

B Hearing Counsel maintain that the show cause form of investi

gation is justified in this proceeding because the issues raised do not

involve any disputed questions of fact and the subject rate structure

is not a routine arrangement and therefore requires additional Com

a

The Commerce and Industry AssocIation of New York Inc intel VeDed but did not

otherwise participatein the proceeding

10 F M C
64 FEDERAL MARITIME COMMISSION

mission approval berore it may be instituted fifore specifically they

allege

1 The show cause proceeding has repeatedly been used by the

Commission where as here the questions to be resolved involved only

issues of law and there wasno dispute as to material questions of fact

The use or a show cause order has moreover recently been upheld hy

the Court or Appeals for the Ninth Circuit in a case similar to the

instant one in which the Court affirmed the Commission s determina

tion in a show cause proceeding that a port equalization system was

unauthorized hy general ratemaking provisions in a basic conference

agreement Although the Commission is not empowered to issue cease

and desist orders prohibiting the parties from carrying out an ap

proved agreement prior to findings of violations there is no authority

ror the proposition that the Commission may not issue such orders

prohibiting the carrying out of unapproved agreements and the Com

mission has boon forbidden to allow dual rate contracts to go into

effect prior to approval

2 The two level rate system established by respondents is no more

routine than port equalization systems dual raJe contracts and

agreements to prohibit brokerage lJI or which the Commission has

required to be filed for separate approval under section 15 It may

well be that trade factors are such that the system should be granted

approval However approval of the system is not the question here

An agreement like the one in question cannot be instituted prior to

approval and such approval would require full evidentiary hearing

on the merits especially since the two level rate systenl appears to be

discriminatory with reference to Government cargoes which must

under cargo prererence laws move on American flag vessels

DISCUSSION AND CONCLUSIONS

The use by the Commission of an order to show cause to resolve the

legal question or whether or not a certain type of arrangement is

authorized by the wording of an approved conference agreement has

been recognized as propel by the courts Pcwific Ooast Port Equaliza

tion R le 7 F M C 623 1963 aff d 8ub rwm American EOJport

h bfandt8en L v FederallJfantime Com n 334 F 2d 185 9th Cir

1964 4

Respondents attempt to distinguish the order used in the Instant case from that used

ftn the Pamjlc GOallt case on the ground that the order which forms the basIs of this case

did not provide for the submission of affidavits of fact ThIs Is a distinction without a

dIfference The order to show cause in this proceedIng recited that tJhe issues raised

10 F M C
AGREEMENT 700 ESTABLISHMENT OF A RATE STRUCTURE 65 

It is clear from a

reading of section 1 of Agreement 7700 and a

review of the applicable case law that the two level rate system here

involved is one which cannot be effectuated prior to separate section

15 approval Separate section 15 approval has been required by the

Commission and its predecessors of arrangements 1

introducing

an entirely new scheme of rate combination and discrimination not

embodied in the basic agreelnent the dual rate contract 5

2

rep

resenting a new course of conduct prohibition ofbrokerage onapar

ticular shipment 63 providing new means ofregulating and con

trolling competition port equalization system 7

4 not limited to

th pure regulation ofintraconference competition 8

or 5 constitut

ing an activity the nature and mannerof effectuation of which cannot

be ascertained by a mere reading ofthebasic agreement

The effectuation of conduct following under only one of the above

criteria would require separate prior section 15 approval The two

level rate system here involved comeswithin all five ofthem No men

tion is made in the basic agreement of a system of rates based upon

vessel flag the institution of such new system ofrates would of course

represent a new course of conduct the conference moreover admits

that the purpose of the systenl is to maximize interconference com

petition in the trade while at the same time regulating and minimiz

ing business confusion and intraconference competition 10 finally

it cannot be contended that a mere reading of article 1 or Agreement

7700 the sole provision under which the conference alleges it has au

thority to institute the system indicates that the conference is to be

herein do not involve any disputed issues of fact requiring an evide lltiary hearing

Respondents have set forth the material facts on pages 2 and 3 of their reply to the order

to show cause These facts are not in dispute and have been as noted above inorporated

verbatim into this report Respondents contention that the shw cause order in this

proceeding improperly attempts to shift to them the burden of proof is irrelevant The doc

trine of burden of proof has no application in proceedings in which there are no material

facts in dispute Respondents do request a foU evidentiary hearing to develop the facts

relating to whether the two level rate structure at issue here is employed now or was

recently employed in the foreign commerce of the United States as well as other facts

bearing on the allegedly anticompetitive nature of these tari1f revisions and their eftect

on the foreign commerce of the United States Such additional facts bearing on the oper

ation orprobable operation of a two level rate system may well be important ina proceed

ing to determine the approvability of the system They are however irrelevant in the

resolution of the only issue involved in this proceeding the legal question of whether or

not the two level ratesystem is authorized by approved Agreement 7700

III8brandt8en 00 v United States 211 F 2d 51 56 D C Cir 1954

6

American Union Tran8port v River Plate Brazil 00nf8 5 FM B 216 221 1957

afJd 8ub nom American Union Tran8port v United State8 257 F 2d 607 613 DC eir

1958

7

Pacific Ooast Port Equalization Rule 8upra at 630

SId

g

Joint Agreement Far Ea8t Oont and Pac W B Oonf 8 F M C 5l3 558 1965

10 See Respondents Reply to Order To Show Cause 24

10 F MC

299 843 0 68 6
66 FEDERAL MARITIME COMMISSION

empowered to institute any system of two levels of rates for the car

riage of the same commodities much less one based on vessel flag 1

Ve do not mean to imply that routine operations relating to current

rate charges and other day to day transactions between the carriers

under conference agreements need separate approval under section 15

See Ex Parte 4 Section 15 lnq uiry 1 D S S B 121 125 1927 In fact

Congress in enacting Public Law 87 346 12 which amended section 15

specifically stated that tariff rates fares and charges and classifica

tions rules and regulations explanatory thereof agreed upon by

approved conferences and changes and amendments thereto if other

wise in accordance with law shall be permitted to take effect without

prior approval

A review of the legislative history of this provision and the cases

construing it ho vever indicate that it is intended absent additional

approval to limit conference authority sueh as that contained in sec

tion 1 of respondents basic agreement strictly to the ratemaking au

thority therein provided fol 13 As the flouse Merchant l1arine and

Fisheries Committee stated in reporting on what eventually became

Public Law87 346 Je construe the purpose of thisprovision to be

that indivichml rate ehltnges by Conferences need not be ap

proved The difficulty stems from the fact that in luany instances

conferences lnay insert rules and regulations in their tariffs hich have

the effect of restricting competition in a manner Hot reasonably to be

inferred from the basic agreement 14

We conclude that the two level rate system based upon vessel flag is

unauthorized by Agreement 7700 ltnd cannot be effectuated prior to

Commission approval Should the Conference wish to effectuate this

system it must submit an agreement embodying it for and receive our

approval

The Conference s contention that the Commission cannot issue a

1 Rtsponde1lts analogy of their two level rate system to project rate systems is at bes

not in pcint The proceeding cited by respondents forthe analogy Fact Finding Investiga

tion No 8 May 24 1965 Rep01 t of E Robert Seaver Inve Utating Officer does not indi

cate that project rate systems may lawfully be carried out without special section 15

authorit rhat proceeding is jmt what its name implies a factfinding investigation

It is not adjudicatory in nature It indicates that some canference agreements do not

contain separate authorization forproject rate systems Italso indicates that the Commis

sion has approved in a docketed proceeding a conference agreement containing a separate

proviSion authorizing project rates In the Matter of Agreement No 6870 3 F M B 227

1950 ProjeCt rate systems have never been held by the Commission or its predecessors

not to require specific authorization in a section 15 agreement

cJ 75 Stat 762 764

13 Pacific Ooast Port Equalization Rule supra at 632

14 H Rept 498 87th Cong p 19 Because of this difficulty the Committee suggested

striking of the words tarills of preceding rates fares and charges As enacted in

accordance with this recommendation the provision reads simply tariff rates fares and

charges

e 10 F

C
AGREEMENT 7700 ESTABLISHMENT OF A RATE STRUCTURE

cease and desist order and require the two level rates stricken from the

Conference s tariff in this proceeding is without merit 11Ytn8 Paoific

Fre1 ght Oonfe rence of Japan v Fede1allJtJa riti J1M BOa1 d 02 F 2d

875 D C Cir 1962 relied upon by respondents for support of this

position is inapposite That case merely held that the Commission

could not issue cease and desist orders against the implementation of

provisions in a conference agreement which had been approved by the

Commission and had not thereafter been found to be unlawful The

Coult in thatvery case stated

In Pacific Coast Europcan Oonfc rcnce pl1Jment of B1 okcragc 5 H M B 65

1956 the Board asserted the authority to issue a cease and desist order pro

hibiting the parties from carrying out an unapproved agreement We need not

express a

view as to whether such an order is iithin the Board s authority

But we note that different congiderations mi ht Yell be involved in such a case

Of Isb1 andtscn Co v U S 211 If 2d at m Board not allowl d to let dual rate

contract go into effect prior to approval At 879 footnote 8

That the power of this C0l11mission to issue cease and desist orders

preventing the carrying out ofunal provecl agreements is a necessary

corollary to the requirement that such agreements obtain approval

before they may be carried out has been recognized by the Courts l

The assertion of such power and the requirement by the Commission

pursuant to its exercise that authorizing matter be stricken from a

tariff have moreover specifically been affirmed in a proceeding insti

tuted by an order to show cause InAme1 ican EXP01 t Isb1 andtsenL

v Federal Maritime Corn n

sU1J1 a the COl1 mission was upheld by the

Court of Appeals for the Ninth Circuit in requiring the respondent

conference in a proceeding instituted by order to show cause to cease

and desist from effectuating a port equalization system without spe

cific prior approval and to strike the rule implementing tlult system

from its tariff

Respondents will be required to cease and desist from carrying out

the two level system here at issue until such time as it may be spe

cifically authorized by an agreement approved by the Commission

The two level rates contained in the Conference s tariffs are not in

accordance with the presently authorized conference agreement As

only those tariff modifications in accordance with law ntay take

effect upon filing these rates cannot be giveneffect and must be stricken

from the Conference tariff until such time as approval may be obtained

for the two level rate system based upon vessel flag

An appropriate order will be entered

1li See e g Tran8 Pacific Fryt ConI 01 Japan Federal Madtime ComJnJ 314 F 2d 928

935936 9th Clr 1963 upholding the Commission s issuance of a cease and desist order

against the carrying out of modification of neutral bodr system without prior Commission

approval

10 F MC

67 
FfDERAL MARITIME COMMISSION

Docket No 6627

THE PERSIAN GULF OUTW ARD FREIGHT CONFERENCE AGREEMEN

7700 ESTABLISHMENT OF A RATE STRUCTURE PROVIDING FO

HIGHER RATE LEVELS FOR SERVICE VIA AMERICAN FLAG VESSEL

VERSUS FORIEGN FLAG VESSELS

ORDER

This proceeding having been instituted on order to show cause th

Commission having received memoranda of law and heard oral argu

ment on such order and having pursuant thereto issued on this da

a

report in this proceeding which is hereby referred to and incorpo

rated herein by reference

Therefore it is ordered That

1 Respondents Persian Gulf Outward Freight Confer nce an

its member lines Central Gulf Steamship Corp and Isthmia

Lines Inc cease and desist from carrying out prior to Com

mission approval its two level system of rates based upon vess

flag and

2 Any and all tariff rates implementing such system be stricke

from the Conference tariffs

By the Commission

68

Signed THOMAS LISI

Secretary

10 F M C
FEDERAL l1ARITIME COMMISSION

locket o 6642

IN THE MATTER OF THE CARRIAGE OF MILITARY CARGO

Decided August 9 1966

The Cargo Commitment Contract found notto be a dual rate contract within the

meaning of section 14b of the Shipping Act 1916

Item No 1 of Local Freight Tariff No 1 Y FM01 of the Pacific Westbound Con

ference and Agreement 8086 construed notto prohibit certain petitioners from

participation in the proposed competitive prourement program of the Mili

tary Sea Tran port Service Depalltment of Defense in its present form and

coverage

The requirement that bidding under the proposed proeurement program be under

seal and secret does not constitute an unjust or unfair device or means

within the first paragraph of section 16

Warner W Gardner Robert T Basseches and James B Goodbody

for petitioners American Mail Line Ltd American President Lines

Ltd Pacific Far East Lines Inc States Steamship Co and Waterman

Steamship Corp

George F Grilland Robert N Kharasch Philip F Hudock and J

K Ada m8 for petitioners States Marine Lines Inc Isthmian Lines

Inc Global BulkTransport Inc BloomfieldSteamship Co

Richard W K U1 rU8 for petitioner American Export Lines Inc Wil

ow L Morse William W Parker and Howard A Levy for the Mili

tary Sea Transport Service Department ofDefense

Donald J Brunner Hearing Counsel

MitchellW Rabbino for intervenor Sapphire Steamship Lines Inc

Ehner O Maddy and John W illia m8 for intervenor Atlantic Gulf

AmericanFlag BeI thOperators

REPORT

By THE COMMISSION John Hadlee Ohai an Ashton C Barrett

George H Hearn Oommissioners

This proceeding is before us on petitions seeking orders declaring

unlawful the proposed competitive procurement program of the Mili

Vice Chairman John S Patterson did not participate

10 F M C 69
70 FEDERAL MARITIME COMMISSION 

tary Sea Transportation Service Department of Defense In all 

U S flag steamship lines filed five petitions for declaratory order a

still others intervened 2

Byorder served July 19 1966 we agreed to he

three ofthe issues raised in the petitions and declined to entertain t

other issues urged therein because they were premature and did n

present us withjusticiable controversies 3

THE PROPOSED COMPETITIVE PROCUREMENT PROGRAM

On June 16 1966 the Military Sea Transportation Serv

MSTS issued Request for Proposals No 100 RFP 100 co

taining the terms and conditions under which the Department 

Defense proposed to extend its competitive procurement program 

ocean transportation The program is open to U S flag steamsh

lines only 4

Under RFP 100 any line desiring to carry military cargo offero

must submit a basic offer2 which is simply a quotation of the rates 

which the offeror will carry military cargoes These rates must 

guaranteed for a period of 1

year The basic offer must be submitt

underseal and theofferor certifies thathe has reached hisbid indepen

ently without consultation with or disclosure to any other offero

or he must certify as to the conditions and circumstances of t

consultation or disclosure ifany has occurred

Upon analysis of all basic offers MSTS will enter into Shippi

Agreements with the selected offerors 5

Shipping Agreements a

awarded on the basis of the lowest rates offered but there does n

appear to be any limit to the number of Shipping Agreements whi

may be awarded on any given trade route The award of a Shippi

1

States Marine Lines Inc Isthmian Lines Inc Global Bulk Transport Inc a

Bloomfield Steamship Co joint petition filed June 30 1966 American Mail Line L

American President Lines Ltd Pacific Far East Lines Inc States Steamship Co a

Waterman Steamship Corp joint petition filed June 30 1966 American Export Isbrandts

Lines Inc single petition filed July 11 1966 Lykes Brothers Steamship Co single petit

filed July 11 1966 United States Lines Co single petition filed July 11 1966

2 Intervenors were Sapphire Steamship Lines Inc and the U S fiag lines parties 

Atlantic Gulf American Flag Berth Operators Agreement No 8186 Alcoa Steams

Co Inc American Export Isbrandtsen Lines Inc American President Lines Lt

American Union Transport Inc Bloomfield Steamship Co Central Gulf Steams

Corp Farrell Lines Inc Grace Line Inc Great Lakes Bengal Lines Inc Isthm

Lines Inc Lykes Bros Steamship Co Inc Moore McCormack Lines Inc Pac

Seafarers Inc Prudential Steamship Corp States Marine Lines Joint Service Unit

States Lines Co

3Our disposition of the various Issues raised in the petitions is discussed infra

Department of Defense Cargo is reserved to U S fiag carriers by the Cargo Preferen

Act 1904 10 US C 2631

5

The Shipping Agreement Is the standard contract of MSTS for ocean transportati

and Is In three parts Part I Description of Services Part II Standard Maritime Claus

and Part III Standard Government Clauses

10 F M C
IN THE MATTER OF THE CARRIAGE OF MILITARY CARGO 71 

Agreement does not constitute the allocat on to the selected offeror of

any specifjc amount OJ portion ofthe cargo to be shipped in thetrade

Actual bookings of cargo under Shipping Agreements are made

first with the rate favorable carrier provided he offers suitable space

and an acceptable schedule of delivery Failing this thecargo is booked

with the line offering the next highest rate and so on

The holder of a Shipping Agreement is protected from competi

tion of other common carriers on the route in question including

those who hold Shipping Agreements as well as those who do not

Thus if another holder of a Shipping Agreement reduces his rate

his competitive position vis a vis other holders is considered on the

basis of the rate originally bid and while a carrier new to the trade

may be awarded aShipping Agreement his service is used only if the

original holders on that route cannot provide suitable service and

finally lines who either did not bid or were not awar ed Shipping

Agreements wiH be used only if the services or cap3Jbilities of the

holders on the route are inadequate

Any line which makes a basic offer may also if it feels that a firm

commitment to ship a TIlinimum volume of cargo on each sailing in

order to enahle it to offer its best rates or to establish service on a

particular route submit an alternate offer Offers based on minimum

volume wIll not be considered unless the line has also submitted a

basic offer If an alternate offer is accepted a Cargo Commitment

is entered into

Under the Cargo Commitment the line agrees to furnish space

in specified amounts on each of its sailings and the Government agrees

to provide a minimum volume of cargo for each sailing Default on the

part of either party results in payment of dead freight under the

terms and conditions set forth inthe contract6

The Government does not contemplate except possibly for special

services thaJt Cargo Commitments will be awarded to exceed 50 per

cent of the total Government requirement on any given route or that

any individual Cargo Commitment will result in the use of more

th n 5

percent fthe spae of any single carrier ona given route

8

Article 4b provides Should the Government fail to ship cargo to fullfill its commit

ment on a particular saiUng by a deficit of more than five 5 percent of the total cargo

required to meet its commitment it shall pay for the full deficit in its commitment at

the ratestated for dead freight in annex A Similarly article 4d provides To the extent

the carrier fails for any reason to make acceptable space available to the Government on

a

sailing of its ships on the route in an amount required for the Government to meet its

requirement to ship cargo the carrier shall pay the Government for its default at tJle rate

per MT of such deficit as stated in annex A

provided however that the carrier shall be

excused from its commitment to furnish ship capability to the extent that its default is

caused by force majeure including strikes

10 F lfC
72 FEDERAL MARITIME COMMISSION

When awards are made either on basic offers or under Ca

Commitments all rates must be filed with the Commission

THE ISSUES

Inthe order instituting this proceeding we declined to consider 

lawfulness of the proposed procurement program under sections 

Fourth 16 First 17 and 18 b 5 of the act because the issues rais

under those sections were premature and did not present us w

justiciable controversies Certain petitioners view our denial improp

at least insofar as sections 14 Fourth and 16 First of the act 

concerned

The relevantportion of section 14 Fourth makes it unlawful for 

common carrier by water to make any unfair or unjustly discri

n3ltory contract based on volume of freight offered Si

no particular contraot for any stated volume of cargo at a fixed r

had as yet been made w declined to speculate on the validity un

section 14 Fourth of contracts to be made in the future

In a similar vein section 16 First makes it unlawful for a comm

carrier by w3lter to give any undue or unreason3Jble preference or 

vantage to any person locality or description of traffic or to sub

any person locality ordescription oftraffic toany undue or unreas

able prejudice ordisadvantage in any respect whatsoever Here po

ing out that as yet n rates had been fixed under the proposed procu

ment program we agai 1declined to speculate as to validity 

nonexistentrates under section 16First

Itis argued however that what we wereasked was to determine 

legality Qf thesystem and not t measure the precise injury itinflict

Or as orie petitioner would put it we are not at the moment c

plaining about rates but about a practice or device proposed by 

in ts Req1 lest for Proposal No 100 We are referred to the fact t

neither section 14 Fourth nor section 16 First makes specific refere

to rates An analysis of their arguments will clearly reveal their le

insutficiency

The basic premise upon which the entire argument is grounded 

that the Department of Defense through MSTS proposes by the 

viceof competitive bidding to reduce ocean transportation ra

on mil tary cargo by 25 percent Thus we are variously told

There is no question that the new competitive procurement device is inten

t9drive common cartier rates for MSTS cargiOes to rock bottom levels or 

ha below The Department of Defense has boasted widely about the an

pated 25 percent reduction inoeean transportation costs

10 F l1
IN THE MATTER 01 TIIE CARRIAGE OF MILITARY CARGO 73 

The Department of Jefense recognizing the large volume of the MSTS cargoes

and their importance to the caniers expects a reduction in MSTS rates

of at least 25 percent Itwill accept an use the lowest rate whether or

not it is compensatory arid recognizes that this may well result in some lines

going outof business

it must be remembered that the announced purpose of the competitive

bidding sytem is to drive rates down as much as 25 or 30 percent in favor

of the world s largest h pper The disa trous effects of such a rate slash are

evident

Th thre d of tpe 25 percent reduction runs throughout every

argument of petitioners This is their prrime col lcern Itis also the key

to their allegations of unlawfulDeSunder the provisions of theShip

ping Act c1ted to us Thus the contract is an unjust one unqer section

14 Fourth because the reduction in rates would not be based upon

a

recognition thatMSTS cargoes by lteir volume and their concen

trated lO 1tiop p

ented different shipping characteristics but would

p the PFQ4w tsol rPfcompe itive bid PI g

Whatever the validity of

this latter umpt 9n it is it e f

precisely the reason why there can

ge as yet nQ det rmination ale under section 4 Fourth The section

dOesn toutlaw all cOlltriwts based on volume ot freight offered it pro

scribes only those whlch are unfair orunjustly discriminatory But how

is such a contract to be unfair or unjustly discriminatory Obviously

if the advantages offered under it are not hased upon transporta

tion factors which are altered by the volume offreight offered Here

the Cargo Commitment is sught if the offeror needs a fixed volume

to provide his best rate By i

ts very terms tle contract in question is

geared to a rate It is on the basis of rates t at the contracts if any

are to be awarded To argue now that no specific contract nor any

specified volume nor any fixed rate is needed to declare the Cargo

Commitment unlawful is to ignore legal realities Not even the

most strained reading of section 14 Fourth can render unlawful the

mere pro torms solicitation by a shipper no matter how large of

contracts based on volume offreightand thisis how p

titioners would

have us read thesection

It should be equally clear that any consideration of the system

under section 16 First is just as premature Again the preference

to MSTS i ar duced rate Itis nothing els And yet again not all

preferences or prejudices are outlawed by that section but only those

which are undue or unreasonable How the undueness or unreasonable

ness of the rate preference is to be determined until the particular

rate is in exi Iice i never made clear nor indeed can it be at this

time

10 F MC
74 FEDERAL MARITIME COMMISSION

Certain petitioners point out that our order of July 19 1966 faile

to deal specifically with two issues raised in their petitions ie th

the competitive bidding system was unlawful 1 because it violate

the policies ofthe merchant marine staltutes and 2 the Commissio

lacked st3itutory authorization necessary for the establishment 

preferential rates for Government cargo

While we did not read petitioners references to policy as asserti

a violation ohe is now specifically asserted To the extent th t th

assertion is divorced from specific allegations of violation of parti

ular substantive provisions of the statutes we are charged with a

ministering it should only be necessary to point out that expressio

ofpolicy are nothing more than the goals sought to be achieved by Co

gress in the enactment ol the particula substantive provisions 

law which the statement accompanies Standing alone a statement 

policy grants no substantive power and prohibits no specific condu

It is an aid in the construction of the substantive provisions of 

statute and it is not violated in the sense that those substanti

provisions of a statute are violated The policies of the maritim

statutes as an aid in statutory construction wherever relevant a

discussed in connection withthe specific issues dealt with herein How

ever some preliminary considerations are necessary to place t

policy questionin its proper perspective

We are urged not to confuse our determination of the validity 

RFP 100 undertheShipping Act with such foreboding and seeming

omnipresent spectres as the Douglas Committee or a putative poli

confJ i

ft with the Department of Defense We need only say that pe

tioners trust that we would not so confuse our deliberations and d

terminations was well placed But we would that petitioners h

rendered our tasks less difficult by restricting their arguments to 

to particular provisions of theShipping Act 7In resolving the issu

before us we are told that it is mandatory that we consider the object

or promoting the American Merchant Marine We are cited to the p

amble to the Merchant Marine Act of1920 46 U S C 861 which sta

thatit is

the policy of the United States to do whatever may be necessary to 

velop and encourage the maintenance of a privately owned Americ

Merchant Marine and insofar as it may not be inconsistent with the provisio

of the Act the United States Shipping Board now the Federal Maritime C

7 Thus we are offered arguments such as the program proposes a practice which 

revolutionary and Improper deviation from Anglo American transportation law 

such a pra tice bas never been sanctioned under the venerable Interstate Commerce Ac

and that the practice calls for a diabolical form of Russian roulette but It Is 

application of the law only that 18 germane In our deliberation herein

10 F M C
IN THE MATTER OF THE CA RIAJ E OF MILITARY CARGO 75 

mission keep always in mind this purpose and object as the primary end to b

obtained

Thus it is argued th objective ofpromoting and maintaining an

adequate and well balanced American Merchant Marine pervades

the functions of the Commission under the regulatory provisions of

the Shipping Act and In considering whether a practice is unfair

or detrimental to commerce the Commission must properly be in

fluenced in its determinations by the resultingeffect that such a practice

would have on the American Merchant Marine There is very little

in this latter conclusion with which we could disagree However a

cautionary word ortwo is called for

Volumes have been written in the annals of Congress concerning our national

shipping policy The topic traditionally a favorite one for patriotic addresses

throughout the country yet the interrelationships between the dual elements

of our national shipping policy both promotional and regulatory has never at

any time been clearly articulated orwell defined Itcan only be deduced from

a careful and painstaking study of our shipping laws and administrative prac

tices which areneither consistent norcodified s

This national shipping policy which is to be ultimately deduced

from a study of the shipping laws and past administrative practices

is a synthesis in which there is found nothing inconsistent with reg

ulatory policy in U S promotional policy Cellar Report 25 and

2G Indeed tJ he development and maintenance of a sound maritime

industry require that the Federal Government carry out is dual re

sponsibilities for regulation and promotion with equal vigor 9

The

history of past organizational arrangements for carrying out these

dual responsibilities had proved inadequate and the Government s

experience under them culminated in Reorganization Plan No 7 The

purpose of the plan wasto provide the most appropriate organizational

framework for each of the functions regulatory and promotional

thus

Regulation would be made the exclusive responsibility of a separate com

mission organized along the general lines of other regulatory agencies On the

other hand nonr gulatory funotions including the determination and award of

subsidies and other promotional and operating activities would be concentrated

in the head of the Department of Commerce House Doc No 187 87th

Congo 1st sess 1961 p 2

This Commission is of course the result ofReorganization Plan No

7 and its responsibilities are exclusively regulatory We may not pro

mote Neither may we regulate without regard to the consequences

a Report of theAntitrust Subcommittee of the Committee on the Judiciary on the Ocean

Freight Industry House of Representatives 82 Congo 2d sess 1962 p 5 Celler report

9 Message of the President Transmitting Reorganization Plan No 7 of 1961 House Doc

No 187 87th Cong 1st sess 1961 p

2

10 F M C
76 FEDERAL MARITIME COMMISSION 

of that regulation on our merchant marine because the Americ

merchant maFine is itself a part of the foreign commerCe of the Unit

States and as such is entitled to the full protection of the Shippi

Act But the act does not stop with the merchant marine it extends 

protections to shippers and other persons subject to its provision

Just as we must scrupulously insure that all carriers regardless 

flag are accorded equal treatment under the laws we administer 

we must be equally scrupulous lest ourconcern for our merchant m

rine lead us to a construction of the act which dilutes the protecti

afforded by it to shippers and other persons For under the act su

persons as shippers forwarders terminal operators and the like a

just as much a part of national maritimeindustry as are the ships wh

carry the cargo The act does not afford degrees of protection bas

lipon differences of identity alone It is based upon the assumpti

tlu tadherence tothe rules ofthe game will of itself aid in promoti

our merchant marine and it is our sole re ponsibility to insure th

these rules are observed With this in mind we turn to a conside

tion of the issues athand

DISCUSSION AND CONCLUSIONS

The Oargo Oom mitrnent Under Section lJb

The petitioners urge that the only type contract lawful under t

Shipping Act where a

shipper commits himself to giye all or a fix

portion ofhis patronage to a

particular carrier is one approved by t

Commission under section 14b of the act

Indeed a dual rate contract is nothing but a cargo commitment by a shipper 

a carrier orgroupof carriers The heart of thedefinition ofadual rate contrac

is the commitment by the shipper of a fixed portion of patronage to the carri

This is done by MSTS form 4280 21 The Cargo Commitment Itfollows th

the form is a dual rate contract

Thus would petitioners bring the Cargo Commitment within the pu

view of section 14b which provides in releyant part

Notwithstanding any other provisions of this act on application the Fede

Maritime Commission shall after notice and hearing by order permit the u

by any common carrier or conference of such carriers inforeign commerce of a

contract which is available to all shippers and consignees on equal term

and cond tions which provides lower rates to a

shipper orconsignee who agre

to give all or any fixed portion of his patronage to such carrier or conferen

of carriers

It is by a literal reading and application of this language th

petitioners conclude that the Cargo Commitment is a contract cover

10 Northern PanAmerican Line A

8 v Moore McOormack lines Itc 8 Fl 1C 213 

229 1964

10 F M C
IN THE MATTER OF THE CARRIAGE OF MILITARY CARGO 77

by section 14b We may not according to petitioners resort to the

legislative history because the language of the statute is clear and

unequivocaJ on its face and the intent of Congress is relevant only to

resolve ambiguities We shall have more to say about this later but for

the monlent we shall restrict ourselves to a literal reading of the

statute

As petitoners point out the critical language is all or any fixed

portion of his patronage The Cargo Commitment deals with mini

mum amounts Under RFP 100 no Cargo Commitment would be for

all ofMSTS s patronage On a givenroute Thus we have the prob

lem ofequating fixed portion with minimum amount Inoutview

they are not synonymous

The patronage referred to in section 14b is quite obviously the

sum total of the particular merchant s foreign exports Ideally the

dual rate contract commits all of these exports to move on conference

vessels The very purpose of the exclusive patronage or dual rate

system is to tie to the conference as much ofthe total export movement

in a given trade as possible In thisway the conference counters com

petition from the so called independent or nonconference opetator u

Vhere the contract calls for all of the merchant s patronage no

problem is presented But what of the fixed portion referred to in

14b How is this to be determined Petitioners would equate fixed

portion with minimum amount We don tfind them synonymous

however

Aportion is an allotted part or a

part ofthe whole 12 The whole

is of course everything exported by the merchant in the trade and

the portion to be fixed is a part of that whole Let us see what hap

pens if we accept petitioners reading of fixed portion as minimum

amount Amerchant agrees to commit to a carrier 1 000 tons of cargo

under a contract running fora year Clearly this is some portion of

his patronage but is it fixed within the meaning of the statute

Obviously not Ifthe merchant exports a total of 2 000 tons over the

duration of the contract the portion represented by the 1 000 tons

is 50 percent or one half of hispatronage but ifthe merchant exports

lO OOO tons the portion representOO by the 1 000 tons committed

under the contract is only 10 perecnt orone tenth ofthe whole Clearly

the 1 000 tons cannot represent any fixed portion of the merchants

patronage However if the same merchant agrees to give the carrier

50 percent one half or 10 percent one tenth of his patronage the

JOrtion remains fixed whatever his total exports may be for the

USee FederaZ Maritnne Board v 18lJrandtB 00 S 4 U S 481 191S

12 Websters New Oollegiate Dictionary p 658

0 F M C
78 FEEnAL MARITIME COMMISSION

period of the contract Thus it is clear that fixed portion does n

equate with a specified or minimum amount st3lted in terms of to

rather as used in section 14b fixed portion is synonymous with 

percentage or an invariable pari of the whole A consideratiqn 

section 14 in its entirety buttresses thisconclusion

Section 14 Fourth makes itunlawful ror a common carrier by wa

to make any unfair or unjustly discriminatory contract based 

volume offreight offered Ifevery contract calling for a m

imum amount of volume is a contract for a fixed portion and 

cluded within 14b what is the contract which may be made under 

Fourth 18 Are we now to assume that contracts originally unlaw

only if unfair or unjustly discriminatory must now because of 1

be filed for approval and contain provisons concerning such thin

as the prompt release ofthe shipper orwhohas the legal right to sel

the carrier with whom the goods are shipped or diversion of goo

from natural routings And all thiswithout any referenceto 14 Fou

in the newly enacted 14b This is of course the way petitioners wo

have us read the section IfCongress had intended to alter the sta

of contracts based on volume of freight offered they certainly wo

have made such an intention clear Amendments to statutes are 

to be implied Wherever poss ble a statute is to be construed so as 

preserve intact all its provisions Ifsection 14b is read as petitione

urge then section 14 Fourth would at the very least take on a mean

different than it originally had That petitioners misread section 1

becomes even clearer when resort is had to the background and leg

lativehistory orthat section

In 1958 the Supreme Court in Federal Maritime Board 

sbrandtsen 00 354 U S 481 struck down the so called exclus

patronage dual rate contra tof the Japan Atlantic and Gulf Freig

Conference as unlawful under section 14 Third or the Shipping Ac

In sbrandtsen supra the Board had argued that the contracts 

question had to be lawful because the legislative history or 

Shipping Act dearly demonstrated thatCongress was well aware th

13 That the Cargo Commitment is a volume contract would seem beyond dispute T

the Cargo Commitment w1ll be awarded where the contracting officer finds it to be in 

best interest to commit the Government to ship a minimum volume of cargo for a

spec

number of sa1l1ngs on a particular route Thus if a carrler can offer his best rate i

is guaranteed say a minimum of 500 tons for each of his sa1l1ngs he would seek a C

Commitment Here there is no difficulty in equating minimum volume and minim

amount Thus contracts call1ng for a stated volume and contracts call1ng for a st

amount are but different ways of stating the same thing

l Section 14 Third makes it unlawful for a carrier to Retaliate against any shippe

refusing or threatening to refuse space accommodations when such are available o

resort to other discriminating or unfair methods because such shipper has patron

any other carrier or has filed a

complaint charging unfair treatment or for any o

reasons

10 F M C
IN THE MATTER OF THE CARRIAGE OF MILITARY CARGO 79

the use of suoh contracts as a

tying device was widespread in the for

eign commerce of the United States and it had not outlawed such

contracts even though it had specifically outlawed other tying devices

such as the deferred reba prohibitedin section 14 Second Inrejecting

this contention the Court pointed out that the contracts recognized

by Congress h8d been described as fol lows

Such contracts aremade for the account of all the lines in the agreement each

carrying its proportion of the contract freight as tendered from time to time The

oontracting lines agree to furnish steamers at regular intervals and the shipper

agrees to confine all shipments to conference steamers and to announce the

quantity shipped in ample time to allow for the proper supply of tonnage

The rates are less than those specfied in the regular tariff but the lines

generally pursue a policy of giving the small shipper the same contractrates as

the large shippers i e arewilling to contractwith all shippers on the same terms

In distinguishing th contracts from the exclusive patronage dual

rate contract then before it the Court said

These contracts were very similar to ordinary requirements contracts

They obligated all members of the Conference to furnish steamers at

regular intervals and at rates effective for a reasonably long period sometimes

a year The Shipper was thus assured of the stability of service and rates which

were of paramount importance to him Moreover a breach of the contract sub

jected the shipper to ordinary damages

By contrast the dual rate contracts here require the carriers to carry the

shipper s cargo only so far as their regular services are available rates are

subject to reasonable increase within 2 months plus the unexpired portion of

themonth after notice of the increase is given e ach Member of the Oonfer

ence is responsible for its own part only in this Agreement the agreement is

terminable by either party on three months notice and for a breach Ithe shipper

shall pay as liquidated damages to the Carriers fifty 50 per centum of the

amount of freight which the shipper would have paid had such shipment been

made in a

vessel of the Carriers at the Contract rate currently in effect Until

payment of the liquidated damages the shipper is denied the reduced rate and

ifhe violates theagreement more than once in 12 months he suffers cancellation

of the agreement and denial of another until all liquidated damages have been

paid infull

Almost immediately after theSupreme Court s decision in sbrandt

sen the Congress moved through moratorium or interim legisla

tion to preserve the legality ofthe dual rate system until such tjme as

it could enactpermanent legislation 15 In1961 Congress enacted Public

Law 87 346 75 Stat 762 which among otherthings added section

14b to the Shipping Act The connection between sbraJTU ltsen and

Public Law 87 346 is too well known to warrant detailing here 16A

16 Public Law 856U 85th Cong So 29116 Aug 12 19518 amended by Publlc Law

86542 86th Congo HR 10840 June 29 1960 further amended by Public Law 87 75

87th Congo 32154 June 30 1961

18 See however House Report No 498 87th Congo 1st sess 19 pp 3 7 and Senate

Report No 842 87th Congo liSt sess 1961 pp

1 11

I

10 F M C
80 FEDERAL MARITIME COMMISSION 

simple reading of the provisions of 14b makes it patently clear 

contract which was to be legal under theShipping Act notwithsta

ing any other provisions of the Act Y was the dual rate cont

before the Supreme Court in sbrandtsen But what of that cont

which the Supreme Court had round to be something distinct 

different from the dual rate contract the contract of which Congr

expressly stated its awareness of but did not outlaw the cont

which the Supreme Court found similar to ordinary requireme

contracts Such contracts had since 1916 been lawful under sec

14 Fourth so long as they werenot unfair or unjustly discrinlinato

We will not now read section 14b as altering the longstanding sta

of these contracts

Just as itis clear th3lt section 14b deals with the dual rate or ex

sive patronage contracts it would seem equally clear that the Ca

Commitment is just that kind of contract which the Supreme Co

found similar to anOrdinary requirements contract Thus itobliga

the carrier to furnish steamers a

specified amount of space at regu

intervals by sailing and at rates effective for a

reasonably lo

period sometimes ayear the specified period in the Cargo Comm

Inent is 1 year We conclude that the Cargo Commitment is not 

exclusive patronage or dual rate contract the use of which is to 

permitted subject to the provisions of section 14b but is a cont

based on volume of freight offered within the meaning of sec

14 FOurth Whether a particular Cargo Commitment is unfair 

uujustly discriminatory and thus unlawful under 14 Fourth is 

we have already pointed out dependent upon such things as the p

ticular amount of cargo committed and the specific rate fixed unde

That we have thus far said is of course in no way concerned w

nny special status of the Government as a shipper under the act 

wauld apply to all shippers Petitianers hawever make much Of 

absence from the Shipping Act Of any express pravision in the 

for reduced rates to the Gavernment Although petitioners cont

tions aremade in the context oftheir arguments under section 14b t

entail much more as we read them Petitioners point out that in 19

the Comptroller General in letters to the Hause l1erchant l1a

and Fisheries Committee and the Senate Cammittee on Comme

urged inclusion in the legislation enacting 14b of a provision sim

to section 6 ofthe Intercoastal Shipping Act 1933 S

At one point 

17 For the full text of sec 14b see appendix

18 Actually the requested provision would have added to the present tariff filing req

ments now in section 18 b a proviso to appear in subsection 3 thereof stating

Provided that nothing in this act shall prevent the carriage storage or handlin

property free or at reduced rates for the United States State or municipal governm

or for charitable purposes

o F M 
IN T E MATTER OF THE CARRIAGE OF MILITARY CARGO 81

Senate Committee acceded to the request and added the reduced

rate provision but this was dele d without explanation from the

final act as passed See Index to the Legislative Iistory Senate Doc

No 100 87th Congo 1st sess p

218

Petitioners argument reduced to its essentials is no exemption no

reduced rates to the Government In his lette the Comptroller

General cited United States v Associated AirTransport 275 F 2d 837

C A 5 1950 andSlickAirways v United States 292 F 2d 515 Ct

C 1951 and it is upon these cases that petitioners rely

The Slick and Associated cases both involved the proper charges to

be imposed for services already performed The issue in both cases as

the applicrubility of the carriers already published and filed tariff

rates to the particu lar services rendered In each case the Court s

decision rested upon the simple proposition that the filed tariff rate

alone governed the dispute Thus in the Associated case the Court

refused to consider contracts or iagreements or understandings or

promises whirch had not been filedwith the Civil Aeronautics Board

declaring The tariffs are both conclusive and exclusive 275 F 2d at

827 Again in Slick the Court ofClaims he dthat the rate specified in

a contra Ct was superseded by a new rate when the new rate vas

properly filed with the Civil Aeronautics Board stating The tariff

must control in the event of an inconsistency between it and the

contractofcarriage 292 F 2d at 51 Neithe casedenied the rig htof

the Government to reduced rate transportation when the reduced rate

was properly fi1ed and a

part of the pub lished tariff of the carrier

thus

under the Civil Aeronautics Act the Government had the right to

reduced rates only pursuant to tariffs lawfully published and filed by a

carrier under section 403 of the Act Slick 8tlpra at 518

Here there can be no question of a conflict between the tariff rate and

a tUal rate paid by the Government Under RFP 100 itself alll 1ates

agreed upon are to be published and filed with the CditiinisSiotr

under section 18 b of the act The authorities of the petitioners are

not relevant to the issue here 19

19 At common law the sovereign was of course entitled to reduced rate transportation

and any statute which would tend to restrain ordiminish the soverelgn s powers rlg tf or

interest Is not binding unless the sovereign Is named therein Emergency Fleet Coryora ion

v We8tem Union 275 U S 415 1927 Thus It would seem that any denial of reduced

rate transportation to the Government would have to be based on express statutory

language See also Guarantee Co v

Title Guaranty Co 224 U S 152 1912 Unite

State8 v California 297 U S 175 1936 Guaranty Trust Co v

US 304 U S 126

1938 Public Utilitie8 Commission of California U

S

335 US 543 1958 and Paul

v

U S 371 u s 245 1963

O F LC

299 843 0 68 7
82 FEDERAL MARITIME COMMISSION

Betitioners contentiops are based upon the assumption that unle

the Government is some type of preferred status shipper under t

act it is a

shipper withinthe meaning of section 14b and thus t

Oargo Commitment is a dua rate contract The legislative histo

makes it dear tous that shipper and consignee as used in section 1

have a distinct and somewh t

limited frame of reference

In the so caHed interim or moratorium legislation by which Co

greSs preserved the legality of the dual rate systenl until the ena

ment of Public Law 87346 see note 15 supra the term merchan

is used throughout 20Eventhe most cursory examination of section 1

itself reveals the commercial nature of the problems dealt wi

therein For example section 1 b 2 provides that a rate insofar as 

is under the control of the carrier must remain in effect for 3lt 1ea

90 days This was the period uniformly urged by exporters as nece

sary to their doing business abroad Section 14b 3 deals with t

legal right of the contract shipper to select the vessel Here aga

sale and purchase are involved and the provision relieves the shipp

from li3JbiEty under the dual rate contract when the terms of sa

vest the right to seloot the vessel in the purchaser or Consignee

Hearing Counsel MSTS and intervenor Sapphire Steamship Line

Inc all urge thatCongress could not have intended that so large a pa

of thetotal carriage ofthe American flag lines 21 be the subject of se

tion 14b without extensive

heariI gs on the nlatter These parties we

ab e to unearth only a

single referenceto military cargoa letter fro

the Sec ret ryofthe Navy in which he declined to comment on a pred

cessor hi ll of Public Law 81 346 because it would have no effect o

Depar

tment of Defense shipments and appea rs to be of prima

importanceto theDepartment ofCommerce 22

Moreover that the industry has long viewed the dual rate syste

a prely commercial tying device would appear from the histo

c l

treatmento f project rates The Report ofthe Investig ting Of

r

in E Finding Investigation No 8 Project Rates and Relate

lItIndeed tn our original rules dealing with the dual ratesystem under 14b we express

our understanding of the Intent of Congress when we termed the contract provided fo

Uniform Merchants Rate Agreement and used the term merchant throughout 

addltl l the uniform agreement expressly provided in article 7 b that goods not intend

or comJIiercial or Industrial use shipped by governments or charitable institutions cou

ake rat 8 l wer than contract rates and not constitute a violation of the agreement 

long as those rates were filed with tQe Commission

21 Sapphire points out MSTS cargo mounted to 282 6 mllllon out of a total of 646 

mllUon of earnings for the U S fiag merchant arineIn 1964 See the Impact of Gove

me i G ner ied Cargo On the U S Flag lloreign Trade Fleet for Calendar Year 196

Office of Program Planning Maritime Administration Department of Commerce Octob

1965 published by the JOInt Economic Committee 89th Cong 1st sess p 6

lit On the other hand an appendix to the Opening Brief of Hearing Counsel lists refe

ences to the legislative history too numerous to mention here all demonstrating t

omm r t8I Qature Of the problems and solutions under 14b

10 F MC
IN THE MATTER OF THE CARRIAGE OF MILITARY CARGO

Practices May 24 1965 shows that presently and overthepast there

have been innumerable contracts between ocean commo earriers a d

shippers for the transportation at discount rat of volu e move

ments of cargoes that are not for resaJe

2S The Investigating Officer at

page 14 of his report stated

One terst universally applied is the requirement that the CQllillodities shipped

under project rates may not be for resale by the shipper cOrislgnee qr anyone

else The cargoes do notenter the istream of commerce Shippers and Carriers

alike feel that this is allessential characteristic of project rates and that it

prevents unfair competition and unj ly discriminatory or pr ferential treat

ment betweenshippers

But if petitioners construction of section 14b is now adopted it

would seem obvious that project rate agreements as they have existed

historically would be illegal under that section 24 Indeed petitioners

sole reply to all arguments of past practice is that all ofthis was be

fore the law was changed Petitioners would have us oonclhde that

Congress by preserving the legality of one traditional and historic

practice intended by implication to outla v still another historic and

itwould appear equally venerable practice We will not alttribute such

an intent to Congress nor do we feel that even petitioners really

desire such a conclusion

On the basis of the above we conclude that the Cargo Commitment

proposed by MSTS is not a contract within the meaning of section

14b approval of which by the Commission is required before its use

may be permitted in the foreign cOmmerce of the United States In

sofaI as the petitions herein seek an order declaring t4e Cargo Com

mitment a contract within the meaning of section 14b they are denied

Oompetitive Bidding Under the First Pa ag1aph of SeJtio 1

Petitioners would also have us declare that the requirem eIi that

bids in response to RFP 100 must b submitted tInder seal cOlistttlftes

the use by a shipper of an unjust device or Q1ea s fQr obbiiribig or

attempting to obtain transportation at less thah the regul r rates

and charges which would otherwise be applicable on the lines pe

tioners within the meaning of the first paragraph of section 16 2t1

which provides

That it shall be unlawful for any shipper c n

sigpor consign forw

broker or other person or any officer agept or e ployee there f lmowli gly

23 As MSTS points out the m1l1tary cargoes shipped under Cafl ro Comm1tIB would hot

be for resale by anyone

2

They normally contain few or none of the required provis1on under set1on T4b und

it does not appear that they could and still accomplish the desired result

25 Petitioners seek the same declaration under section 16 Second which makes it arihi w

ful for a carrier to allow a shipper to use stich a device Resolution of tbe issue under the

first paragraph of section 16 w111 dispose of the issue under 16 Second

10 F M C

83 
S4 FEDERAL MARITIME COMMISSION 

and willfully directly ar indirectly by means af false billing false classificatio

f lse weighing false report af weight or by any ather unjust or unfair devic

ar means to abtain ar attempt to abtain transpartatian by water far praperty 

less than the rates ar chargeswhich would otherwise be applicable

Petitioners begin with the premise that thi provision is designate

to protect carriers from the loss of a

rightful source of revenue

through shipper coercion They point out that under RFP 10

non ofthe lines will know the rates which its competitor is bidding

The procedure is the petitioners argue essentially the sanle as r

quiring of each line that it submit a secret promise of a rebate Thu

petitioners urge a device or Dleans which accomplishes a r te d

parture through the use of concealment is automatically the unfa

device or means contemplated by thestatute

It is difficult to conceive of a greater misapplication of the fir

paragraph of section 16 Under the terms of RFP 100 the rates e

tablished must be filed with the Commission They are then of cours

available to the public both shipper and carrier alike Adlnittedl

no one will know the rates before they are published but it must 

asked how else can there be competition among the bidders It 

precisely because none of the lines will know the rates which i

eompetitor is bidding that the proposed program achieves its state

purpose of placing the carriage of military cargoes on a competitiv

basis 26 It is easy to see that by reading section 16 first paragrap

as affording carriers a

rightto know what their competitors are wi

ing to offer by way of ates petitioners have changed the provisio

from one designed to eliminate certain competitive practices whi

were deemed unfair or unjust into one that would eliminate virtua

all cQmpetitio

Certainly it is true that carriers may restrict competition amo

themselves under theShipping Act but they may do so only under t

terms and conditions of section 15 of the act There is nothing in t

act which requires them to restrict competition just as there is not

ing in the act which gives an individual carrier the right to kno

wh t rate a competitor may be willing to negotiate with a shipper 

order to get that shipper s patronage All that the act requires is th

when a carrier and a

shipper have agreed on a rate it must bepublish

in its tariff filed with the Commission and made available to all in 

way which is not unjustly discriminatory orunduly prejudicial etc

By the same token there is nothing in the act which requires 

shipper to deal with any anticompetitive combination of carrie

20 As petitioners themselves have pointed out we are not here concerned with whet

th new program with its in8istence on competition is good or bad but only its lawfulne

under the Shipping Act

10 F M C
IN TEE MATTER OF THE CARRIAGE OF MILITARY CARGO 85

established under section 15 The act leaves the shipper free to seek

the best rate he can get subject only to the act s prohibitions against

preference prejudice and discrimination and further provided that

the means employed by the shipper is not unjust or unfair within

the meaningof section 16

The basic purpose or section 16 is to insure adherence by a carrier

to his publicly announced rates not to foreclose any change in those

rates at the behest of an individual shipper Thus the first para

graph of section 16 makes itunlawful for a

shipper to submit a false

classification of the goods contained for example in a sealed carton

in order to bring his shipment within a

commodity class taking a

lower rate under the tariff thereby depriving the carrier of a

right

ful source of revenue Itis equally unlawful for the shipper to sub

mit a false statement of weight The purpose behind these prohibi

tions as well as those of section 16 Second is not far to seek It was

Stated by Congress

SEo ction 16 of the Shipping Act of 1916 I3S amended among other things pro

vides that it shall be unlawful for apy common carrier by water orother person

subject to that act to allow the transportation of property at less than the regu

lar rates then in forc by the common carrier by means of false billing or other

misclassification of freight false claims etc Thus it will be seen thatJwhile the

carrier is prohibited from allowing favoritism or partiality as among competing

shippers the carrier itself is afforded no protection against the practice of an

unscrupulous shipper forwarder broker orother delivering goods to thecarrier

for transportation in deliberately misdassifying packages of freight for the

purpose of obtaining a lower transportation rate at the expense of the carrier

The Senate measure therefore strengthens this portion of the Shipping Act of

1916 and goes further inproviding that such a practice shall neither be engaged

in by a common carrier by water nor by any shipper consignor consignees

forwarder broker or otherperson or any officer agent or employee thereof and

provides a penalty for violations of from 1 000 to 3 000 thereby effectually

removing the means left open to dishonest shippers or consignees whereby they

may take advantage not only of their competitors who do not indulge in the

practice of false billing and mi sclassification in order to receive a lower trans

portation rate for their freight but also of the carrier itself by depriVing the

carrier of a rightful source of revenue

The section clearly contemplates not that the tariff rate will not be

changed but rather that the tariff rate will ostensibly remain in effect

whilesome otherrate is actu lly pajd by the shipper Thus it is unlaw

ful to misclassify an article to obtain a lower rate 27 to rebate a portion

of the freight rate to aparticular shipper 28 to withhold information

from the carrier essential to a determination of the proper rate 29

or

Z1 Royal Netherland8 8 8 00 v FMB 304 F 2d 928 C A D C 1962

21 U 8 v Peninsular d Occidental 8 8 00 208 F Supp 957 S DN Y 1962

zt Prince Line Ltd v American Paper ElDports 1no 55 F 2d 1053 C 2 19

10 FMO
86 FEDERAL MARITIME COMMISSION 

to seek a lower rate or rebate by false billing 30 Inall ofthese instance

the tariff rate remained unchanged even after the unlawful practic

was employed Indeed it wasessential to theparticular scheme that th

tariff rate not be changed Under RFP 100 the rates will as we hav

already pointed out be filed with the Commission it is therefore im

possible for the shipper to obtain transportation at less than the rate

otherwise applicable i e the rates that the carrier is bound to charg

undersection 18 b 3

Moreover no strainingofthe principleofejusde1n generis can equa

the competitive bidding called for in RFP 100 with the type of unju

orunfair device or means contemplated in the first pa agraph of se

tion 16 On the basis ofthe foregoing we conclude that the competitiv

bidding embodied in RFP 100 is not an unjust or unfair device 

means within the meaning of the first paragraph of section 16 31 a

to the extent the petitions here seek an order declaring RFP 100 u

lawfulthereunder they are denied

Ompetitive Bidding Under the Pacifie Westbound and AGFBO

Agreernents

Certain petitioners 32

urge that their participation in the propos

competitive procurement program would place them in violation 

their obligations under Agreement No 57 which establishes the Paci

Westbound Conference Article 1 of Agreement No 57 requires th

a 11 freight or other charges for the transportation of cargo in t

trade shall be charged and collected by the members strictly 

accordance with the tariff Item No 1 of Local Freight Tariff N

1 Y FMC1 the tariff which these petitioners are bound to obser

under the agreement provides that Member lines are permitted 

negotiate special rates or cha rters with the Military Sea Transport

tion Service Petitioners argue however that this provision cann

be distorted to authorize the type of competitive dealings with t

military called for in the MSTS invitation for competitive proposals

Itis difficult to determine just what petitioners seek from us und

this argument for they go on to say

These lines recognize that this issue is necessarily subsidiary to the statuto

issues We would assume that the conference would revise the relevant tariff r

to authorize response to RFP 100 should this Commission conclude that 

practice is not violative of the Shipping Act Alternatively if the Commiss

were to conclude that the practice is violative of the Shipping Act the mean

of the tariffprovision would bemoot

80 Hohenberg Br08 Oompany v FMO 316 F 2d 381 C AD C 1963

Slitistherefore lawful under section 16 Second as well

81 American Man Line Ltd American President Lines Ltd Pacific Far East L

Inc States Steamship Co and Waterman Steamship Corp

10 F M C
IN THE MATTER OF THE CARRIAGE OF MILITARY CARGO

At first blush this would appear a simple straightforward statement

Under it should we as we have find RFP 100 lawful the conference

at petitioners request would simply substitute some appropriate lan

guage in the tariff rule to render clear the US flag lines freedom to

respond to RFP 100 The argument however does not stop here In

arguing that negotiate could not be read to include competitive

bidding petitioners state that the conference did not intend to sanc

tion the advent ofacompetitive innovation such as RFP 100 with its

highly disruptive potential in the trade Indeed petitioners argue

that it is highly unreasonable to conclude thatthe conference intended

any such thing Moreover petitioners indicate that their assumption

that the conference will amend the rule is placed on shaky ground by

our bifurcated decision on their petition for declaratory order Thus

their assumption is stated yet another way

If competitive bidding for MSTS cargo were finally held lawful we should

suppose it likely that the PWC tariff rule would be amended to permit its D S

flag member lines to compete We have however no idea what its membership

would conclude if competitive bidding for MSTS cargo were held lawfU1 with

respect to three arguments with decision deferred to another proceeding upon

another three

Whatever petitioners precise position may be the implications in

volved are quite clear That the foreign flag segment ofthe conference

may restrict or refuse to sanction a particular method by which its

U S flag member lines may deal with the U S Government on the

terms under which cargo reserved by law to those U S flag lines is

to be carried Ve think it patently clear that any agreement or any

rule promulgated under it which could properly be construed to

achieve such a result would be contrary to the public interest withi r

the meaning of section 15 Itwould seem equally clear that under such

circumstances we should have to withdraw ourapproval of the agree

ment In all fairness however it should be remembered that no amend

ment has yet been sought We assume that these petitioners will now

Reek prompt amendment of Item No 1

SS

The Atlantic Gulf American Flag BertJh Operators S4 intervened

in thisproceeding apparently for thesole purpose of asserting that we

may not disapprove cancel ormodify theAGAFBO agreement in this

proceeding i e a full evidentiary hearing would be necessary before

any such action could be taken We say this is apparently their only

purpose because they do not stop here or at least it would seem that

83 This is of course not to be taken as a determination on our part that the construction

plaCed upon Item No 1 by petitioners is the proper one Since RFP 100 does not as yet

extend to the trade covered by the PWC petitioners would have ample time to obtain an

amendment

86 Established pursuant to Agreement FMC No 8086

10 F M C

87 
88 FEDERAL MARITIME COMMISSION 

they do not For while they admit that article 1 of the agreement 

permissive and merely provides thatthe member lines may negotiat

rates with MSTS they further point to article 2 a which provide

that all actions taken under the agreement shall be binding on a

parties thereto As these petitioners themselves admit the rates 

tiated with MSTS are embodied in contracts between MSTS arid th

individual operators the fact that these contracts have n6t as ye

been canceled by MSTS although they provide for cancellation o

60 days nptice by either party is we think irrelevant in this proceedin

The outstanding contracts certainly do not prohibit agreement upo

new contracts and we can only assume that the present contracts w

be canceled before or aJt the time of entry into the agreements In an

event there is nothing in Agreement 8086 as we read it to prohibitth

parties thereto from responaing to RFP 100 nor does it appear th

they tl1emselves view it as a bar thereto Since we find it unne essa

to take any action with respect to Agreement 8086 the issue of wh

type of proceeding is necessary before such action may be taken 

moot

Forthe above stated reasons the petitions before us insofar as the

request th twe issue an order declaring any of the petitioners here

prohibited from responding to RFP 100 because of any agreement a

proved undersection 15oftheact are denied

Therefore for the reasons stated herein we find that RFP 100 

not unlawful under section 14b or the first paragraph of section 1

and further that no agreement approved under section 15 and cite

to us herein would prohibit any of the petitioners from responding 

RFP 100 inits present form andcoverage

Accordingly the petitions for declaratory order are denied

JAMES V DAY concurring

Iconcur that RFP 100 containing the terms and conditions und

which the Department of Defense proposed to extend its competiti

procurement program to ocean transportation is not unlawful tind

section 14b or the first paragraph of section 16 and further that 

agreement approved under section 15 and cited in this proceedin

would prohibit any of the petitioners from responding to RFP 1

in the form and coverage described in this record Iwould emphasiz

however thatin our concernwithshippers as wellas other persons

covered by the shipping laws which we administer we must also ma

tain a

vigilant watch over the consequences of regulatory determi 

tions on our carriers As part of our commerce the carriers are entit

10 FM C
IN THE MATTER OF THE CARRIAGE OF MILITARY CARGO 89 

to the full protection of the Shipping Act In this regard with the

establishment of competitive bidding for low cost service to the Gov

ernment we should be constantly mindful of the longer run as well

as the immediate results Further in future determinations of the

reasonableness ofrates filedwith us relative to the competitive bidding

procedures as they may be developed it is pertinent to weigh the

effect on U S flag carriers not contracting for cargo as well as to

consider the effect on the financial prospects of those carriers so

contracting

Signed Thomas Lisi

Secr tary

10 F M C
ApPENDIX

SEC 14b Nothwithstanding any other provisions of this Act o

application the Federal Maritime Commission hereinafter Com

mission shall after notice and hearing by order permit the u

by any common carrier or conference of such oarriers in foreign com

merce of any contract amendment or modification thereof whic

is available to all shippers andconsignees on equal terms and condition

which provides lower rates to a shipper or consignee who agrees to giv

all or any fixed portion of his patronage to such carrier or conferenc

of carriers unless the Oommission finds that the contract amendmen

or modification thereof will be detrimental to the commerce of th

United States or contrary to the public interest or unjustly discrim

natory orunfair as between shippers exporters importers or ports o

between exporters from the United States and their foreign compe

itors and provided the contract amendment or modification thereo

expressly 1 permits prompt release of the contr t

shipper from th

contract with respect to any shipment or shipments for which th

contracting carrier or conference of carriers cannot provide as muc

space as the contract shipper shall require on reasonable notice 2

provides that whenever a tariff rate for the carriage ofgoods under th

contract becomes effective insofar as it is under the control of th

carrier or conference of carriers it shall not be increased before 

reasonable period but in no case less than 90 days 3 covers on

those goods of the contract shipper as to the shipment of which h

has the legal right at the time of shipment to select the carrier Pro

vided however That it shall be deemed a breach of the contract i

before the time of shipment and with the intent to avoid his obliga

tion under the contract the contract shipper divests himself or wit

the same intent permits himself to be divested of the legal right t

select the carrier and the shipment is carried by a carrier which 

not a

party to the contract 4 does not require the contract shippe

to divert shipment of goods from natural routings not served b

the carrier or conference ofcarriers where direct oarriage is available

5 limits damages recoverable for breach by either party to actua

damages to be determined after breach in accordance with the prin

ciples of contract law PlIovided howeve l That the contract ma

specify that in the case of a breach by a contract shipper the damage

90 10 F M C
IN THE MATTER OF THE CAR IAGE OF MILITARY CARGO

may be an amount not exceeding the freight charges computed at the

contractrate on theparticular shipment less the cost ofhandling 6

permits the contract shipper to terminate at any time without penalty

upon 90 days notice 7 provides for a spread between ordinary rates

and rates charged contract shipperS which the Commission finds to be

reasonable in all the circumstances but which spread shall in no

event be more than 15 per centum of the ordinary rates 8

excludes cargo of the contract shippers which is loaded and car

ried in bulk without mark or count except liquid bulk cargoes other

than chemicals in less than fullshipload lots Provided however That

upon finding that economic factors so warrant the Commissron may

exclude from the contract any comrriodity subject to the foregoing ex

ception and 9 contains such other provisions not inconsistent here

with as the Commission shall require or permit The Commission

shall withdraw permission which it has granted under the authority

contained in this section for the use of any contract if it finds after

notice and hearing that the use of such contract is detrimental

to the commerce ofthe United States or contrary to the public interest

or is unjustly discriminatory orunfair as between shippers exporters

importers or ports or between exporters from the United States and

their foreign competitors The carrier or conference of carriers may

on ninety days notice terminate without penalty the contract rate

system herein authorized in whole or with respect to any oommodity

Provided however That after such termination the carrier or con

ference ofcarriersmay not reinstiture such contractrate system orpa

thereof so terminaJted without prior permission by the Commission in

accordance with the provisions of this section Any contract amend

ment ormodification ofany contract not permitted by the Commission

shall be unlawful and contracts amendmen and modifications shall

be lawful only when and as long as permitted by the Commission be

fore permission is granted or after permission is withdrawn it shall

be unlawful to carry out in whole or in part directly OT indirectly any

such contract amendment or modification As used in this section

the term contract shipper means a person other than a carrier or

conference of carriers who is a party to a contract the use of which

may be permitted underthissection

91 
FEDERAL MARITIME COMMISSION

DOCKET No 66 14

AGREEMENTS No 4188 No 4189 No 5080 No 7550 No 7650

AND No 7997

Decided August 17 1966

The discontinuance of the trade involved is solely due to governmental embarg

and on the facts and circumstances of this record approval fthe agreemen

is continued

Pooling Agreement No 7997 disapproved and canceled because of withdraw

of members

John R lJfahoney and John G JltfcGarrahan for respondents

Donald J Brunner and San1Juel B Nemirow as Hearing Counse

REPORT

By THE COMMISSION John HarlIee Ohairman James V Day Georg

H Hearn Oommissioners 2

This proceeding was instituted on March 10 1966 to determin

whether these conference and pooling agreements all involving th

trade between the United States and Cuba remain subject to the pro

tection of section 15 of the Shipping Act 1916 as amended since th

circumstances warranting their continued approval have apparentl

ceased to exist The conferences by affidavit and memorandum of law

urge continued approval of the agreements Hearing Counsel say th

agreements should be disapproved Neither the conferences norHear

ing Counsel sought oral argument and accordingly none was heard

FACTS

The conference and pooling agreements in question are domicile

in the United States All the agreements have U S flag carrier mem

1 No 4188 Havana SteamShip Conference No 4189 Gulf and South Atlantic Havan

Steamship Conference No 5080 Havana Joint Agreement No 7550 Havana Northboun

Rate Agreement No 7650 Santiago de Cuba Conference and No 7997 West Gulf Havan

Pool Agreement

Commissioner Ashton C Barrett did not participate

10 F M C

92
AGREEMENTS

bership The approved agreements have covered the Cuban trade for

periods extending from 11 to 31 years Trade with Cuba had been

substantial prior to the ascendancy Ofthe present de facto regime De

spite the fact that trade ceased between Cuba and the United States

in 1962 the conferences maintain offices current tariffs on file with the

Commission and residual funds on deposit in New York and New

Orleans banks Duarate cOntracts as approved by the Commission

have been printed and filed All the general orders promulgated by the

COmmissiOn have been complied with and recently amendments were

flIed in accordance with the latest general order SOme of the confer

ences have been participating in prOceedings before the Commission

during the embargo the latest having been served On June 28 1966

ProPOsed Rule Covering Time Limit On The Filing Of Overcharge

Claims 10 FM C 1 DOcket NO 65 5 Everything has been main

tained in conformity withthe COmmission sdirective in The Dual Rate

ases 8 F M C 16 1964 and rel ted proceedings

DISCUSSION AND CONCLUSION

The conferences argue essentially that approval should be contin

ued On a stand by basis until resumption of the trade It is averred

that precedent may be found in thesuspension ofoperations of certain

cOnferences serving Spain during the Spanish Civil ar or in the

abeyance Ofservice under the Trans Atlantic Passenger Conference

Agreement and through stand by arrangements maintained for other

conferences affected by the Outbreak OfhOstilities in the SecOnd World

ar

Hearing Counsels position is that approved section 15 agreements

may nOtbe suspended or stayed citingas authority Pacific Ooast Euro

pean Oonference PaY1nent ofBrokerage 5 F MB 65 1956 Hence

they assert nothing can be done but to disapprove these agree

ments The resolution of this primary issue will be dispositive of the

proceeding

The cessation of trade to which these conference agreements are

applicable would under Ifediterraneant Pools Inve8 gation 9 F MC

264 Docket No 1212 andAg reem ent No 876t5rOrder to Show OaJU8e

Docket No 6542 9 F MC 333 certainly seem to constitute that lack

of transportation circumstances which would warrant disapproval of

the agreements Add to this the dictum in Pacific Ooast supra that

suspension or stay of section 15 agreements would be tantamount t0

disapproval and there would appear to be no option but to disap

prove these agreements on the basis of the facts presented and the

Ostensibly applicable la y Such is not the case however

10 F M C

93 
94 FEDERAL MARITIME COMMISSION

Thile Mediterranean Pools is appropriate to determinationswheth

agreements are to be accorded continued approval as well as initi

approval yet both it and Agreement 8765 are not precedent with r

spect to the issue at hand The situation in Mediterranean Pool8 an

Agreement 8765 arose because of voluntary action of the conferenc

members The situation presently being considered is due to circum

stances outside the control of the conference members Al 

Pools dealt with a proposed pooling agreement designed to curb ma

practices in the trade and Agreement 8765 concerned a defunct agre

ment contrived originally to suppress a rate war Here the cessatio

of trade was brought about by sovereign act Itwould be illogical an

indeed inequitable for an agency of the very government which im

posed the embargo to disapprove the agreements of the conference

involved in the trade when they weretotally without responsibility fo

any part of the embargo As the conference activity before the trad

ceased was within the standards of the Shipping Act there is no rea

son to presume that there will be anything objectionable about it whe

the trade begins again Finally the continued approval of the agre

ments will facilitate the rapid resumption of service whell the embarg

is lifted Accordingly and for the reasons stated herein approv al o

the conference agreements is being continued

vVith regard to the Vest Gulf Havana Pool Agreement Agreemen

No 7997 as only one carrier remains the approval hitherto accorde

it is being withdrawn and it is herewith disapproved

An appropriate order will be entered

Vice Ohairman JOI N S PATTERSON concurring separately

Iconcur in the conclusion that reasons for disapproval have no

been proven

ORDER TO SH01V CAUSE

ORDER

This proceeding having been instituted by the Federal Maritim

Commission and the Commission having fully considered the matte

and having this date made and entered of record a report containin

jt s

findings and conclusions thereon which report is hereby ref ne

to and made a

part hereof

It is ordelred ThatAgreements No 4188 No 4189 No 5080 No

7550 arid No 7650 shall continue to be approved and

Itig f

l rther ordered That Agreement No 7997 be disapproved an

is hereby canceled

By the CommisSion

Signed THOMAS LISI

S eJletary

10 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 916

INVESTIGATION OF PRACTICES OPERATIONS ACTIONS AND AGREEMENTS

WEST COAST OF ITALY SICILIAN AND ADRIATIC PORTS NORTH

ATLANTIC RANGE TRADE

Decided August 19 1966

Three carriers by entering into and carrying out an agreement to pay a 3 percent

commission to certain selected forwarders which was unauthorized by any

section 15 agreement violated section 15 by failing to file the agreement

and carrying it out prior to approval

No other violations have been shown

lVarner W Gardner and Robe1 t 1 Basseches for respondent

American President Lines Ltd

Ralph D Ray Oarl S Rowe Paul 111 Bern3tein Th011Ul8 F

Daly Franklin G Hwnt and Rainer N Greeven for respondent

Americ8Jn Export Isbrandtsen Lines Inc formerly American Ex

port Lines Inc

Frarwis J Greene and George F Roberts for respondent Prudential

Steamship Corp

Horace 111 Gray for respondent Home Lines Inc

Herrnan Goldman andSeynwur H Kliger for respondent Fern Ville

Mediterranean Lines

Thomas K Roche Sanfo1 d O 1I1iller and WiUian1 F Faison

for respondents Concordia Line and Torm Lines

Ed oin Longcope and David IGilchrist for respondents Hellenic

Lines Ltd and Zim Israel Navigation Co

Burton H lVhite and Elliott B Nixon for respondent Fabre Line

Robert J Nicol and Joseph J L01nbardi for respondent Fassio Line

Leonard G Jame8 Robert L Harmon and F Conger Fa1CeU for

respondents Costa Line and Italian Line

Edwa1 d Aptaker John E OOgiYWf Fa111k Go m7ey lla olrL

lVitsaman H B il1utter RobeTt T Bl 1 kwf7 7 Donrr7rl J fJill171 T a nd

NOJlrwm D I line as Hearing COll l l

10 F M C

9
96 FEDERAL MARITIME COMMISSION

REPORT 

By THE COMMISSION

The Federal Maritime Board instituted this proceeding on Se

tember 19 1960 to investigate certain alleged violations of theShippin

Act 1916 46 D S C 801 et seq by members or former members 

the vVest Coast of Italy Siciiian and Adriatic Ports North Atlant

Range Conference VINAC The proceeding was specifically d

signed to determine 1 whether respondents violated section 14 Fir

of the Act 46 U S C 812 by paying or agreeing to pay deferre

rebates 2 whetl er respondent violated section 15 of the Act 

U S C 814 by entering into and carrying out ltgreements concerni

deferred rebates special rates or other prefer enti l

arrangem nts 

3 whether respondents violated section 16 First or Second of th

Act 46 U S C 815 by discriminating between persons or allowin

persons todbtain transportation at less than the regular rates by a

unjust orunfair device ormeans

FACTS

From the very beginning of the TINAC Conference in 1934 th

trade has been characterized by unrest The source ofthis unrest stem

from rebating and continuous rumors of malpractices Many facto

aggravate the situation The trade has not grown and yet an exce

number of carriers has participated in it The number of forwarde

servicing Italian shippers is excessive Competition among forwarde

and carriers is consequently intense Traditionally rebating and oth

concessions are widely employed Italian law specifically sanctionssuc

practices

The Italian forwa rder has played perhaps the most significa

role in history of the troubled VINAC trade 1

Because of congeste

facilities at Italian ports considerruble caremust be exercised in sche

uling cargo for loading aboard vessels Goods are transported fro

inland points by rail truck or horse cart and it is imperative that a

rival be coordinated properly with vessel schedules For these reason

the Italian exporter relies almost completely on the forwarder to exp

dite shipment of his merchandise The forwarder performs a varie

of services including reserving space aboard ship arranging for tran

portation from shipper s warehouse to vessel arranging custom clea

ance preparing shipping documents and providing weighing a

marking Exporters customarily pay to forwarders a

single lump su

payment or forfait which includes payment for the above servic

J

In Italy the forwarder is known as a caricatore which literally translated mea

loader Although sometimes the word Is translated shipper the actual shipper 

ownerof the cargo Is designated as the exporter

10 F MO
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 97

as well as ocean freight The forwarder generally assumes responsi

bility for the transfer of the goods from interior point of origin in

Italy to ultimate destination abroad and usually selects the ocean car

rier This control over the routing of cargo places the forwarder in

an advantageous bargaining position with the carrier with respect to

brokerage arid rebates The forwarder s position is further strength

ened by Italian law which requiresthe employmeht ofa licensed broker

in the exportation ofgoods from Italy and treats the forwarder as the

owner of the merchandise for customs purposes Italian law does not

prohibit rebating which has traditionally been employed in the Italian

trades

Competition among forwarders in Italy is intense with the number

of forwarders servicing the WINAC trade greatly in excess of the

needs of the market In 1952 the conference listed 152 forwarders

for the ports of Genoa Leghorn and Naples Approximately 10 per

cent of these accounted for about 50 percent of the business At other

ports a small minority of forwarders also handle thebulk ofthe husi

ness which forces many small firms to compete intensely for the resi

due Forwarders therefore are induced to seek reductions and con

cessions from carriers and have maintained that such measures are

necessary in order to stay in business

In Italian trades other than those involving the United States de

ferred rebate systems are common Despite the fact that the vVINAC

Conference Agreement forbids discounts payments orreturns to ship

pers without unanimous consent of all parties and provides that tariffs

shall he strictly observed concessions and r bates of one type or an

other have consistently plagued the VINAC trade These practices

are traditional in Italy with respect to transportation generally and

are not unlawful underItalian law Effective curtailment of such prac

tices in the WINAC trade is hindered because of their existence else

where since forwarders can be rewarded for VINAC cargo by large

rebates concessions and commissions in other trades

EMh of the respondents was at least for part of the period under

investigation a member of WINAC 2

Prior to World Tar II conference members paid a standard 4

percent brokerage to Italian freight forwarders Inaddition the mem

2 The Commission approved the basic agreement on Mar 23 1934 Originally there were

nine member lines but membership has fluctuated since ranging from alow of flve members

before the war to 24 in 1960 Originally the Board named over 30 carriers as respondents

but only 14 remain 12 foreign flag lines Torm Linea Hellenic Lines Ltd Concordia

Line Fern Ville Mediterranean Lines Itallan Line italla Cos Line Home Lines

Achllle Lauro Zim Israel American Lines Fabre Lines Fass10 Line and United Arab

Maritime Co and three U S flag llnes American Export Isbrandtsen Lines Inc

Export American President Lines CAPL and Prlldential team8blp Corp

10 F M C

299 843 0 68 8
98 FEDE RAL MARITL IE COMMISSION

bel3 paid a special commission in varying amounts to certain forwa

ers The members alsO operated under a deferred rebate system 3

In 1947 foreign flag lines again began to enter the trade and 

before TINAC authorized payments to forwarders of 4 percent h

kerage the standard amount in Itaian export trades

Between 1948 and 1952 conference memhers authorized an ad

tional commission of 3 percent to forwarders The avowed purpose 

the i

percent commission was to tie the forwarders to the member li

or to insure their loyaltyThe carriers made payments through 

conference office sometime after due for example the commissions 

1952 were not paid until 1955 Before forwarders could he paid 

conference secretary was obliged to obtain freight reports from e

line at each port compile them and bill and receive funds from 

carriers The system did not work smoothly and considerable ti

elapsed before the information could be compiled Although the me

ber lines were not too happy with the system and considered its ter

nation after 1950 it was allowed to continue for fhe benefit of 

forwarders

The commission wasto be paid only to those forwarders who gen

ated at least 5 000 ofbusiness However the conference administer

this rule flexibly and paid commissions to many forwarders who 

not reach the minimum requirement The conference did not pay co

missions on certain low rated tariff items and goods of Swiss orig

In addition to the regular i

percent commission some forwarde

received extra payments if a

surplus nccumulated in the nrrierq co

mission account Although the conference filed nothing pertaining 

the 3 percent commission with the Federal 11aritime Bonrcl the st

wasgeneralIy aware ofit

The smaller lines opposed the 3 percent system One Scandinav

line believed that it was contrary to the Shipping Act 1916 Ilowev

an official of APL believed that these lines opposed the system 

cause it limited their ability to offer special concessions

The last year in which the commission system operated wHh co

ference support was 1952 Although forwarders encouraged its co

tinuation on three occasions the conference rejected proposals to p

the commission for theyear 1953 The conference formally voted do

the system at an owners meeting on May 1 1956 despite oppositi

by APL and Export who wanted commissions paid openly n

covertly

With the termination of the 3 percent commission system the thr

major lines in the trade APL Export and Italia became fearful 

3

The U S Maritime Commission was apparently informed of this on at least th

separate occasions

10 F M C
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 99

their competitive position The Big Three believed that rebating was

rife among their smaller competitors The excessive number of car

riers in the trade created an atmosphere of suspicion with respect to

malpractices Because of the elimination of the 3 percent commission

the forwarders who were favorable to any arrangement which would

authorize additional commissions put additional pressure on the car

riers for rate concessions Because ofthese conditions on January 20

1954 representatives of the Big Three agreed to pay a commission

of 3 percent to seven forwarders mutually agreed upon in lieu of the

discontinued conference 3 percent commission Although the forward

ers selected were not the largest in the business they were old and

valued firms which had been loyal to these lines in the past and it

washoped would provide a nucleus of high paying cargo

As with the defunct conference commission system commissions

were to be paid on a deferred basis in the expectation that the for

warder would remain loyal to the carrier For example commissions

that accrued to forwarders for 1954 were paid in August 1955 Al

though the agreement was designed to secure a tie to the carriers

forwarders who routed cargo via other carriers were not necessarily

barred from receiving accrued commlssions Moreover the list of

recipient forwarders was subject to enlargement and four new bene

ficiaries were added in 1955 The Big Three also agreed to treat

each forwarder on the list identically The agreement was not filed

with the Federal Maritime Board

The Big Three entered into this agreement in order to combat the

other carriers in the trade who were rebating and to preserve their

positions in the trade To some extent this Vas accomplished For the

year ending April 30 1956 APL and Export were first and second

in tonnages loaded per sailing at Genoa and Leghorn

Despite the beneficia1 effects of the initial three line agreement in

preserving their competitive positions forwarders continued to pres

sure the lines for futher concessions during 1956 4

APL s agents in

Italy reported that foreign flag lines were aheady paying brokerage

to replace the conference s terminated commissions API was in

formed that Export and Italia had offered to pay commissions even

if the conference did not Thus API wasconcerned not only with the

practices ofthe smaller lines but also with the conduct ofthe paTties

to the 1954 Big Three agreement Furthermore rumors circulated

concerning 10 percent rebates and other concessions offered by the

smaller lines Consequently the Big Three felt compelled again to

act in concert to protect themselves

4

The conference commission system continued only through 1952 and was formally terminated in1956

10 F M C
100 FEDE RAL MARITIME COMMISSION

Representatives of Export and APL conferred in Genoa in 

effort to ameliorate these aggravated competitive conditions On Oc

ber 20 1965 these lines and shortly thereafter Italia agreed to p

additionalcommissions not in excess of3 percent to selected forwarde

The paTties prepared schedules for payments alterable only by agre

ment Although the three lines attempted to limit the amou t 

payment and the number of recipient forwarders nine of the fo

warders included in the 1956 agreement were still participating 

the earlier agreement so as to be eligible to receive an aggregate 

6 percent in commissions in addition to the stanclard 4 percent 

age The agreement was not filed with the Federa IVlaritime Boa

The Big Three designed thisagreement to preserve their positio

in the trade and ag ain to some extent they were successful For 

year ending April 19fi7 APL and Export lifted 9 percent R0 perce

and 60 percent of the eargo at Genoa Leghorn and Napl

respectively

rr Frazier Bailey who was appointed l

lanaging Director of E

port in late 1957 provided stimulus for the termination of the B

Three agreements Mr Bailey felt that the Big Three commiss

system was illegal and took steps to eliminate it Export and Ita

terminated the agreements on December 31 1957 APL agreed 

terminate but preferred a later date either out of fear of busin

losses or consideration to forwarders who had made bookings in r

ance on the commissions APL also had misgivings since repo

were circulating which indicated that carriers might continue to gr

concessions Nevertheless APL selected January 31 1958 for termi

tion Itis not clear when final payments wereactually made by Exp

and Italia However APL s last payment nnder the system occur

in August 1958

Both APL and Export hoped that the conference would reestab

a commission system to offset the demise of the Big Three agr

ments but the conference took no actiOll

Therefore the elim ination of the Big ThI e comrnissions 

surprisingly was followed by for varder complaints For instan

forwarders inrormed APL that other carriers would resort to conc

sions tha the Swiss traffic would be lost and that loss or extra co

missions would jeopardize APL s operations in sqch a hig

competitive business

Vithout extra commissions APL was convinced that it wonld 

cargo From 1958 through 1960 a period during which no extra c

mission systems were in effect APL share or VINAC cargo decli

from 16 percent to 14 percent to 10 percent Export also suffere

noticeable decrease in tonnages loaded at Genoa Leghorn and Nap

10 F M 
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 101

in the summer or 1960 although carryings or other lines declined as

well APL believed that the attractiveness or its superior service was

being offset by malpractices or the roreign flag lines Other lin s were

also disturbed over the existence or malpractices among conference

members duringthe period 1958 60

In December 1960 the conference secretary advised the Federal

Maritime Board that the trade was experiencing difficulty particu

larly because or the overwhelming excess of the services offered by

the Member Lines in respect or the necessities or the trade 5 Con

Terence statistics showed an increasingly excessive number or calls by

conference vessels at Italian ports ofloading

By the end or 1960 unrest among VINAC members had become

intense One roreign flag carrier representative notified the Federal

MaritimeBoard that malpractices werecontinuing among the carriers

and were causing instability in rates 6

He described the situation to

be so bad that the WINAC is being looked upon in many quarters as

ararce

Even prior to 1958 when the Big Three agreements were still in

effect WINAC took certain steps to effect reform For instance the

conference appointed a Controller ofCargo to veriry descriptions and

valuations of cargo made by shippers The Controller since he could

but make random cheeks on rare occasions was ineffective A Sole

Arbiter was also considered but thisplan railed to win necessary sup

port among member lines Cancellation or contracts with persistently

dishonac t rorwarders was suggested but never carried out 7

Finally

the conrerence placed payment of extra loading and overtime

expenses by carriers to shippers under conference control

These attempts at reform were followed by more vigorous efforts

after 1957 when the Big Three agreements terminated In 1958 the

conference engaged the Atlantic Cargo Inspection Corp ACIC to

conduct spot checks on weights measurements and classifications

ACIe reports indicated that violations were widespread The con

rerence reported to the Federal MaritimeBoard on July 31 1961 that

ACIC uncovered 325 misdeclarations out or 923 spot checks ACIC

further discovered instances of mism surement at Italian ports of

loading although the conference had supposedly engaged sworn

measurers at Leghorn and Genoa

5 The conference frequently notified the staff of the Federal Maritime Board of the

unrest due to malpractices duriug 195860

6

The alleged malpractices were mismeasurement of cargo reduction of values of cargo

in the case of ad Valorem payment of freight improper classification absorption of demur

rage of l1ghters aud trucks aud fiuancing forwarders and shippers without interest

1 The Federal Maritime Board s sta1r informally Indicated that this action might be

unjustly discriminatory and suggested arbitration

10 F M C
102 FEDERAL MARITIME COMMISSION

An owner s Police Committee was next established by the confere

to investigate allegations of malpractices determine violations 

impose fines The only proceedi g

of record brought before the Po

Committee however wasdropped for lack of evidence

On Tanuary 22 1958 a special owners meeting was held in whic

pledge to observe all conference rules regulations and tariffs 

unanimously adopted Similar pledges were adopted at subsequ

meetings but were not heeded in practice On October 20 1960 

conference appointed the accounting firm of Price Waterhouse 

as a neutral body to police and enforce VINAC regulations The i

was suggested several years earlier at conference meetings but s

time elapsed before the conference could obtain the approval of 

Federal Malitime Board which required certain alterations in thep

posed agreement The system did not work as well as had been exp2c

and the resignation of the accounting firm was accepted March 

1962 No succesSOr was appointed

Widespread rumors regarding continued malpractices persua

Export and APL among others to tender their resignations fr

VINAC On September 8 1960 these lines and Prudential and C

cordia gave the required 90 days notice of resignation Other l

indicated their intent to resign unless rates were opened or the exis

resignations were withdrawn A series of special meetings were h

in an effortto prevent dissolution of VINAC The establishment 

neutral body pledges of adherence to conference regulations 

expressed intentions to seek reform persuaqed the resigning mem

to reconsider and the resignations were withdrawn s

This was d

although APL was advised by its agent in Italy not to remain in 

conference until rebating by otherlines ceased

Early in 1961 the conference approved a plan to pay extra c

missions to all forwarders in exchange for compliance by forward

with WINAC regulations Payment of commissions was to be 

ferred and forwarders were expected to remain faithful to confere

regulations Some time elapsed pending consideration of the sys

by the Federal Maritime Board It was then dropped

One of the most serious steps taken to reform the trade was 

opening of rates among the conference members in 1961 whieh 

mitted each member to fix rates independently APL believed that o

rates would curtailrebating and would restore itto a position ofpro

nence based upon its superior service To some extent this was realiz

APL s share of total VINAC traffic rose from 10 percent in 1

to 11 percent the following year despite a general decrease in t

8 WINAC on Oct 1 1961 eatabl1ahed a body of sworn measures at Leghorn In hop

el1minating a large proportion of mismeasured shipments

10 F M 
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 103

tonnage in the trade However open rates did not prove to be a

satisfactory solution because of the resulting revenue losses andthe fact

that some rebating still continued Because of the losses and because

of the anticipation of the formation of a pool rates were closed by

theend oftheyear

The final conference effort to reform was the pooling agreement of

12lines approved by the Commission on March 6 1962 which g

uaran

teed a fixed percentage of revenue to each line APL entered the pool

despite the fact that its share was considerably below its historic

participation in the trade

Not all the WINAC member lines were parties to the pool thus

there was no restraint on malpractices by nonmembers Rebating to

some extent continued even among the pool members Since the pool

could be renegotiated it was advantageous to a line to increase its

participation over its original allocation In particular on high rated

cargo temptations to rebate were still present Early studies following

execution of the pooling agreement show that the pool operated more

to the benefit of nonmembers than members Nevertheless APL as

well as many others in the trade believed the pool to offer perhaps

theironly salvation

While much of the record is devoted to competitive activities in

Italy one instance occurred in this country National Silver Co

an importer of glassware ceramics and other produCts maintained

a warehouse in New Bedford Mass about 60 miles from the Port

of Boston Cargo destined from Italy to the New Bedford warehouse

is booked for Boston discharge However if there were inadequate

Boston cargo aboard to justify a Boston call the vessel would dis

charge the cargo at New York and truck the cargo to New Bedford at

the vessels expense thereby in effect giving National Silver free over

land transportation although when the cargo was discharged in Bos

ton overland transportation was for the account of the cargo This

was a common practice and occurred during the period of record In

deed National Silver made every effort to avail themselves of this

concession Itbecame an important point in the solicitation An official

of Fassio Line discussed this concession with National Silver but

indicated this free transportation would not be granted unless the

vessel did not call at Boston

DISCUSSION

The foregoing facts as well as the exceptions and replies to excep

tions present the following issues for our consideration and decision

1 Whether the agreement among the VINAC members to pay

a 3 percent deferred commission to Italian freight forwarders

10 F M C
104 FEDERAL MARITIME COMMISSION

from 1947 to 1952 was an unfiled and unapproved agreemen

violation of section 15

2 Whether the1954 agreement between APL Export and Ita

to pay a 3 percent deferred commission to certain forward

was an unfiled and unapproved agreement in violation of 

tion 15

3 Whether the 1956 agreement between APL Export and Ita

to pay a 3 percent deferred commission to certain forward

was an unfiled and unapproved agreement in violation of 

tion 15

4 Whether pursuant to any of the above agreements respond

entered into and effectuated deferred rebating systems in vio

tion of section 14 First

5 Whether any respondent violated section 16 First by 

absorption oftruckingcharges

6 Whether any respondent violated section 16 Second by all

ing persons to obtain transportation of property at less t

the regular rates by paying commissions to forwarders

With respect to Issue No 1 amajority ofthe Commission compo

of Vice Chairman Patterson and Commissioners Barrett and D

findsthat the members ofWINAd wereauthorized by their confere

agreement to pay commissions to forwarders and accordingly did 

violate section 15 With respect to Issues Nos 2 and 3 a majo

composed of Chairman Harllee Vice Chairman Patterson 

Commissioner Hearn finds that respondents APL Export and Ita

violated section 15 by entering int and carrying out unfiled 

unapproved agreements to pay a 3 percent commission to sele

forwarders With respect to Issues 4 and 6 a majority composed 

Vice Chairman Patterson and Commissioners Barrett and Day fi

that none of respondents violated sections 14 First or 16 Second W

respect to Issue No 5 the Commission Chairman Harllee V

Chairman Patterson and Commissioners Barrett Day and Hea

finds that respondent Fassio Line did not violate section 16 F

by absorbing certain trucking charges

Examiner Charles E Morgan issued an initial decision in wh

he absolved the carriers of any improper conduct The Exam

emphasized that it was difficult to obtain documents regarding 

competitive activities of foreign flag lines from abroad indeed 

some cases foreign flag lines were forbidden by their governme

to furnish these documents to the Commission Conversely the 

aminer points out that Export and APL had furnished detailed 

formation during the course of the investigation and yet they w

10 F M 
INVESTIGATION PRACTICES EIC N ATLANTIC RANGE TRADE 105 

denied discovery against the foreign flag respondents he therefore

considered it unfair to prosecute the US flag lines alone

In addition to his emphasis upon the difficulty of obtaining foreign

documents the Examiner stressed that the ctivities under investiga

tion occurred on foreign soil in an environment where such activities

are considered lawful Export and APL in order to maintain their

positions in the WINAC trade ere forced to join the customary

practices of granting rebates to Italian forwarders Consequently the

Commission should not judge these activities too harshly Further

more the Examiner stated that the Commission cannot as a practical

matter enforce the Shipping Act against transactions which occurred

in Italy

In further exoneration of respondents the Examiner noted gen

erally that the statute of limitations of 5 years had run against the

assessment of any fine or penalty In particular in mitigation and

extenuation of the activities of APL and Export the Examiner al

luded to the claim of these lines that being subsidized they would be

discriminated against indirectly since a finding that either acted

unlawfully might lead to a disallowance by the Maritime Administra

tion of commission expenses already suspended in the computation

ofoperating differential subsidy

Regarding the merit ofthe inve tigation the Examiner found that

the 3 percent VINAC commission was in accord with the VINAC

agreement which authorized payments to brokers if unanimously

agreed upon by the members With respect to the Big Three agree

ments the Examiner considered them as generally reconfirming the

VINAC proviso not to pay commissions not endorsed by the full

vVINAC membership To the extent the Big Three agreements

provided for optional payments to selected forwarders the Examiner

found that technically the agreements should have been filed under

section 15 Nevertheless since the Federal 1aritime Board knew of

the agreements and neither requested that they be filed nor instituted

an investigation since no data from foreign lines were available and

since the statute of limitation had expired the only effect of a tech

nical finding of violation of section 15 would be to penalize Export

and APL under their subsidy contracts Thus the Examiner found

no substantial violation of section 15

The Examiner also found no violation of section 14 First by the

respondents by use of deferred reb tes The holding is based upon a

finding that generally commissions were paid to forwarders not ship

pers Furthermore theExaminer finds no proof that a

shipper or a for

warder booked cargo with the assurance of the payment of a deferred

rebate Next the Examil er says that the commissions were not neces

10 F lIC
106 FEDE RAL MARITIME COMMisSION 

sarily deferred rebates since to qualify as such artillegal scheme p

ment must be made oilly if during both the period for which c

puted and the period of deferments the shipper has complied w

the terms of the rebate agreement or arrangement Since the 3 p

cent WINAC commissions and the BigThree commissions werec

puted on a yearly basis and the duration of deferroonts varied 

also since forwarders were apparently paid commissions even thou

they routed cargo via other carriers the Examiner found that 

commissions were not violative of section 14 First

The Examiner found no absorption of trucking charges in 

United States and accordingly no violation of section 16 F

Regarding section 16 Second he concluded that since the commiss

paid to Italian forwarders werein fact well known devices rather t

unfair devices or means plus the lack of technical proof of spe

instances ofpassing on the rebates from forwarders to shippers th

wereno violations of section 16 Second

In support of his findings of no violations or of no substant

violations the Examiner qualifies the Commission s

jurisdiction 

follows

Ifthe arrangements entered into overseas operate in the United States s

to affect the foreign commerce of the United States directly and materially 

jurisdiction of American law results Ifthere is no direct and substantial effe

the United States on our foreign commerce then jurisdiction does not ap

There must be direct and substantial consequence within our borders resu

from the conduct overseas if our jurisdiction is to apply

Using this test the Examiner found that commissions paid in It

to Italian forwarders did not affect our commerce more than remot

Even if the activities of respondents were in violation of the lite

terms ofthe Act the Examiner found that the Commission wasnev

theless without jurisdiction over the practices occurring in Italy 

cause of lack of direct and material effect upon the foreign comme

ofthe United States

Hearing Counsel have excepted to the Examiner s

findings of 

violations of sections 14 First 15 and 16 Second Hearing Counsel a

challenge the jurisdictional standard imposed by the Examine r

Hearing Counsel contend that the record supports a holding t

respondents entered into agreements subject to section 15 which w

neither filed with nor approved by the Federal Maritime Board S

cifically Hearing Counsel except to the Examiner s

finding that 

WINAC commission system of 1947 52 was authorized by the c

ference agreement Hearing Counsel argue that the WINAC ag

ment did not and could not authorize payments under a commiss

system since the scheme was in reality an unlawful deferred rebat

10 F M 
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 107

system not a simple decision to pay brokerage it therefore could not

be authorized by a section 15 agreement Likewise Hearing Counsel

assert that the WINAC commission system wasan entirely new scheme

not contemplated by the basic agreement which wasdiscriminatory on

its face and certainly not permitted by language in the WINAC agree

ment which merely provides that the parties hereto undertake not

to make any discount payment or return unless unani

mously agreed upon by the parties

1Vith respect to the Big Three agreements Hearing Counsel argue

that there can be no question that these were agreements in violation of

section 15 even the Examiner made this finding However Hearing

Counsel attack the Examiner s description ofthese agreements as tech

nical violations only Hearing Counsel point out that in Unapproved

Section 15 Agreement Coal to Japcun Korea 7 F MC 295 1962

and Unapproved Section 15 Agreements South African Trade 7

F M C 159 1962 the Commission refused to distinguish substantial

and technical offenses and gave no heed to extenuating circumstances

Hearing Counsel also oppose the theory offered by the Examiner

that since the Federal aritime Board knew ofthe use ofthe commis

sion system the Commission should find no violation here On the con

trary it is clear say Hearing Counsel that the Commission is free to

act as it sees fit in the public interest regardless of what its sub

ordinates may have done or not have done in the past

Vith respect to the Examiner s

finding that no violation should be

found because of the possible repercussions upon APL and Export by

the laritime Administration Hearing Counsel state that the Ex

aminer has made an unsupported assumption as to what course of

action the aritime Administration would follow The decision here

does not control the administration of the subsidy program Hearing

Counsel concede that APL and Export were subjected to considerable

pressure to rebate in order to remain competitive but this is something

for the aritime Administration to consider Ithas no bearing on the

Commission s responsibility upder the Shipping Act

Hearing Counsel except to the Examiner s failure to find that the

various commission systems were unlawful under section 14 First

Hearing Counsel argue that the VINAC commission system provided

for the payment of 3 percent commission sometime subsequent to the

elate of shipment In addition the admitted purpose ofthe system was

to tie forwarders to the conference The Big Three agreements like

wise were deferred and were paid with the understanding that the

recipient forwarder would remain loyal to the lines According to

Hearing Counsel under these schemes respondents by paying deferred

rebates or agreeing to pay deferred rebates violated section 14 First

10 F M C
108 FEDERAL MARITIME COMMISSION

The Examiner refused to find violations of section 14 First wh

payments were directed to forwarders not shippers According 

Hearing Counsel this construction would frustrate the aim ofCong

by reading the section to exclude payments to forwarders particul

where as here forwarders have preempted the role of shipper F

thermore Hearing Counsel submit that it would be naive not to in

that the rebates in some significant manner redounded to the be

of the exporter Thus Hearing Counsel conclude that the commis

systems were indeed unlawful deferred rebate systems Hearing CO

sel also object to the Examiner s

finding that the commission syst

werelawful because the system wasviolated by the parties who crea

it i e commissions were paid to forwarders who did not remain lo

to the carriers

Hearing Counsel contend that respondents allowed persons to ob

transportation at less than the regular rates by an unfair device 

means in violation of section 16 Second They assert that while 

SysteJll waswidespread and apparently well known the amounts o

concessions and the names of the beneficiary forwarders have b

shrouded in secrecy thus constituting unfair devices or means Th

fore the commission system which was designed to preserve 

position of the carrier and which in fact treated shippers and 

warders in a discriminatory manner was the type of practice pro

bited by section 16 Second

APL excepts to the Examiner s failure to hold that these proceed

are barred by the statute of limitations APL also excepts on 

ground that the Shipping Act is not intended to apply to the cond

of U S flag lines abroad where the Act cannot also be applied w

equal force to foreign flag lines APL considers this to be uncons

tionally discriminatory Finally APL alleges that the Examiner e

in findingthat the Big Three agreements were more than agreem

not to paycommissions

Section 15 Violations

As set forth above besides the 4 percent brokerage paid to 

warders VINAC members between 1947 and 1952 authorized an a

tional 3 percent commission to forwarders with payments m

t

hrough the Conference office Under this additional commission 

rangement the Conference Secretary obtained freight reports fr

each line at each port billed and received funds from the member lin

and disbursed the amounts to the forwarders The system was cumb

some and the 3 percent commissions were not paid until long a

they were due Those for 1952 were not paid until 1955 for exam

Originally it wasintended that the 3 percent commission be paid o

10 F M 
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 109

to those forwarders which generated at least 5 000 of business but

this rule was flexible and commissions were paid to many forwarders

which did not reach the minimum No commissions werepaidon certain

low rated freight and goods originating in Switzerland and other

goods onwhich the shipper already had received tariff benefits of some

other sort

The agreement to pay commissions to forwarders within the

VINAC machinery was not a violation of section 15 Issue No 1

The terms of the VINAC agreement expressly referred to payments

to brokers in that no such payments were to be made unless unani

hlously agreed upon by the parties This agreement to pay commissions

was reached unanimously Therefore when the VINAC Conference

3 percent commission system was in effect it was in accord with the

vVINAC agreement

Ve have held that while an agreement fixing or regulating the

amounts ofbrokerage was an agreement withinthe meaning of section

15 that had o be filed for approval once a conference agreement had

been approved conference arrangements regarding brokerage pay

ments to forwarders were permissible without separate section 15

approval Agreements and Practices Pertaining to Brokerage 3

U S MC 170 177 1949 Arnerican Union Transport v River Plate

Brazil Oonferences 5 FM B 216 221 1957 affirmed American

Union TranpsOlftInc v United States 257 F 2d 607 1958 cert

denied 353 U S 828 1958 Therefore no filing under section 15 was

necessary with regard to the 3 percent Conference commissions

Upon the demise of the TINAC commission payments in 1952 the

two largest American lines Export and APL together with Italia

were persuaded that an additional commission arrangement was

imperative in order to preserve their positions against the increased

rebating of their competitors The American lines believed that their

superior service alone could not retain the patronage of forwarders

who were offered concessions by otherlines In 1954 and again in 1956

the Big Three entered into agreements to pay additional 3 percent

commissions As with t11e earlier conference commission system these

commissions were paid some time after they weredue in order to secure

the continued patronage offorwarders The Big Three agreement of

1954 called for the paymentof 3 percent deferred commission to seven

mutually agreed upon forwarders The agreement was not authorized

by in fact it wasin derogation of theWINAC agreement The second

Big Three agreement of 1956 was the same type of arrangement

Again the agreement called for an additional 3 percent commission

paid to nine forwarders on a deferred basis These agreements were

not filed with the Federal Maritime Board

10 F M C
110 FEDERAL MARITIME COMMISSION

The agreements between APL Export and Italia were unfiled 

unapproved section 15 agreements Issues No 2 and 3 Both 

failure to filethe agreements immediately and the effectuation of 

agreements without approval are violations of section 15 9B

commission agreements were the type described in section 15 as ag

ments giving or receiving special rates accommodations or o

special privileges or advantages controlling regulating ordestroy

competition or in any manner providing for an exclus

preferential or cooperative working arrangement The two 

Three agreements should have been filed with the Commission 

required by section 15 These agreements cannot be described as me

reiterations of the WINAC reql lirment not to pay rebates as arg

by APL Rather these agreements affirmatively contemplated p

ments of commissions to selected forwarders APL s exception in 

respect is overruled

The Examiner concedes that technically the Big Three agreem

should have been filed however the Examiner concluded that th

was no substantial violation of section 15 for failure to filethe ag

ments to pay commissions to Italian forwarders Ve reverse 

Examiner in this respect The Examiner s exoneration ofrespond

cannot be premised upon the mere designation of the failure to 

as technical or insubstantial As we have held before there is no ro

in the proper enforcement ofsection 15 for technical violations Sec

15 requires absolute compliance Unapproved Section 15 Agreemen

South African Trade 7 F M C 159 179 1962 Unappro1 ed Sec

15 Agreement Coal to Japanjl orea 7 F MC 295 1962 10 As sta

in theSouth African case

Itgoes without saying that we find untenable the suggestion that respond

arrangement constituted a teehnical viol3Jtion of the law It hould be n

furthermore that section 15 affords little room for so called technical violat

To us the breadth and force of its language literally implore attention and 

9

See Unapproved Section 15 Agreements South African Trade 7 F M C 159 

1962 Unapproved Section 15 Agreement Coal to Japan Korea 7 F M C 295 301 

1962 Unapproved Section 15 Agreements SpaniSh Portugese Trade 8 F M C 

614 1965

10 The Examiner supports his technical violation theory by stating that the Fe

Marltlme Board s staff knew of the agreements This is immaterial Section 15 req

that all agreements subject thereto be filed These agreements were not filed The re

simply does not reflect that the Board s staff advised respondents to ignore sectio

orthat the staff were actually aware of the breadth and scope of the concerted act

Ct Unapproved Section 15 Agreements South African Trade 7 F M C 159 196 1

in which the Commission stated that an allegation that certain Board personnel 

cognizant of the arrangements was immaterial The ramifications of our holding upo

subsidy program is also immaterial to the question of whether the agreement was su

to section 15 and was flied We have stated above that APL and Export were subj

to intense pressure in climate favorable to such commission agreements an d that 

and Export took the lead In ending the agreements and otherwise regularizing the trad

10 F M 
INVESTIGATION PRACTIC S ETC N ATLANTIC RANGE TRADE 111

dience or at the verY least inquiry if any loubt as to the propriety of propOsed

conduct 7 F M C at 197

We have previously acknowledged the attempts ofAPL and Export

to normaLize the trade nevertheless we must in consonance with our

responsibilities under the Shipping Act define the law consistently

In Unapproved Section 15 Agree7lU3nts South African Trade 7

F M C 159 1962 the Coonmission found that respondents entered

into and carried out agreements subject to section 15 In making this

finding the Commission strongly emphasized that section 15 requires

government supervision of concerted activities and that consequently

rigid compliance twith the filing and approval provisions of section 15

is mandatory llThe opinion points out that a Commission investiga

tion is an administrative proceeding looking to the regulation ofpres

ent and future activity the proceeding is not a penal or criminal trial

for past violations of laJW and should not be condlllcted as such Infact

the Commission held that matters in mitigation and extenuation were

immaterial

Respondents argument that the arrangement promoted stability aided the

subsidy program was in the public interest and not objectionable under sec

tion 15 is quite beside the point Such matters were for the Board the agency

administering the Sh pping Act to weigh and determine before and during the

time the anticompetitive activities occurred They were not for the respondents

to decide themselves Respondents prevented any Board consideration by ignor

ing the eminently clear requirements of section 15 and thus frustrated it for

years Ve think it impos ible for anyone now to state that what transpired

between respondents was all well and good buteven ifthis were notso the impact

of the statute manifestly cannot be made to depend on the ex post facto chance

that the violation was not harmful Section Hi may as well be scrapped as to

attempt to administer it inthis fashion 7 F lLC at 19697

The Examiner was also swayed by the fact that only the U S flag

carriers were effectively regulated However in UnapprovedSectiorn 15

Agreements Japan Korea et al 8 F M C 503 1965 the Commis

sjon rejected the argument of a U S flag carrier that the administra

tion of sootion 15 was discriminatory to it since the proceeding did not

have coextensive thrust against foreign flag carriers The Commission

held as follows

Thus the essence of respondent s argument is that all must hang or all must

go free This is simply not the law and the adoption of any such philosophy

would make effective regulation a practical impossibility 8 F M C 512 12

11 Compare In re Pacific Ooast European Oonference 7 FM C 27 1961 Isbrancltsen

00 Inc v United States 211 F 2d 51 DC Clr 1954 cert den sub nom Japan

Atlantic Gulf Oonv U S 347 US 990 1954 Oalif S B 00 et al V Stockton

Port Dist et al 7 FM C 75 1962

U

See also Unapproved Section 15 Agreements Spanish Portugese Trade 8 F M C

596 613 14 1965 U S v Wabash R 00 321 US 403 413 14 1944

10 F M C
112 FEDERAL MARITIME COMMISSION

APL s ex ption that it is being discriminated against is overruled 

these reasons

We turn now to the allegation that the Commission either ha

jurisdiotion or should not exercise jurisdiction because the su

activities occurred abroad We believe the Examiner has ignored 

clear language of section 15 and has draIWn an improper analogy 

the antitrust laws vVhilethe acts under investigation occurred in I

they neverthelesshad some effect on the commerce ofthe United 8ta

There can be no doubt that the agreements to pay commissions ab

had some resultingimpaot on the landed costs ofgoods in this cou

Furthermore these practices had significant effect upon the com

tive positions ofthe carriers in this trade who are undoubtedly su

to our jurisdictJion But more importantly theShipping Act itself 

cifically has extraterritorial application it does not require de

strable impact on our commerce Itsimply refers to all agreemen

a

competitive natur between common carriers by water in the for

commerce of the United States Under this statute the Commis

cannot divest itself of its responsibility because it is difficult to in

tigate and regulUJte misconduct which occurred rub road We have 

sidered this contention before As we said in Unapproved Sectio

Agreements Spanish Portuguese Trade 8 F M C 596 1965 1

Respondents arguments to the contrary notwithstanding there can at 

late date be no serious question as to the so called extra territorial applic

of the Shipping Act Kerr Steamship Co v United States 284 F 2d 61 2d 

1960 Montship Lines Ltd v Fed ral Maritime Board 295 F 2d 147 

Cir 1961 Hellenic Lines Ltd v Federal Maritim Board 295 F 2d 138 

Cir 1960 United States v Anchor Line Ltd 232 Fed Supp 379 sD

1964

Respondents are all common carriers by water in foreign commerce w

the meaning of the Act and there is no question that the agreements in 

are of thekind covered by s tion 15 ie agreements fixing orregulating 

portation rates or fares and regulating preventing or destroying comp

in our foreign commerce These facts having been established nothing m

needed and the failure to file such agreements results in a violation of s

15 For in requiring the filing and approval of such agreements as a con

precedent to their lawfulness Congress itself has determined that the agree

by their very natlHe have an effect on our foreign commerce The p

nature and degree of that effect is irrelevant to any determination as t

applicability of the filing requirements of section 15 8 F M C at 600 01

Section 16 Violations

The record shows that Fassio discharged cargo consigned to B

at the Port of New York and then trucked that cargo free of ch

13 Cf Unapproved Agreements Spanish Portuguese Trade 6 FM B 103 1960 

proved Section 15 Agreements Japan Korea Okinawa Trade 6 F M B 107 1960 

ments Etc ojN AU W B FreJqhtAssn 7 F M C 228 1962

10 F M 
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 113

to National Silver s warehouse at New Bedford Mass The record

however does not show that National Silver was unduly or unreason

ably preferred or advantaged in violation of section 16 First This

absorption of inland transportation charges was alleged as a solicita

tion factor but this allegation was not established on the record

Consequently thisalleged absorption was not proven to be a violation

of section 16 First Issue No 5

Hearing Counsel urge that the payments to forwarders were un

lawfulunder section 16 Second because they allowed persons to obtain

transportation at less than the regular rates by an unfair device or

means

The record does not disclose sufficient details of the arrangements

between forwarders and carriers We simply cannot ascertain whether

the rates charged by respondents were other than the regular rates 14

Issue No 6 vVe therefore overrule Hearing Counsels exceptions

as to section 16 Second

Seotion14 First Violations

Section 14 First of the Act bans deferred rebates to shippers The

commission payments of record generally were not made to shippers

the exporters in Italy but to the Italian forwarders Even if the

commissions had been made to shippers or if we should consider the

forwarder to be the shipper they were not necessarily deferred

rebates prohibited by section 14 First which speaks in terms of

payments made only if during both the period for which computed

and the period of deferments the shipper has complied with the terms

of the rebate agreement or arrangement

There must be proof that the deferred rebate payments were con

ditioned upon compliance by the shipper with the rebate agreement

both during the period for which the payment was computed and

duringthe period of deferment The 3 percent conference commissions

and the payments under the Big Three agreements were computed

on calendar year basis whereas the periods of deferment were of

varied lengths Concerning the Conference 3 percent commission

although forwarders were expected to remain loyal commission pay

ments to Italian forwarders were not conditioned upon continued

loyalties or other arrangements Therefore there is no showing of un

lawfully deferred rebates because there is inadequate proof that the

deferred commissions met the technical requirements of the Act that

the shipper be required to comply with certain conditions duringboth

ofthe two periods ofshipment and of deferment Issue No 4 Itdoes

not matter that the carriers or the forwarders designated the rebates

14 Of course this record predates section 18 b which requires the flUng of rateswith us

thus accounting for the lack of technical proof of the regular rates

10 F M C
114 FEDERAL MARITIME COMMISSION

as deferred rebates and it does not matter that the payments we

deferred because the Act requires tqat there be a particular type 

deferred payment of which there is inadequate proof herein to ma

the deferred rebates unlawful The missing ingredient in the Confe

ence 3 percent commission system and in the Big Three agreeme

was the continued obligation of the shipper to remain loyal Hearin

Counsels exceptions regard ing section 14 First are according

overruled

Miscellaneous Contentions

APL and Export argue that the proceeding is barred by the statu

of limitations However as the Commission has consistently held t

statute oflimitations pertains to actions for the collection ofcivil a

criminal penalties not to investigations instituted by the Commission 

We overrule APL s exception and hold that the proceedings here a

notbarred

APL and Export continue to argue that the Big Three agreeme

weremerely agreements not to pay commissions in excess of 3 percent

they did not require that comm issions be paid According to APL a

Export this simply reconfirmed the promises made in the WINA

agreement not to pay commissions but with the qualification that no

of the lines would consider itself aggrieved if one of the others pa

commissions up to 3 percent However the argument is without me

As we have found the Big Three in order to preserve their positio

in the trade set about to insure the patronage ofimportant forwarde

by paying commissions The agreements werenot routine and not me

confirmations of the WINAC agreement they were prohibited und

WINAC

Export contends that there is insufficient evidence against it to wa

rant findings of violations against it Such is not the case howev

Our factual findings are supported by the record and indeed are f

large measure those found by the Exam iner The record will suppo

with evidence properly admissible against the appropriate responden

our holding that the Big Three agreemepts were unfiled and u

approved section 15 agreements Export also argues that the parti

made inquiry of the Board regarding the commission agreemen

and the Board confirmed that no approval was necessary We ha

already overruled this argument in considering Hearing Counse

argument We reaffirm that ruling the argument is meritIess Suff

it to say that the record shows that the Board s staff had an inklin

of the general status of the trade There is no showing that the st

16 See Agreements etc 01 N Atl W B F eight Assn 7 F M C 228 237 196

Indeed the Commission has already considered and rejected the plea that this Investigat

is barred by the statute of limitations Order of Oct 20 1961

10 F lfC
INVESTIGATION PRACTICES Ef1C N ATLANTIC RANGE TRADE 115

decided that is was unnecessary to file the Big Three agreements

and we know of no such decision In addition the argument is some

what contrived becau e the demise of the agreements was the direct

result of the pronouncement of an Export official that the commission

agreements wereillegal

We have already ruled in considering Hearing Counsels exceptions

on Export s technical violation argument Likewise we overrule Ex

port sjurisdictional contentions for the reasonspreviously stated Ex

port argues that while we have jurisdiction to investigate the activities

reflected in the record the reach of the prohibition of the Act is

another matter entirely This is of course a distinction however our

holding herein involves anticompetitive activity among carriers serv

ing an important inbound U S trade The impact of this anticompeti

tive activity permeates the entire trade The carriers themselves have

admitted the impact of malpractices on the trade Competition sub

stantially affected the relationship between carriers in U S foreign

commerce and necessarily reflected itself in the landed price of goods

here The record also shows that competition as well as anticompeti

tion had a clearly discernible effect upon the level of freight rates

which were paid directly or indirectly by purchasers in this country

We therefore overrule the arguments that the Big Three agree

ments were too remote from our commerce to be amenable to section 15

Italia also has contended that the Commission is without jurisdic

tion In substance the contentions are the same as those already dis

cussed and rejected 16 Italia contended at oral argument that an agree

ment to pay commissions to forwarders does not require section 15

approval This is so because an agreement to pay deferred rebates

ould not be approved under section 15 therefore itneed not be filed

This is fatuous Ifan agreement falls within the scope of section 15 it

must be filed whether approvable or not

Because of our decision in this proceeding it is unnecessary to con

sider in detail the arguments of other respondents Fabre Line Con

cordia Line Torm Line and Costa Line Thile no violations were

found against these respondents we have in ruling upon Hearing

Counsels exceptions also considered and ruled upon these arguments

We will not repeatthem here

UVTIl fATE CONCLUSIONS

For the aforementioned reasons we find that APL Export and

Italia in 1954 and 1956 entered into and carried out unfiled and un

l Italia filed no exceptions or replies to exceptions Accordingly they have waived their

arguments on brief to the Examiner In favor of the Initial Decision

10 b M C
116 FEDERAL MARITIME COMMISSION

approved agreements to pay a 3 percent commission to selected f

warders in violation of section 15

We find that these unlawful activities have been voluntarily ter

nated by the appropria te

respondents Consequently no order wil

entered This proceeding isdiscontinued

ohairrnan HARLLEE and Oom misswne7 HEARN concurring and d

senting

Itis our view that the Commission s decision here is correct in fi

ing that the Big Three agreements were unfiled and unapprov

section 15 agreements The Big Three agreement of 1954 betwe

APL Export and Italia called for the payment of a 3 percent co

mission to seven mutually agreed upon forwarders The Big Thre

agreement of 1956 was the same type of agreement between the sa

carriers and called for the payment of a 3 percent commission o

deferred basis to nine selected forwarders It is our opinion that e

agreement was the type contemplated by section 15 that none w

authorized by the WINAC agreement that the agreements called 

affirmative anticompetitive action by the parties and that the agr

ments were unlawfully carried out These agreements cannot be ch

acterized as technical

Ve also concur in the majority decision to the extent that there 

insufficient evidence to find unlawful absorptions of trucking charg

on theshipments by NationalSilver

Tith respect to the other issues we must dissent from the positi

taken by the majority Ve would find that the members of WINA

violated section 15 The record shows and there seems to be no di

greement that during the period 1948 1952 the WINAC memb

agreed to pay and did pay a commission of 3 percent to forwarders 

addition to the regular 4 percent brokerage The carriers paid the

commissions through the conference office on a deferred basis to f

warders who booked cargo amounting to 5 000 in freight charg

within a

year The purpose ofthe agreement wasto insure the loya

of forwarders to the conference carriers as a means of fighting the 

croachment ofnonconference carriers The agreement was anticompe

tive and subject to section 15 We do not consider this or any ot

discriminatory commission system to be authorized by the WINA

agreement which provides merely that the parties hereto underta

not to make any discount payment or rate unless una

mously agreed upon by the parties This language prohib

individual rebating Itdoes not authorize any commission system 

properly set forth in a conference tariff and more importantly 

language does not permit a commission system paidon a deferred ba

10 F lVI C
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 117

to selected forwarders Although the Commission does not require the

filing and approval of routine conference action the agreement is far

more than a routine or simple decision to pay brokerage Indeed for

the reasons set forth below the agreement was not and could not be

authorized by the VINAC agreement because it waS also unlawful

under section 14 First and section 16 Second

YVe believe that the eommission system set up by the vVINAC mem

bers during the 1948 52 period as well as the systems under the Big

Three agreements were illegal arrangements to pay deferred rebates

In each instance the commissions were paid to selected forwarders on

a deferred basis This much is clear Itis likewise clear to us that the

motivation of the carriers in paying the forwarders on a deferred

basis was to secure as much cargo from the favored forwarder as pos

sible As ve see it the only questionable ingredient of the scheme was

exactly hat the forwarder promised in return for the commission

or what the forwarder was supposed to do during the period the com

mission was deferred The record does not reveal an unequivocal

promise of the recipient forwarders tQ give all ora fixed portion of the

cargo to the carrier We do not even know if there was awritten con

tract between carrier and forwarder Nevertheless we do know that

there was intense competition among forwarders and that this com

petition forced forwarders to reduce the price of the transportation

packa ge in order to retain their customers This in turn makes any

reduction in ocean freight which is paid by the forwarder a critical

element in the for varder s profit margin Thus we find an overton

naged trade in need of high paying cargo and forwarders anxious to

maintain their accounts by reducing the overall price to their cus

tomers In this context the commission arrangements take on their

true significance The carriers agree to rebate to favored forwarders

on a deferred basis in order to guarantee to themsel ves cargo from these

important for varders It is reasonable to infer because of the cut

throat competition among forwarders that the opportunity to obtain

the revenue of the 3 percent deferred rebates would not be readily

jeopardized Itis thus reasonable to believe that a deferred rebatewas a

consideration for future patronage In fact no other explanation is

plausible

Vith respect to the contention that the commissions could not be

deferred rebates because the statute speaks in terms of shippers and

the commissions were paid to forwarders we disagree First the rec

ord reflects the extreme competition between forwarders for the

available accounts This competition resulted in reduction of the for

warder s price Thus some of the benefit of the commission found

10 F M C
118 FEDERAL MARI IIME COMMISSION

its way to the shipper Second and more important the forward

was as a practical matter the actual shipper He selected the carri

booked the cargo paid the freight was considered the shipper 

Italian customs etc Under these circumstances we believe it app

priate to consider the forwarders to be the shippers particula

where it is clear that section 14 First is speaking of an arrangeme

between a carrier and a person with control overthe booking of car

where a deferred rebate is paid in exchange for patronage Accordin

ly we would find that the carriers violated section 14 First by payin

andby entering into a combinationto pay deferred rebates

We also would find that the same commission system and payme

to forwarders pursuant to these systems resulted ili violations of s

tion 16 Second which makes it unlawful for a common carrier to all

any person to obtain transportation at less than regular rates by mea

of an unjust or unfair device or means Our view is based upon t

fact that the commissions were paid on a selective basis and result

in a cheaper net freight rate to the recipients of the commission T

central fact is that the carriers had tariffs setting forth the purport

cost of transportation yet these rates werediscounted by various a

varying percentages In U S Lines and Gondrand Bro8 Sect 

Violation 7 F MC 464 1962 theCommission found a carrier to be 

violation of section 16 Second by rebating a portion of the freig

charges in order to meet nortconferellce freightlevels

The Commission held

United States Lines WH hound by it conference agr flnellt to ob fr pthe ra

in the conference tariff TheRE were thf only rates filed and published b itor 

it behalf The rates RO reported and published were its regular 01 e

rates which it was bound to charge and shippers were bound to pay Prince L

Ltdv

American Paper Exports Inc 45 2d 242 affd 55 F 2d 1053 C A 

1932 Compania Anonhna Venezolana de NM cfG cion Y A T Perez EXP01 t 

et al 303 F 2d 692 C A 5 19627 F M C at 46970

Therefore the command of section In Second is ahsolute that a c

rier shall not by false means a11ow any person including a fonvnrd

to obtain transportation at less than the regular rates The policy u

derlying this command prohibits the carrier from deviating from 

tariff

The record here shows that commissions werepaid and that the co

missions were not contained in any tariff provision The exact amou

of the commissions ere undisclosed to competing carriers and to 

shippers and forwarders This is demonstrated by the evidence 

continuous rumors of malpractices and pressures from forwarde

who were frequently able to play one carrier against another becau

the carriers themselves were not cognizant of the actual discount

10 F M C
INVESTIGATION PRACTICES ETC N ATLANTIC RANGE TRADE 119

rates charged by their fellow carriers vVhile everyone knew there was

rebating the details of the various payments were definitely clandes

tine Consequently we hold that the payment of commissions as set

forth in the record were unfair devices or means prohibited by

section 16 Second

Admittedly the record here does not include every detail of every

rebate paid in this trade However it does disclose that the practice

of rebating waswidespread We would therefore condemn thepractice

or paying certain commissions to selected forwarders as the type of

unfair activity prohibited by section 16 Second

Oommis8ioner BARRETT concurring and dissenting

Imust disagree in part from the decision of the majority and find

that no violation of the Shipping Act has occurred In regard to the

211eged unfiled and unapproved agreements in 1954 and 1956 ofAPL

Export and Halia Ishare the views expressed by the Hearing Ex

aminer Ican find no substantial violation of section 15 Furthermore

Ican find no support from the record that the criteria for violation

have been met or that the arrangements entered into overseas ma

terially affected the foreign commerce of the United States

Oommissione TAMES V DAY concurring and dissenting

Iconcur with the majority opinion except in the followingrespects

The majority interprets ourpast decisions as holding that Section

15 requires absolute and rigidapplication and that there is no room

for technical violations Ido not quite readthe cases thatway Inthe

South African 17

case we held rather that Section 15 affords little

room for so called technical violations To us the breadth and force

ofits language literally implore attention and obedience or at the very

least inquiry ifin any doubt as to the propriety of propo conduct

Here the Board apparently was aware not only of the Commission

system but also of the Big Three agreements and did not request

the agreements be filed Exhibit 181 Annex 15 Aside from the con

tention that respondents could reasonably construe their contact with

the Board as producing recognition on its part that no filing and ap

proving of the Big Three agreements were necessary the minimum

standards relative to recognition of technical violations set forth in

the South African case supra would nonetheless appear to be met

ie attention and inquiry The technical aspects of the Big

Three violations should thus 00 recognized in these circumstances

In the past there have been distinctions in the treatment of Section

17 Unapproved Section 15 Agreements South African Trade 7 FM C 159 197 1962

See also Unapproved Section 15 Agreement Ooal to Japan Korea 7 F M C 295 304

1962

10 F MC
120 FEDERAL MARITIME COMMISSION

15 violations In the two cases cited by the majority at page 21 t

violations there involved agreements fixing rates somewhatmore su

stantial than the violations here present In those cases the violatio

were not excused as technical On the other hand the Commission 

its prodecessors has merely in other cases noted a faHure to file 

agreement or declared that no further action was required because t

agreement had expired Massachusetts v Oolumbia S S 00 Inc 

U S MC 711 1938 and A880ciated Banning 00 v MatsonN JfV 0

5 F MB 336 1957 In this case the violations as to the Big Thre

agreements now no longer in effect should le

recognized as not 

stantial The Examiner so held I

agree with his conclusion on th

point

signed THOMAS LISI

Secretary

10 F rd C
FEDERAL MARITIME COMMISSION

DOCKET No 664

INDEPENDENr OCEAN FREIGHT FORWARDER LICENSE APPLIOATION

JAMES J BOYLE CO 507 WASIDNGTON STREET SAN FRANCISCO

CALIF

Deeided August 24 1966

Applicant for freight forwarder license held unfit for licensing in view of fact

the record shows thatapplicant knowingly and willfully operated as a

forwarder without lawful authorization

Ola1ence jJione for J ames J Boyle Co applicant

Robe1 tReed Gray for World Wide Services Inc respondent

Donald J Bfltnne1 and Thomas Ohristensen Hearing Counsel

REPORT

By THE Co nIISSIoN Jolm Harllee Ohai1mamj Ashton C Barrett

James V Day 001nmi8sioners

This proceeding was instituted by Commission order to determine

whether James J Boyle Co applicant qualifies for an independent

freight forwarder license and whether the freight forwarding license

of vVorld vVide Services Inc World Wide should be revoked pur

suant to the provisions of section 44 of the Shipping Act 1916 Act

Upon completion ofhearings Vorld Vide filed a motion to dismiss

the proceedings as to it upon theground inter alia of failure of proof

Hearing Counsel agreed that the motion should be granted Accord

ingly the Examiner dismissed the proceeding as to World Wide

All mterested parties hay e been heard and the proceeding is now

before us upon exceptions to the Initial Decision ofExaminer Paul D

Page Jr holding applicant Boyle fit for licensing as an independent

ocean freightforwarder

Vice Chairman John S Patterson and Commissioner George H Hearn did not

participate

121

10 F MC
122 FEDERAL MARITIME COMMISSION

FACTS

Applicant James J Boyle Co was established as a partnership

on July 29 1964 to act as a customhouse f

broker foreign freigh

forwarder air freight forwarder and consolidator Three of th

partners James J Boy Ie Dale Zerda and Terry Hatada were for

merly employed by James Loudon Co a licensed forwarder Boyle

had been employed as the Vice President and Manager of Loudon 

San Francisco office The fourth partner Howard Cheung was em

ployed by World Wide as its District Manager in San Francisco an

handled the freight forwarding business for Vorld Wide there Whe

Loudon co encountered financial difficulties Boy Ie Cheung Zerda

and Hatada offered to assume the management ofLoudon s San Fran

cisco office and when this offer was declined the partnership o

James J Boy Ie Co was formed

The partners in July 1964 entered into an oral agreement whereb

Cheung purporting to act with the consent of his employer World

Vide authorized the partnership to perform freight forwardin

activities in San Francisco under the firm name of World Wide an

usingthe license number ofVVorld Vide Pursuant to this agreemen

all freight brokerage and forwarding fees were to be billed in th

name and for the account ofWorld Vide Applicant was to be com

pensated on the basis of 25 percent of the total forwarding fee

excluding all ocean freight brokerage revenue

Although this agreement was entered into orally in July 1964 th

termsofthe agreement which are embodied in Exhibit Idated July 2

1964 were only reduced to writing in September of 1964 The agre

ment was reduced to writing at thattime because

Mr Cheung and I Boyle agreed we should get something in our fi

of a working agreement such as this Exhibit I inorder to satisfy theMaritim

Commission agents sbould they come in the office to investigate our activitie

Tr 59

Mr Boyle further testified that it was reduced to writing abo

the time Mr Kerttu FMC investigator called on us

Exhibit 1 was drafted by Boyle and executed by him on behalf 

the partnership Cheung supplied the World Wide letterhead

Neither Boy Ie nor Cheung advised World Wide of the existence 

the agreement representedby Exhibit 1 and World Wide wasunawa

of its existence until March 29 1966 the day before the hearing in t

proceeding Cheung in fact did not have the authority to sign t

letter ofJuly 29 1964

By an oral agreement not reduced to writing Boyle and Cheu

10 F MC
INDE PENDENT OCEAN FREIGHT FORWARlDER LICENSE APPLIC 123

amended Exhibit 1 to allow Boyle to retain approximately 75 to

80 percent of the forwarding fees billed in World Wides name

Applicant began its forwarding business on August 1 1964 using

the name and number of World Wide Applicant applied to the Com

mission for an ocean freight forwarder s license on August 6 1964

A notice to prospective clients import export firms announced

that Boyle Co would open its offices on August 3 1964

The announcement stated

James J Boyle Co

is pleased to announce the

opening of its offices on

August 3 1964 providing customs

brokerage foreign freight for

warding and air freight

forwarding services

Associated with James J Boyle Co

are

Mr Terry Hatada Mr Dale Zerd

Mi ss Alice Young

Mrs Elizabeth De Maree

507 Washington St San Francisco

Yukon 65516

The announcement omitted any reference to its alleged connection

with World Wide

Applicant using rorld Wides nari1e and license number billed

shippers for forwarding fees and steamship lines for brokerage All

such moneys collected by applicant were retained by it and no money

was remitted by the partnership to Vorld Wide

Applicant continued to operate pursuant to this agreement and on

December 31 1964 Cheung withdrew from the partnership purport

ing however to authorize the continued usage by applicant of the

name and license ofvVorld vVide until such time as applicant received

its own license but for a period not to exceed 4 months By this

agreement applicant bound itself to cease using vVorld Wides name

and license as of May 4 1965 nevertheless applicant continued to use

World Wide shipping forms until July 31 1965 in known disregard

of the agreement

Although Cheung withdrew from the partnership on December 31

1964 he retained office space on the partnership premises untilJuly 31

1965 en on the latter date he moved out Cheung notified the

partners thatapplicant could no longer use the name and license

of World Wide Applicant ceased performing forwarding services

under World Wide s name and number as of July 31 1965 it did use

10 F M C
124 FEDERAL MARITIME COMMISSION

the World Wide name and number however through August 196

to bill shippers and steamship lines for services performed in July 196

Boyle s application for a forwarder license Form FMC 1

Exh 2 discloses he had 1

years of experience as Export Traf

Manager of an industrial company and 2years of experience 

Assistant Traffic Manager Export Department of a Customs Broke

and Foreign Freight Forwarding firm and 8 years of experience 

Vice PresIdent and Manager of another Customs Broker and Foreig

Freight Forwardingfirm directly supervising as many as 23 employe

in all phases of customs brokerage and freight forwarding activitie

Boyle formerly held a forwarder registration number issued 

predecessor agencies

Boyle was aware in Juiy 1964 when the partnership was form

that he and the partnership required a license to engage in oce

freight forwarding

Applicant maintains that it informed the Commission of all t

facts involving its relationship with World Wide and that the Co

mission never indicated to applicant that such relationship w

improper In its application for licenSe applicant stated that Cheu

was presently the San Francisco representative on an agency bas

of World Wide The partnership agreement which was attached 

the application states in Article 9 thereof that if the partnership we

to be dissolved Howard Cheung will be allowed to withdraw fro

the assets of the partnership the business account and franchise 

World Wide Services Inc

Applicant further states that

itdisclosed all the facts to lr I ertt

a Commission investigator in September of 1964 and received 

indication that its operations might he illegal

By letter of August 6 1965 a few days aTter applicant ceased 

forw rding activities this Commission notified applicant of its inte

to deny the application for license the groupds for denial being th

app1ic nt appeared to have been operating as a forwarder without 

license or other proper authorization Applicant requested a hearin

DISCUSSION

Hearing Counsel except to the Examiner s failure to hold th

applicant s operatioil renders it unfit for licensing Heariilg Couns

do not challenge applicant s willingness or ability to act as 

lO F M C
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE APPLIC 125

ocean freight fOrW lI clelhal they do Coutelld however that applicant

is not Ht to so act

Hearing COlulsel seek to show thut applicant knowingly and will

fully operHted withont liceI18e or other Ifwful authorization and

contend that such a howing will furnish sufficientgrounds fordenying

appliea

llt s license for lack of titness to caI

ry on the business of

fOI varding

IIearing Connsel vie v the resolution of the question of whether

applicant knowingly and willfully operated without lawfulauthoriza

tion as being dependent upon a determination of the force and effect

to be given the agreement behveen 1pplicant and Cheung which

agreement purports to authorize applicant to operate under the name

of 1Vol ld vVide lIearing Counsel feel that said agreement by its

terms alone may have created an acceptable employment relationship

hut that applicanfs conduct thereunder demonstrates that such rela

tionship was neither l reated in fact nor intended to be created

In support of their contention th1Vt no meaningful employment

relationship was meant to be created Hearing Counsel offer th

following

1 By terrns of I he agreenlent lppIicallt was to perform a complete

forwarding se lvicCand vas to receive only 25 percent of the fonvard

ing fees as compcnsation therefor Seventy five percent of forwarding

fees and all brokerage were to be remitted to 1Vorld iTide Such a

Imv level of compensation indicates that no meaningful employment

relationship existed

2

lplicant billed fOlw

rcling fees aud brokerage on all services

llerful lned 111 it nsing Yorld 1iVide s BaIne aD d liccllse number COl1

ITary to the 1O11l18 of the a greelnont a pplican t retained all monies

l eceivlct front shippers nd steamship lines Even when the agreement

was sllbseqnelltly orally amel1ded to allow applicant to retain 75 80

pereent of forwarding fees applicant in fact retained all forwarding

fees and brokerage This is strong circumstantial evidence thatappli

ant intended to dislegnxd its obligations under the agreement with

Volld Vide and th t no enlployment relationship ever existed

i By written agrccIHcnt npOll ehelIng S withdrawal from the part

nership appJicant bound itself to cease using Torld Vide s naIDP

The pertinent langnage of section 44 of the Act provides A forwarder s license shall

IH isl1l to an qnnJified aplllIcnnt therefor tflt is fOllnd by the Commission that the

lppHcant is or will he an independent ocean freight forWllrder as defined In this Act and

j fit willing and able properly to carryon the bllslness of forwardinA Emphasis

supplied

Section 510 4 b of General Order 4 46 CFR 510 4 b provIdes Au employee of a

licenfled independent ocean freight fOl wnrner Is not required to he lirensed In order to act

Rolely for his employer

10 F M C
126 FEDERAL MARITIME COMMISSION

and license as of May 4 1965 Despite this agreement 1pplicant co

tinued to act as a forwarder using World Wide s name and licen

until July 31 1965 No good faith intention to operate lawfully c

be inferred from applicant s knmving disregard for an agreement 

its own making

HeaTing Counsel contend that this evidence compeJs a conclusi

that applicant never entered into an employment relationship w

iTorld Tide that applicant never intended to enter into such a re

tionship and that applicant s arrangements with Cheung amount

to nothing more than a scheme whereby applicant attempted to beg

fonvarding operations before obtaining a license and without oth

lawful authorization

Hearing Counsel contend further that a

finding thrut applica

operated without authority warrants a conclusion that applicant 

unfit for licensing citing Johmon Son Inc Oomman Oarr

Application 79 MOC 362 1959

FINDINGS

The facts permit findings that

1 Applicant engaged in carrying on the business of forwardin

bebveen July 1964 and July 31 1965 without a license issued by t

Federal 1faritime Commission and during such period operate

through the use of guile and deception

2 Applicant was not authorized to use the license of a licens

independent ocean freight forwarder

3 Applicant is not qualified as an independent ocean freight fo

varder because the applicant is not fit properly to carryon thebusine

of forwarding and to conform to the provisions of theAct and rul

of the Commission issued thereunder

CONCLUSION

In our opinion the record of facts before us and ourinterpretaJtio

of them in findings support beyond a reasonable doubt that the app

cant knowingly and willfully operated as an ocean freight for vard

without lawful authorization hence in violation of the law a

therefore the applicant is not fit to be licensed as a forwarder by th

Commission

It is not disputed that the respondent was engaged in dispatchin

of shipments on behalf of others by oceangoing common carriers 

commerce from theUnited States and handlingthe formalities incide

10 F M C
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE APPLIC 127

to such shipments and was therefore carrying on the business of

forwarding as defined in the first section of the Shipping Act 1916

Boy Ie is a trained knowledgeable person who knew the require

ments of law and ethics pertaining to his profession

The fact thatWorld Tide did not employ the applicant nor appoint

it as its agent and the conduct of the applicant show there was no

true operation pursuant to vVorld vVide s

freight forwarder license

The initialdecision bypassed a central issue in this case i whether

applicant held itself out as an employee as opposed to an agent of

World Wide This issue is one of primary importance to be decided

rut this time Section 44 a specifies that No person shall engage in

carrying on the business of forwarding unless such person holds

a license issued by the FMC l Sections 510 4 b and 510 23 a

provide that an employee of a licensed forwarder need not himself be

licensed Certainly nothing in this record indicates Boyle was an

employee of Vorld Vide The facts in this case indicate that Boy Ie

had a

very loose arrangement with Cheung to act as Ohe ung s agent

rather than the agent ot orld Vide Services Inc

The pertinent statutory provision and our rules clearly state that

only a bona fide employee of a licensee need not himself be licensed

There appears nowhere any provision in the statute or our rules

imputing the authorization of a license to carryover to any or all

agents

The facts showing applicant agreed to take only 25 percent of

forwarding fees and later 75 to 80 percent but in all cases retained

all money received without objection or claim by others and showing

a partnership with a person purporting to confer right t

o use another s

license proves the arrangement was a sham to make the public believe

applicant was operating with a license vhen he was not The actions

of devising such a plan and caTrying it out and operating beyond the

time applicant agreed to stop show guile and deceit and sueh a

person

is not a fit licensee

The profession of ocean freight forwarding is a highly responsible

one requiring honorable conduct by all of its practitioners Past mal

practices disclosed by our predecessor agencies induced Congress to

enact licensing requirements imposing on us responsibility for review

ing and limiting access to the profession to those fit willing and able

and of sufficient financial standing to be able to provide a

fidelity bond

Existing licensed professionals are entitled to protection as part of

the public just as much as shippers but we can make our influence

felt only by establishing and maintaining high quality standards of

access to licenses To grantthe license would ignore significant aspects

10 FM O
128 FEDERAL MARITIME COMMISSION

of applicant s past conduct and permit a

lowering of standards 

access to this distinguished and honorable profession and in fa

diminish forwarder s own ability to protect and serve the public 

line with their professed high and worthy ideals

Our ultimate conclusion is that

respondent s application for a licen

as an independent ocean freight forwarder should be denied

ORDER

DOOKET No 664

INDEPENDENT OCF AN FREIGHT FORWARD ER LICE NS APPLICATIO

JAMES J BOYL E Co 507 VVASHINGTON STREET Sl N FRANCISC

CALIF

The Commission having fully considered the above matters an

having this date made and entered of record a Report containing i

conclusions and decision thereon which Report is hereby referred 

and made a parthereof

Itii ordered That the application for license of Tames J Boyle

Co is hereby denied pursuant to section 44 b Shipping Act 191

By the Commission

Signed THOMAS LISI

SeCl e

ta1VY

10 F M C
FEDEltAL 1 1AHrrIl1E COJ1J1ISSION

No 66 30

INDEPENDENT OCEAN FREIGHT FORWARDER LICl NSE ApPI lICATION No

654 E R FORWARDERS INc 150 BROADWAY NEw YORK N Y

Applicant for license as ocean freight fonvarder found notto b an independent

oceanfreight forwarder as defined by section 1 of the Act though a holder of

grandfather rights found to be a dummy freight forwarder of the kind

that Congress intended to eliminate by the enactment of P L 87 254

Application denied

Philip G Maron attorney for Applicant

Donald J Brunner and Sarrvuel Nemirow as Hearing Counsel

INITIAL DECISION OFBENJAMIN A Tl IEEAN EXAMINER 1

The order in this proceeding served l1arch 2 1966 by the Federal

Maritime Commission on E R Fonvarders Inc Applicant stated

as follows

By letter dated March 14 1966 E R ol varders Inc was notified of the

Federal MarItime CommIssion s intent to deny its application foran independent

oceanfreight fOrvarder license Tihe ground for denial is that applicant s associ

ation with ROmerovski Bros Inc RemorWaste Material COrp and RODler

Export Corp shippers and sellers of merchandise to foreign countries precludes

it from qualifying as an Independent ocean freight forwarder as defined in

Section 1 Shipping Act 1916 46 U SC 801 Applicant has now requested the

opportunity to show at a hearing that denial of the application would be

unwarranted

The hearing was held in New York City on Jnne 20 1966 The

parties stipulated the facts into the record and agreed upon theexhibits

placed in evidence Applicant made an opening statement on the

record but has filed no brief although given the opportunity to do so

From the record as a whole it is found

1 Applicant E R Forwarders Inc aNew York corporation has

been operating as an ocean freight forwarder with the permission of

the Commission since 1957

1This decision became the dec1sion of the Commission on Sept 13 1966

129

10 F M C
130 FEDERAL MARITIME COMMISSION

2 After theShipping Act of 1916 the Act was amended on S

tember 19 1961 by the passage ofP L 87 254 2

theApplicant pursu

to section 44 b of the amended Act See Appendix filed an appli

tion for a

freight forwarder s license on January 17 1962

3 On January 27 1962 theApplication was given Application 

654 by theCommission

4 Applicant is presently conducting its business at 450 Westf

Avenue Roselle Park N J Its three directors are its officers F

Udelsman president Eva Romer treasurer and Rose Romerov

secretary The 20 outstanding shares of Applicant s stock are h

equally by Eva and Rose and the letters E and R in the Applican

name stand for the first names of these two ladies

5 Eva Romer is the wife of Harry Romer and Rose Romerovsk

the wife of liartin Romerovski These four established theApplica

Mr Romer and Mr Romerovski are brothers and the owners ofall 

stockof RomerovskiBros Inc S

Romerovski Bros Inc theShippe

is a shipper ofshipments to foreign countries in that it is a corporat

engaged in the export of used clothing and rags at the Roselle Pa

address Applicant s president Udelsman is the Traffic and Exp

Manager of the Shipper and is ptid by the latter corporation

6 All office facilities utilized by the Applicant belong to and are 

the premises of the Shipper The bills of lading and other necess

shipping documents are prepared by p

id employees oftheShipper 

the offices of the Shipper Applicant s files are kept by employees 

and its books by the bookkeeper of the Shipper Applicant pays 

compensation of any kind to either the Shipper or the Shipper s e

ployees for the work done or for the use of the office facilities App

cant has no capital equipment or any office facilities ofits own App

cant s only paidemployee is a messenger named Daniel Fabriso

7 There is no evidence to show that either the secretary or t

treasurer perform any services for theApplicant Applicant paid ea

5 000 per year until 1965 That year each received 6 000

8 Applicant s entire forwarding operation consists of handli

from 70 to 100 shipments per rnonth for the Shipper Applicant bi

the Shipper monthly for these services at the rate of 7 50 per sh

ment Applicant also collects ocean freight compensation from t

Entitled An Act to amend the ShippIng Act 1916 to provide forl1censing Independ

ocean freIght forwarders and for other pUrposes Pertinent provIsions of the amended 

are contained In the Appendix

3RomerovskI Bros Inc came Into being in 1966 as a result of amerger of three corpo

tions wholly owned by the brothers They were RomerovskI Bros Inc Romer Export Co

and Romer Waste MaterIal Corp See quotation from theCommission s order in the open

paragraph

4 Official notice is taken of a Udelsman g position with theShIpper and b of the d

in paragraphs 2 and 3

10 Fld O
LICENSE APPLICATION NO 654 E R FORWARDERS INC 131

steamship carrier Applicant s gross receipts for the fiscal year ending

June 30 1965 were 16 334 89 Carriers paidapproximately 10 000 of

this sum the Shipper paid the remainder as forwarding fees

9 Ocean freight charges are paid directly to the carriers by the

Shipper

10 Applicant maintains a

telephone answering service and a mail

ing address at 150 Broadway New York City There is no evidence

that any forwarding business is transacted at this address

11 Applicant s board ofdirectorshas never held ameeting

DISCUSSION

There is no question and it is found that the Applicant doing busi

ness as shown herein is not an independent ocean freight forwarder

within the meaning of section 1 of the Act Applicant is subject to

effective control by Romerovski Bros a

shipper of shipments to

foreign countries the Shipper has a beneficial interest in the

Applicant

The brothers Romer and Romerovski own all the stock ofRomerov

ski Bros the Shipper The wives of the brothers own all the stock of

the Applicant Each corporation is a closed one family corporation

There is no evidence that the wives in any way participate in engage

in or exercise any control over the affairs of the Applicant Accord

ingly although the Applicant and the Shipper are separate corpora

tions it is found that the real parties at interest behind both corpora

tions are the brothers Romer and Romerovski

Applicant has no paid employees otherthan the messenger Fabriso

All the work of freight forwarding is done by employees of the Ship

per under the guidance and control of an executive of the Shipper

All the operating costs of the Applicant including labor costs except

the messenger are paid for by the Shipper The wives as already

stated other than receiving certain payments from the Applicant

neither engage in nor take any interest in the affairs business or

operations of the Applicant Thus it is clear that the only persons in

charge or performing the operations ofApplicant are personnel ofthe

Shipper Though as asserted by Applicant there may exist a technical

and legal distinction between the Applicant and the Shipper never

theless under the circumstances ofthis case the conclusion is inescap

able that the Applicant is under the effective control of the Shipper s

Iso find

8

This control Is considered none the less effective because the stock of theApplicant is In

the mimes of the wives and not in the names of the brothers Cf In the Matter 01 Luis

Louis A Pereira etc 5 FMB 400 405 etc also Investigation of Ocean Freight

Foarder8 eto 6 llMB 827 345

10 F M C
132 FEDERAL MARITIME COMMISSION

In addition to the facts stated in the above paragraph the rec

shows the Shipper was instrumental in the organization ofthe Ap

cant and the Applicant does no ocean freight forwarding for a

other concern than the Shipper The Applicant receives payme

from carriers for services rendered in connection with the shipme

of the Shipper The Shipper also pays the Applicant forwarding fe

These monies are paid by theApplicant to the vives of the two sto

holders ofthe Shipper The record contains no evidence as to what 

wives do with the money But in view of the marital relations

between the stockholders of the Applicant and the stockholders of 

Shipper it is easily concluded that the brothers receive financial 

vantage from the payments received by the wives i e from the Sh

per s shipments Itfollows contrary to the contention oftheApplica

that the Shipper wholly owned by the two brothers has a benefic

interest in theApplicant 6

There is little question that under the circumstances of this case 

Applicant is a dummy forwarder whose collection of compensat

from carriers redounds to the benefit of the Shipper 7

Itis this type 

freight forwader that P L 87 254 was enacted to eliminate 8

CONCLUSION

Section 44 of the Act is a

licensing statute Like other licens

statutes it should be approached with a liberal attitude to the end th

licenses may begranted to qualified applicants Application forFreig

Forwarde1 s Licen3e Dixie Forwarding 00 lno 7 F fC 109 122 

1965 The Commission in keeping with this policy has given app

cants an opportunity to remove from their opErations or organizatio

such aspects as may be offensive to the Act 9

Applicant at the hear

stated that it would meet with the Bureau ofDomestic Regulations 

make any changes that may be agreed upon liththem as to the man

in which the operations of the Applicant should be continued 

that it may be in full compliance yith all the rules and regulations 

6 The Commission s Regulations Title 46 CFR 510 21 contain the following 1 

term Beneficial interest for the purpose of these rules Includes but is not limited to

right to use enjoy profit benefit or receive any advantage either proprietary

or financ

from the whole or any part of a shipment or cargo arising by operation of law 

by agreement express orimplied

I No finding is made concerning the possibility that the Shipper may be obtaining an 

la vful rebate That aspect of this proceeding is outside the scope of this proceeding

S HR Rept No 2939 84th Cong 2d sess July 26 1956 p 53 etc

9

See Applicntion etc Morse Shipping Co etc 8 FMC 472 1965 Application etc 

Mar Shipping Corporation etc 8 FMC 493 1965

10 F M C
LICENSE APPLICATION NO 6 54 E R FORWARDERS INC 133

the Maritime Commission As of the date ofthis decision Applicant

has not advised the Commission of any corrective steps taken

The Applicationis denied 10

Sigped BENJAMIN A THEEMAN

Presiding Ewa miner

APPENDIX

PERTINENT PROVISIONS OF THE ACT

Sec 1 when used in this Act

An independent ocean freight forwardel is a person carrying on the business

of forwarding for a consideration who is nota shipper or consignee or a seller or

purchaser of shipments to foreign countries nor has any beneficial interest there

in nor directly or indirectly controls or is controlled by such shipper or consignee

or by any person having such a beneficial interest

Section 44 a provides that a person desiring to engage in the car

rying on of the business of forwarding must first secure a license from

the Commission

Section 44 b

requires the Commission to issue the license to any

qualified applicant who is found by the Commission to be an independ

ent ocean freight forwarder as defined in this Act and to be fit

willing and able properly to carry on the business of forwarding and

to conform to the provisions of this Act and the requirements rules

and regulations of the Commission issued thereunder otherwise

such application shall be denied Also by section 44 b the Congress

granted so called grandfather rights to those independent ocean

freight forwarders who on the effective date ofthe Act were carrying

on the business of forwarding under a

registration number issued by

the Commission Such forwarders were allowedto continue in business

for a

period of 120 days after September 19 1961 without a license

and if the forwarder applied for a license vithin the 120 days he

could under such regulations as the Commission shall prescribe

continue such business until otherwise ordered by the Commission

10 Conclusions and contentions not discussed or embraced in this decision have been

considered and are not justified by the record or are consi l red unnecessary for the

determination of the issues

10 F M C
FEDERAL MARITIl1E COMl1ISSION

DOCKET No 66 29

AGREEMENT No 9431 HONG KONG TONNAGE CEILING AGREEMENT

Decided September 1 1966

The Commission has no authority to compel a carrier to participate in a section

15 type agreement against its will

When one of the original parties to an agreement filed for approyal under sec

tion 15 withdraws from such agreement prior to Commission approval

thereof the document so filed no longer constitutes an agreement of all of

the carriers within the meaning of section 15

I

Where in the course of considering an agreement filed for approval under

section 15 it is established that the document does not constitute a true

copy of the continuing agreement of the original parties thereto such

documentwill berejected

Ifone of the parties to an agreement submitted for appronll under section 15

withdraws from the agreement prior to the time Commission approyal

is had the document so filed ceases to constitute a true oPY of the agree

ment within themeaning of section 15 of the Shipping Act 1916 as amended

in that it purports to include the party which has withdrawu

Oharles F Warren and John P Afead3 for respondents New York

Freight Bureau Hong ong

George F Galland and J Donald Kenny for States wlarine Lines

Donald J Brunner and Samuel B Ne1nirow as Hearing Counsel

REPORT

By THE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairman James V Day and John S Patterson

oommissioners

This proceeding was instituted onApril 28 1966 by our Order to

Show Cause why a document designated Agreement No 9431 as origi

nally filed on March 4 1965 should not be rejected as failing to con

stitute an agreement within the meaning of section 15 ofthe Shipping

Act 1916 among all of the parties which had signed it or in the a1

Commissioner Hearn did not participate

134 10 F MC
HONG KONG TONNAGE CEILING AGREEMENT 135

t

rii tive why

this document sh uld not be disapproved under section

15lior the sa m reason and for the additii n al reasons that the docu

rh nt no ronger constitutes a true copy of the agreement between

only the carTi r party thereto arid that the Commission is without

statutory authority to compel a corltmoncarrier by water to participate

in an agreement w which itis not a

party and against its will

BACKGROUND FACTS

The New York Freight Bllreau Hong Kong hereinllfter called

the Bureau is a conference Yhich operated under approved Agr

ment No 5700 4

1

Itis compoOOd of 17 carriers and is concerned with

the inbound trade between JIong Kong and United States East and

GulfCoasts

This agreement provide ill pertinel tpart as follows

1 This agreement covers the establishment and mait tenance of agreed rates

and charges for or in connection with the transportation of all cargo in vessels

owned controlled chartered and or opera ted by the parties hereto in the tlade

coyered by this greement

The agree eI t

votjng provisions were set fort in paragraph

10 a and stated

10 a Ch nges in tariff rates and conditions and all other matters voted

upon with exception of changes in the arrangement shall be effected and or

decided by the affirmative vote of notles than two thirds of tbe parties hereto

Any change in this arrangement shall be made only by the unanimous vote

of all the parties to the

arra lgement

The membe s ofthis conference were parties to a

p

reviou cflrgo ap

pOl tionment agreement No 5700 5 vl ich pl ced a ceilin g

Qn the

number of revenue tons of cargo which any member line c mld lift

clurl g anyone loading at HongJ cmg This agreerpent expired by its

O viterms on January 6 19 5

On January6l14 1965 the members of the Bureau unaniinously en

tered into an agreement designated No 9431 8l

pra which was a new

tonnage ceiling agreement similar to No 5700 5 which had expired 8

days earlier Section Fifth of thi s agreement calls for a three fourths

majority vote to change the tonnage of cargo which may be lifted on

each sailing Section Eighth specifies that the agreement shall continue

in effect for a period of 1

year beginning on the date approved by the

Commission unless by unanimous vote 01 the parties it is extended

further

On May 13 1966 Agreement No 5700 8 was approved in part as to Doncontroverslal

sections The contest portions hav been made file subtect of iin Investigation Docket

6G32

10 F M C
136 FEDERAL MARITIME COMMISSION

Agreement No 9431 wasfiledwith theCommission onMarch 4 19

with a letter of transmittal which stated in part this is a separa

agreement and does not amend Agreement No 5700 On Septe

ber 28 1965 the Commission issued its order of conditional approv

This order approved the agreement upon the condition that sectio

Fifth and Eighth ofthe agreement be modified so as to permit clos

continuing surveillance over the operation of the agreement by t

Commission by requiring the submission of all changes in tonna

ceilings and in the case of decreases in such ceilings advance approv

under section 15 It also limited renewal of the agreement by una

mous vote to one additional period of 1

year

The parties to the agreement were allowed 60 days within which 

accept the changes specified in the order ofconditional approval T

period was extended an additional 60 day at the request of Mr 

Parker Chairman Secretary of the parties to the agreement Th

would have allowed the lines involved until February 3 1966 

comply

On January 21 1966 however States Marine Lines one of the ori

nal parties to the agreement sent a

telegram to the Commission 

which it noted its opposition to the agreement and requested a heari

in the event that the Commission intended to consider the agreeme

further The Commission thereupon withdrew its order of condition

approval on January 24 1966

On February 3 1966 a document purporting to accept the co

ditions specified in the order of conditional approval on behalf oft

parties was tendered to the Commission for filing

On February 4 1966 the matter became the subject of an order 

investigation and hearing Docket No 666 On the same date t

Bureau filed a petition for reconsideration asking the Commission 

vacate its order withdrawing conditional approval This petition w

denied on February 16 1966 and the proceeding was discontinued

THE PRESENT PROCEEDING

This proceeding arose as a result of a petition filed by the Bureau 

March 25 1966 asking for immediate section 15 action on Agre

ment No 9431 in its original form

In a reply filed on April 14 1966 States Marine Lines one of t

original signatories to Agreement No 9431 opposed the petition 

the ground that there is no such agreement before the Commissi

for approval

The New York Freight Bureau Hong Kong filed a further plea

ing on April 18 1966 in reply to States Marine s opposition to t

10 F M C
HONG KONG TONNAGE CEILING AGREEMENT 137

petition in which it contended that States Marine Lines could not

legally back out of the agreement which it had signed and in any

event that the agreement came within the scope of Agreement No

5700 4 the basic coJiference greement Qf the New York Freight

Bureau and as such was governed by the two thirds vote rule ofthat

agreement thereby binding States Marine

Since there was no issue of fact as to States Marine s opposition to

Agreement No 9431 the Commission in an Order to Show Cause

served on April 28 1966 directed the common carriers by water in

volved in the purported agreement to show cause why the document

designated as No 9431 should not be

rejected as failing to constitute an agreement between all of the said

carriers within themeaning of section 15

or in the alternative

disapproved under section 15 for the same reason and for the additional reasons

that the document no longer constitutes a true copy of the agreement between

only thecarriers party thereto and that the Commission is without authority to

compel a common c rrier by water to participate inan agreement to which it is

not a party and against its will

Inour Order to Show Cause we invited the parties to brief the fol

lowing five questions as an aid to our resolution ofthe issues presented

1 l

lay the Commission reject a document purportingto be an agree

ment filed for section 15 approval when it is established that a carrier

signatory thereto is at the time approval is to be granted no longer a

party thereto or must the Commission disapprove such a document

within the meaning of section 15

2 Vhat effect does the failure of a carrier originally a

party to an

agreement filed under section 15 to accept modifications imposed by the

Commission as a condition precedent to its approval have

a On the agreement itself and

b On the dissenting carriers status under the agreement

3 Under what stat tory provision if any may the Commission

compel the participationby a common carrier by water in foreign com

merce in an agreement to which it is not a

party oragainst its will

4 May the Comwission modify Agreement 9431 so as to delete there

from any carrier not a party to the agreement and then proceed to a

determinatio fwhat action to take under section 15

5 Is Agreement 9431 gov erned by any of the provisions of Agree

ment 5700 as amended to date

10 F M C
138 FEDERAL M RI 1IME COMMISBroN

POSITIONS OF THE PARTIES

Briefs andaffidavits have been filed by the New YorkFreight B reau

H0ng oi 1g States larine Lines and lIearing Counsel The po

sitions of each of th parties on these issues re set out below

A The New York Freight Burea t

1 The Bureau contends that the Commission may neither rejec

nor disapprove Agreement No 9431 Itargues that once a carrier signs

an agreement subject to section 15 approval it may not unilaterally

repudiate its action but that it remains a party to the agreement unt

such time as the Commission gives its approval or after hearing dis

approves it

2 It is the Bureau s position that Agreement No 9431 is a supple

ment to the basic Conference Agreement No 5700 4governed by tha

agreement s voting provisions Accordingly it argues a two thirds

vote was sufficient for approval of the ceiling agreement as submitte

originally as well as for acceptance of the modifications imposed by

the Commission in its order of conditioned approval The attempte

withdrawal of States larine Lines from the original agreement and

its failure and refusal to accept the modifications imposed by theCom

mission has no effect on the agreement itself or States Marine s statu

thereunder

3 The Bureau contends that this is not an appropriate case to tes

the question of whether the Commission may eompel a carrier to par

ticipate in an agreement against its will because States larine is 

party to Agreement No 9431 Ioreover the Bureau is not asking th

Commission to c0111pel participation but merely for approval unde

section 15 of the Shipping Act After approval the Bureau will tak

appropriate steps to force States Marine to abi e by the terms of th

agreenlent

4 The Commission may not modify Agreement No 9431 by dele

ing States Marine Lines b cause the adoption of this agreement wa

a valid Bureau action and States Marine as amember is bound thereby

Moreover even ifthis werenot aBureau action States Marine remain

a party to the original agreement as unanimously adopted

5 The Bureau contends that Agreement No 9431 is a supplemen

of the type contemplated in Article 9 of Agreement 5700 4and unde

Article 10 a thereof only a two thirds vote is required for adoptio

B States 111arine Lines

1 States Iarine has no preference as to whether Agreement N

9431 is rejected or disapproved

10 F M C
HONG KONG TONNAGE CEILING AGREEMENT 139

2 The nonacceptance by States Marine of the modification imposed

by the Commission in its order ofconditional approval kills theagree

ment or in any event liberates the dissenter whethef the agreement is

killedornot

3 The Commission has no statutory authority to compel participa

tion in an agreement by a common carrier by water against its will

4 States Marine has no interest in the disposition of the cargo

ceiling agreement as long as States Marine is out ofit

5 States Marine Lines contends that Agreement No 9431 is wholly

separate from Agreement 5700 But even if No 9431 were to be gov

erned by No 5700 the result would be the same since Agreement 5700

requires unanimity where a

change in this arrangement is proposed

O Hearing Oo Un 3el

1 Since the document bearing identification No 9431 is no longer

an agreement due to the withdrawal of States Marine it does not

come within the aegis of section 15 and is unapprovable as a matter

oflaw Itmust therefore be rejected

2 Since a dissenting carrier must be permitted to withdraw on 30

days notice from an approved agreement without penalty under Gen

eral Order 9 ittollows that it should be allo ved to withdraw from an

unapproved executory agreement This should not affect approva

bility provided that the dissenting carrier s name is stricken from the

agreement

3 No provision of the Shipping Act 1916 nor any interpretation

of its legislative history authorizes the Commission to compel a com

mon carrier by water to participate in an agreement against its will

4 The agreement identified as No 9431 purports to be an arrange

ment amOl g

the carriers who are signatories thereto Since a sect on

15 agreement is a voluntary endeavor the Commission may not sub

tract carriers from the membership against their will any lnore than

it can add carriers to it against their will

5 The ceiling agreement No 9431 is a separate and distinct

ar

rangement which must stand or fan on its own merit even though

the parties are the same in each Itis not govern d by any ofthe pro

visions ofAgreement No 5700 as amended to date

DISOUSSION AND CONCLUSIONS

Section 15 of the Shipping Act 1916 authorizes common carriers

by water and other persons subject to the Act to enter into certain

types of anticompetitive agreements subject to the approval of the

Commission vVhen such an agreement is filed the Commission must

10 F M C
140 FEDERAL MARITIME COMMISSION

approve it unless after noti and hearing it finds that it would b

unjustly discriminatory orunfair operate to tle detriment of the fo

eign Commerce ofthe United States be contrary to the public intere

or be in violation ofthe Act Upon such a

finding the Commission ma

disapprove cancel ormodify the agreement

Among the agreements which become the subject of a hearing ther

are usually two broad classes ofissues presented

1 Whether the Commission has jurisdiction over the agreemen

and

2 Whether the agreement ought to be approved

The instant proceeding is concerned only with the jurisdictiona

question Thus the merits of the agreement are not reached

In order for the Commission to have jurisdiction there are thre

necessary elements There must be

1 an agreement among

2 common carriers by water or other persons subject to the Act

3 to engage in anticompetitive or cooperative activity ofthetype

specified in section 15

Ifone or more of these elements is lacking we have no jurisdictio

to consider the matter under section 15 For example unless two o

more of the parties to an agreement are common carriers by water o

other persons subject to the Act the agreement is not subject to filin

under section 15 no matter how anticompetitive it may be Grace Line

Inc v Skips AIS Viking Line et al 7 F MC 432 447 1962 Sim

lar ywhere there is an agreement between persons subject to the Ac

but the cooperative conduct is not of the type specified in section 15

the agreement is also beyond the reach of our jurisdiction D J Roach

Inc v Albany Port District et al 5 F MB 333 1957 Finally an

most fundamental of all is the requirement that there be an actua

viable agreement to which all of the parties have given and continu

to give their assent until approval ishad

The purported Agreement No 9431 in this case fails to meet th

latter criterion

When a group of carriers fil a new agreement with the Commis

sion it is fundamental that each member of this group must give it

individual assent to the document purporting to represent the agree

ment of the parties Ifat any time prior to approval by the Commis

sion one of the parties to the agreement changes its mind and with

draws from the agreement the document previously filed becomes a

that moment obsolete Itno longer constitutes a fair and accurate de

scription ofthe agreement between theparties

10 F M C
HONG KONG TONNAGE CEILING AGREEMENT 141

Accordingly where as here one of theparties to the agreement with

draws from the agreement as filed that act destroys the subject matter

ofthe Commission s

jurisdiction

We can only consider agreements for approval under section 15

What we have before us is manifestly a nonagreement

The Bureau argues that a party to an agreement may not repudiate

the agreement or withdraw until the Commission has acted The major

portion of the Bureau s argument is an attempt to show that Stares

Marine is bound by Agreement No 9431 undertheprinciples of private

contract law The difficulty in the Bureau s premise is that we have

stated that a section 15 agreement is not a private contract but

a public contract impressed with the public interest and permitted to

exist only as long as it serves that interest In Be Pacific Ooast

European Oonference 7 F MC 27 37 1961 Thus the rights of the

parties as against each other for breach of their contract must be

distinguished from the question of whether there is in existence an

approvable agreement undersection 15

Significantly States Marine Lines does not argue that it has an

absolute unqualified rightto withdraw from a section 15 type ofagree

ment prior to Commission approval Itargues rather that the passage

oftime and material changes in circumstances including the inaugu

ration of direct service warrant its withdrawal from an agreement

which is now nearly a

year and a half old especially where the agree

ment by its own terms was limited to a year s duration followingap

proval The Bureau attempts to show that States Marine s increased

carryings are due not to the inauguration of a direct service but to

rebating

These arguments are disregarded because they are totally irrelevant

to the issues raised in the order to show cause Such evidence might

be relevant to a determination ofwhether any ceilingagreement in the

Hong Kong trade should be approved by the Commission but itis not

relevant or material to the determination of the current status of No

9431

We take no position on the question ofwhetherStates Marine Lines

withdrawal or repudiation ofAgreement No 9431 was justifiedornot

Itis the fact of this withdrawal and not the reasons therefor which

concerns us As to this fact there is no dispute among the parties

The Bureau asks us to approve Agreement No 9431 as submitted

notwithstanding States Marine s withdrawal This we cannot do

The role of the Commission with respect to agreements requiring

approval under section 15 is essent ally a passive one We neither en

courage nor discourage such agreements The function of the Com

10 F M C
f4Z FEDERAL MARITIME COMMISSION

mission is to examine such agreements inthe light of thelegal critet

imposed by the Shipping Act If the agIeement meets these criteria

the agreement is approved If there is some question as to whethe

the agreement should be approved the matteris set down for hearin

Ve have no general equity authority to compel specific performanc

on the part of a recalcitrant party Put another way the Commission 

initial task under section 15 is to deal with agreements among or be

tween carriers orother persons subject to th Act not disagreement

The Bureau argues that it is not asking us to compel participationb

States Marine but only to approve the agreement which States Marin

had signed To approve the agreement in question in the circumstance

of this case would be to do by indirection that which we could not d

directly Approval of the agreement would be tantamount to com

pelling participation of States Marine Lines against its will

hile it is true that Congress intended by the Shipping Act t

allow carriers to enter into anticompetitive combinations subject o

course to approval and regulation by the Commission it is equall

trlie that Congress has zealously written safeguards into the la whic

are designed to protect the rights of a carrier to pursue an independ

ent existence

The Bureau objects to the conditional approval procedure charac

terizing it as disapproval by delay The conditional approval pro

cedure is intended as a mechanism whereby quick approval of a se

tion 15 agreement may be had where the Commission has someobjec

tionsto an agreement as filed Ifthe parties to a

proposed agreemen

do not wish to avail themselves of this purely procedural short cut t

approval the Commission will of course set the matter do ril fo

hearing But this is a time consuming process the very thing which th

Bureau objects to

What the Commission is in effect saying when it issues an order o

conditional approval is

Your proposed agreement as it stanBs must be set do vn for hearing Howeve

if you make the following changes it will be approved without a hearing

The BUreali seems to take the positipn that the Commission mus

in the discharge of its statutory obI gatiops under section 15 eithe

approve aproposed agreement instantly or set it down immediatel

ora hearing

It loses sight of th fa t

that m

ny of tlw agreements filed for ap

provai as for example No 9431 require hQurs of economic study i

addition to a egal re ijew before the ComDiission is in a position t

make the determjnati9n t

approve conditionally approve or set dow

for h aring

10 F M C
HONG XON i

TONNAGE CEILING AGREEMENT 143

The Bureau alleges thatthe Commission went backon its word when

it withdrew its order of conditional pproval prior to the expiration

oftime ioracceptance oftheconditions

If the Bureau had subsequent to the Commission s withdrawal of

its order ofconditional approval submitted its acceptance ofthe con

ditions specified and if this acceptance clearly represented the po

sition of all of the parties to the agreement then there is little doubt

that the order of withdrawal would have been vacated and the agree

ment permitted to become effective in accordance with the terms of the

original order ofconditional approval However the events which fol

lowed the withdrawal oftheorder ofconditional approval demonstrate

amply that our withdrawal was fully warranted At most it could be

argued that the withdrawal was a few days premature But this error

if error it was wasclearly harmless since the Bureau admittedly was

and is unable to secure the requisite unanimous approval of its

members

The basic conference agreement of the New York Freight Bureau

Honk Kong in effect at all times pertinent herein is Agreement No

5700 4 This agreement is limited by its own terms to ratemaking

Nevertheless the Bureau argues at some length that Agreement No

9431 is tied to Agreement No 5700 4

For reasons which are best known to the Bureau members the in

stant agreement was carefully insulated from conference activity un

like the earlier tonnage ceiling agreement which had been filed as a

supplement Agreement No 9431 by its own terms does not purport

to be a modification to or an amendment of No 5700 4Moreover the

letter of transmittal accompanying Agreement No 9431 specifically

stated that it was separate from No 5700 Since this letter of trans

mittal is a

required document under the Commission s regulations

Title 46 C F R 522 1 any representation made therein is entitled to

be givensome weightin construingor explaining the agreement which

it accompanies particularly if there is ambigUity in the contract itself

Moreover since the tonnage ceiling agreement is a temporary ex

pedient it is not the type of agreement which is usually incorporated

in a permanent conference agreement We hold therefore that Agree

ment No 9431 is separate and distinct from Agreement No 5700 4

However even if No 9431 wereconsidered to be a part ofNo 5700 4

whether characterized as supplemental ancillary or any othertermi

nology the voting rules of No 5700 4clearly require a unanimous

vote whenever a change in the arrangement is contemplated Since this

unanimous vote waslacking the result is the same

10 F MC
The Bureau however argues thatunanimity is not required be

Agre inent No 9431 i ancillary or suppJemelltal y

to the confe

Agreement No 5700 4 and that conference voting rules require 

it twothirds vote The only matters under Agreement No 

which could be done by two thirds vote were changes in rates 

ordinary internal housekeeping functions Whenever an ant

petitive scheme other than ordinary ratemaking was contempl

a change in the arrangement was called for and this required 

nimity by the clear and unequivocal terms of the agreement

Of course if Agreement No 9431 had been submitted as a su

ment i e a

change in the arrangement to Agreement No 

and if the voting rules under No 5700 4permitted a change in th

rangement by something less than a unanimous vote then a situ

similar to that presented in Docket 1095 might be before us Agree

No 150 1 Trans Pacific Freight Oonference of Japan and A

ment No 3103 17 Japan Atlantic and GLdf Freight Oonfm enc

cided March 24 1966 9 F M C 355

In our view it is immaterial whether No 9431 is considered 

separate and distinct from No 5700 4or an amendment or su

ment thereto If it is sep arate then clearly it requires contin

agreement on the part ofall whom it purports to bind This must 

or it simply is not an agreement itis a disagreement

If on the other hand itis considered to be a part of No 

is nevertheless governed by thatagreement s unanimous vote prov

since it in rolves a basic change in the scope of the agreement

In either event unanimity is lacking If one fact is utterly be

dispute it is that States 1arine Lines is now opposed to the ton

ceiling agreement There is therefore no agreement before the C

mission at this time upon which any action may be taken

Upon consideration ofthebriefs and affidavitsofthe parties an

the reasons set forth in this report it is ordered that thisproceedin

and the same hereby is discontinued

By the Commission

Signed THOlIAS LISI

Secreta

10 F M 
FEDERAL MARITIME COMMISSION

DOCKET No 65 1

MATSON NAVIGATION COMPANY REDUCED RATES ON FLOUR FROM

PACIFIC COAST PORTS To HAWAIl

Decided September 15 1966

Respondent in the carriage of flour from Pacific Coast port to Hawaii as a

common carrier found to be in competition with an unregulated barge line

carrying wheat inthe same trade

Respondent s reduced rate on flour found to be compensatory and justified as a

means of meeting barge line competition

NormanE Suthe J land Alan F Wohlstette1 and liru tin Sterenbuch

for petitioner Hawaiian Flour Mills Inc intervenerHawaiian l1anu

facturer s Association

A R Allen for intervener Portland Freight Traffic Association

Arthur S K Fong for intervener State ofIIawaii

DavidF Anderson for responden tMatsonNavigation Co

Robert N Lowry for interveners General l1ills Inc and Fisher

Flouring Mills Co

Paul Stepner for the Pillsbury Co

H E Franklin Jr for Seattle Traffic Association Port of Seattle

and Seattle Chamber ofCommerce

James R Ounningha7n for vVashington Utihtries and Transportation

Commission

R Stanley Harsh and Donald J B1 unner Hearing Counsel

REPORT

By THE Co aunssION John Harllee Ohair7rlanj James V Day George

H Hearn and John S Patterson Oommissioners

This proceeding was instituted py us as a result of petitions filed by

Hawaiian Flour Mills Inc petitioner and Hawaiian Grain Corp l

Vlce Chairman Asbton C Barrett did not participate

1 Hawaiian Grain advised the ommissio nby letter dated Mar 24 1965 that it would not

fUftber partic p

a 1 tl1 lro edl pg

10 F M C

299 843 0 68 11

145
146 FEDERAL MARITIME COMMISSION

protesting a reduction in rates on flour carried from Pacific Coas

povts to Hawaii by 1atson Navigation Co CMatson Petitioner als

sought a suspension ofthe rate reduction

By order ofJanuary 7 1965 we instituted an investigation to dete

mine whether the reduced rates were unjust unreasonable orotherwis

unlawful as alleged by petitioner 1atson wasnamed as respondent i

thisproceeding We did not grant the requested suspension

Intervening on behalf of petitioner were Hawaiian l1anufacturer

Association Fred L Waldron Ltd 2Portland Freight Traffic Asso

ciation and the State of Hawaii Intervening for respondent were th

State of Washington Utilities and Transportation Commission

Port of Seattle Seattle Traffic Association Seattle Chamber of Com

merce and he following mainland flour mills General Mills Inc

Fisher Flouring Mills Co Fisher and The PillSbury Co Pills

bury Hearing Counsel alsoparticipated

All interested parties have been heard and the proceeding is now

before us upon exceptions to the Initial Decision of Chief Examine

Gus O Basham

FACTS

Historically mainland millers such as General Mills Fisher and

Pillsbury have been the sole suppliers of flour to the islands o

Hawaii These millers have for years shipped their finished flou

product to Hawaii via respondent Matson Navigation Co Matson

Recently a new source of flour for the island has been created by

the establishment of petitioner in Honolulu Petitioner receives whea

transported in unregulated barges from Portland Oreg to Honolulu

and mills it into flour and mill feed for the Hawaiian ma rket

where itcompetes withmainland millers

Petitioner organized in 1963 operates in close connection with

various other related corporate entities Pursuant to a 10 year con

tract petitioner purchases whatever wheat it needs for milling from

Hawaiian Grain in Honolulu Hawaiian Grain previously acquired

the wheat from Kerr Grain in Portland Oreg and has it shipped

to Honolulu via Hawaiian Tug Barge an unregulated carrier 3

Hawaiian Grain stows the wheat in its elevators in Honolulu which

are located adjacent to the mill which petitioner uses in its flour

milling operation The mill is not owned by petitioner but is leased

to it by Oahu Railway Terminal Warehousing Co 4

pursuant to

II Waldron did not appear at the hearing

8

Petitioner and Kerr Grain are both owned by Thomas Kerr

Dillingham Corp is the owner of Hawaiian Tug Barge Oahu Railway and 40 percen

of Hawal1an Grain Carnation Co owns 60 percent of Hawaiian Grain

10 F MC
REDUCED RATES ON FLOUR PACIFIC COAST PORTS TO HAWAII 147

a 20 year loose The total cost of construction of the mill together

with the waterfront land on which it is located was 1 500 000

Petitioner Hawaiian Mills commenced operation on August 27

1964 of this new modern mill which has the capacity for supplying

all of the Hawaiian flour market Ithas a favored location by virtue

or being in close proximIty to deep water to its grain supply and

tQ its purchaser of mill feed It has a specially designed trailer

equipped to load and discharge flour pneumatically which it uses to

transport flour to bakeries It produces only bakery flour now but

has not ruled out the possibility of producing family flour Its cus

tomers enjoy the advantages of having deliveries on a 24 hour basis

without having to carry large inventories Petitioner employs 16

people with an annual payroll of 87 000

Petitioner s competitors from the mainland Fisher Pillsblry and

General Mills have served Hawaii since the early 1900 s These main

land millers have seen their business in Hawaii decrease since the

institution of petitioner s business there Because of this loss of busi

ness and fear of further loss the mainland millers sought to have

1atson decrease its rates on flour to Hawaii latson s rate prior to

the reduction was 516 per container or 22 43 per ton of flour

The first request for a rate reduction was made by General Mills

in September 1963 when it first learned of the proposed establish

ment of petitioner s business General Mills had concluded that peti

tioner would have a cost advantage ranging from 45 cents to 91

cents a hundred pounds of flour This was hased on an estimated

rate on wheat or 10 69 per long ton which in turn was the equiva

lent of the going common carrier rate on barley in bulk Therefor

General 1ills requested a container rate of 15 per ton which was

denied by respondent as hased upon speculative competition

Upon the opening of petitioner s business August 1964 General

Mills learned that petitioner was quoting prices 40 to 50 cents per

100 pounds less than General11ills prices to the retail bakery trad

Fisher encountered similar price competition in its sales to local

fawaiian bakeries In August an September 1964 Fisher booked

only 25 per cent ofthe volumeit normally expected Fisher s customers

stated that Fisher s prices were too high As a result both main

land mills in October 1964 renewed their request to Matson for a

rate of 15 per ton They presented to Matson in early November

1964 a study showing the estimated cost of wheat transportation

to be 10 62 per ton consisting of a barge rate of 8 per ton and

accessorial charges of 2 62 per ton

10 F M C
148 FEDERAL MARITIME COMMISSION

Matson then decided to reduce the rate per container from 516

to 398 resulting in an equivalent rate of 17 31 per ton or a reduc

tion of 26 cents per 100 pounds The flour shippers were not satis

fied with that rate but stated that they could live with it Matson

emphasizes that it reduced the flour rate to give its flour shippers

rates which would preclude them from being forced completely ou

of the Hawaiian market solely because of the differential then ex

isting between the unregulated barge charges for carrying wheat and

respondent s flour rates Matson disavowed any intention to put the

new mill out ofbusiness or to equalize other competitive factors such

as a possible difference in the cost of producing flour in HonoJulu

and on the mainland economic factors unrelated to transportation

or geographical disadvantage

Matson transported 19 898 short tons of flour from Pacific Coas

ports to Hawaii in 1964 17 337 tons from the Bacific Northwest It

estimated that in 1965 it will have retained only about 61 per cent

12 300shorttons ofits total 1964 movement

DISCUSSION

The Exa miner recommended that the Commission find the reduced

rate to be lawful He found it would not be unduly preferential o

prejudicial to any shipper and that it was not an unreasonable rate

He found the rate to be reasonable though not recovering fully dis

tributed costs inasmuch as the reduction was necessitated by carrier

competition The Examiner also found the reduced rate to be com

pensatory andnot contrary to the public interest

Before reaching a discussion of the issues raised on exceptions

we wish to comment on certain aspects of the Examiner s decision

to which no exception wastaken

The Examiner found no undue preference or prejudice in viola

tion of section 16 First of the Act Since we agree with this con

clusionno discussion is here necessary

There has been much discussion throughout this proceeding con

cerning what cost amounts need be recovered to enable the rate to be

classified as reasonable There was also much discllssion about the

reliability of the cost studies submitted by the two principal parties

and whether either cost study would support their desired conclusion

of reasonableness or unreasonableness of the rate

We endorse the Examiner s

findings concerningthese problems The

Examiner first recognized that rates need not in every case recover

fully distributed costs to be reasonable This Ommission has previ

ously held that a carrier may establish rates below fully distributed

10 F M C
REDUCED RATES ON FLOUR PACIFIC COAST PORTS TO HAWAII 149

costs ifspecial circumstances exist to justify them InlJestigation of In

creased Rates on Sugar Gulf Puerto Rico Trade 7 F MC 404 414

1962 Aleutian Marine Transport CO Rates Between Seattle and

Ports in Alaska 7 F MC 592 596 1963 Matson admitted its rates

did not recover full costs but argued that special circumstances car

rier competition justified thelower rwtes

The Examiner then concluded that Matson s cost studies were based

on proper considerations and that they were acceptable Matson s

studies showed that in 1964 its reduced rate on flour returned a net to

vessel 5

contribution of 78 59 per container and thaJt estimates for

1965 predicted an even higher return for that year On the basis ofthis

return the Examiner determined the rates to be compensatory Since

no exception has been taken to any of these conclusions it is not neces

sary to discuss them in any further detail

Exceptions to the Examiner s decision filed by petitioner the State

01 Hawaii and Hearing Counsel raise the following issues for our

consideration

1 Whether the Examiner erred in finding the rtllte reduction to

be necessitatedby carrier competition

2 1Vhether the Examiner properly treated the question of

whether the rate reduction was necessary to enable the main

land mills to compete with petitioner in Hawaii

3 Vhether Matson s rate reduction unfairly distorts the existing

r te structures thereby resulting in unfair discrimination

among shi ppe rn

4 Whether the Examiner gave proper consideration to the public

interest aspects involved

We first consider whether the Examiner erred in finding the rate

reduction to be necessitated by carrier competition

Matson sought to establish justification for its r8ltes which it ad

mitted recovered less than fully distributed costs Matson a

rgued that

Hawaiian Tug Barge the unregulated carrier employed by peti

tioner for the transportation of wheat supplied meaningful competi

tion so as to furnish justification for a reduced rate The Examiner

found such competition existed and that it was sufficient justification

for rates recovering less than full costs

Petitioner and Hawaii both except to the finding that Iatson is

in competition with the unregulated carrier The substance of their

position is that as a matter of law l1atson in the carriage of flour

cannot be competitive with Hawaiian Barge carrying wheat because

IIA net to vessel rateof return recovers for the carrier all costs of handling the specIfic

traffic and tn addftlon contributes toward vessel and overhead expense

10 F M C
150 FEDERAL MARITIME COMMISSION

they are not competing for the carriage of the same traffic of the same

shipper Petitioner cites Board of Trade of Ohattanooga v East Tenn

Va Ga R O 5 IC C 546 1892 to support its theory that there can

be no actual competition between carriers unless one line could and

would perform the service alone if the other did not undertake it This

case however is not at all in point Itinvolved a

proceeding under sec

tion 4 of the Interstate Commerce Act which prohibits railroads from

assessing greater charges for transportation foJa shorter than for a

longer distance overthe same line or route Relief from this provision

may be granted ifthe lower rate on the longer route is justifiedto mee

water competition The ICe merely held that in the proceeding before

it no water competition in fact existed rt o justify a lower rate The

Commission determined no water competition existed because none o

the goods involved would reach the destination by water if the rail

road withdrew from the business and no competition can be said

to exist unless one line would perform the service alone if the othe

did not do it The case involved no question of different carriers trans

porting different types of commodities

Pet tioner further argues that because rates on raw materials are

not comparable with the usually higher raJtes on the finished products

manufactured therefrom there can be no competitive relationship

between them tVe recognize that such a differential in rates exists be

tween rawmaterials and the finished product but we see no reason why

this means the two commodities cannot be competitive The Examiner

cited two cases in which the ICC recognized such a

competitive rela

tionship between wheat and flour 6

and between coal and fuel oi11

This Commission has recognized a

competitive relationship between

logs and products therefrom 8

We agree with the Examiner that a competitive relationship can

xist other than between carriers competing for carriage of the same

product Such a situation exists here As Hearing Counsel suggested

what we have here are two competing systems involving supply of

grain milling transportation and the sale of flour that flour and

grain are competing products in this scheme and that transportation

rates and charges on one by whatever type of ocean carrier directly

and vitally affect the other

The fact that the competitive relationship between Matson and

Hawaiian Barge is the outgrowth of a more direct competitive re

lationship between the local Hawaiian mill and the mainland mills for

8 Grain and Grain Product8 205 IC C 301 345 1934

T

Fine Goal to Plymouth 280 IC C 745 1951

8 Nickey Bro8 Inc v A880ciated Steam8hip Line8 5 F M 467 1958

10 F M C
REDUCED RATES ON FLOUR PACIFIC COAST PORTS TO HAWAII 151

the sale of flour does not as peti tioner suggests detract from the fact

that Matson is competing with Hawaiian Barge

Ve conclude that the existence of carrier competition is con

vincingly established and its existence serves as sufficient justification

for Matson s reduced rates which return less than fully distributed

costs

Ve turn then to a consideration of the Examiner s treatment of the

question of whether Matson s rate reduction was necessary to enable

the mainland mills to compete with petitioner for the sale of flour in

Hawaii

Petitioner suggests that since l atson s rate reduction was allegedly

instituted to enable its shippers mainland mills to compete in Hawaii

with petitioner Matson is required to show that the reduction was

necessary to achieve that goal Petitioner maintalns that Matson has

failed to make this showing that the Examiner er ed in concluding

that it had been shown and that the Examiner improperly curtailed

petitioner sattempt to show the opposite

The record is clear thatthe mainland millswere losing their business

in Hawaii to petitioner and that a reduction in their price of flour

wasnecessary to enable them to compete there

The Examiner found

Prior to seeking a rate reduction the second time General MillsbeCame aware

of substantially lowerprice quotations by complainant petitioner than its own

Fisher had the same experience losing 75 percent of its contract business during

the first months of complainant s petitioner s operation It appears 1il at

Fisher has lostpractically all of its Hawaiian trade General Mills stands to lose

only about 25 percent of its 196465 volume due to the fact that complainant

petitioner has not entered the family flour market or the Neigbbor Islands

market At the time of bearing in May June 1965 complainant petitioner bad

captured 48 percent of the market Respondent expects to lose about 40 percent

of its 1964 movement

So it is cle rthat if the mainland mills are to retain a meaningful

market in Hawaii it is necessary for them to lower their price of flour

there

The substance of petitioner s argument however is that the main

land millsshould have met their competition in Hawaii by decreasing

their own profit on the sale of flour instead of by asking Matson to

lower its transportation rates applicable to the carriage of flour and

had they done this Matson s reduction would not be necessary to enable

themills to competewith petitioner

Petitioner says that it wasprecluded by the Examiner from develop

ing facts in the record which would show that the mainland mills could

have met the competition by lowering its profit margin The Exam iner

10 F M C
152 FEDERAL MARITIME COMMISSION

barred inquiry by counsel for the petitioner into the production costs

and the profit and loss position of the mainland millers The Exam

iner s decision in this respect was based partly upon the practical diffi

culties and delays inherent in taking a cost accounting excursion

throughthe books but wasbased primarily on the Examiner s conclu

sion that there is no requirement that cost of production or profit

margin of shippers must be revealed to show a

compelling necessity

for a carrier s rate reduction below fully distributed costs

We do not feel that the Examiner improperly barred the above

mentioned line of inquiry since we agree with the Examiner that the

important criteria to be considered here are the transportation consid

erations and notwhetherthe mainland mills could compete by reducing

their own profits

The ICe in State of Alabama v New Yark Oentral 235 IC C 255

320 321 1939 quoted from an earlier case Ootton Woolen and

Knitting Factory Products 211 IC C 692 786 1935 as follows

But the relation of such conditions costs of production whatever they may

be to transportation rates is remote Thesefactors arepart of the industrial

problems as distinguished from the strictly transportation problem with which

we deal and their value in the consideration of the lawfulness of competitive

rates is doubtful When left for determination by this Commission the

decision must be govm ned by the circumstances and conditions directlly or

indirectly having to do with tne tranSp01 ta tion of the commodity Emphasis

supplied

This Commission has consistently refused to permit the profit

ability of a

shipper s business to determine the reasonableness of a

carrier s rates 9The reason given for this rule is that ocean rates are

but a

single factor affecting profitability which is also affected by a

narrowing market increased cost of production overproduction and

many other considerations 10

The true measure ofpetitioner s advantage then lies in its lower cost

of transportation of flour in the form of wheat compared with the

mainland mills cost of transporting flour in finished form under Mat

son s rates Prior to the rate reduction petitioner enjoyed a favorable

transportation cost advantage of 1448 per ton and after thereduction

it still retained an advantage of 9 36 per ton ll

Inview ofthese differentialsand in view ofthe fact thatthe evidence

shows that mainland mills cannot compete with petitioner at this

9

Intercoastal Oancellations and Restriction8 2 U S M C 397 400 1940 Wool Rates to

Atlantic Ports 2 US M C 337 341 1940 Eastbound Intercoastal Lumber 1 US M C

608 623 1936 Alaskan Rate Investigation 1 U S S B I 7 1919

10Eastbound Intercoa8tal Lumber supra

1l Petitioner paid a rate of 7 95 per ton on wheat compar to Matson s rateof 22 43

and 17 31 per ton of dour before and after the rednction

10 F M C
REDUCED RATES ON FLOUR PACIFIC COAST PORTS TO HAWAll 153

higher differential and that they will have trouble continuing even

their present level of flour shipments at the reduced differential we

cannot find that Matson s rate reduction was unnecessary

We conclude that Matson s rate reduction was necessary to enable

the mainland millers to compete in Hawaii with petitioner and that

such necessity was created by the transportabion cost advantage which

petitioner held by virbue of the low rates of the unregulated carrier at

which petitioner wasable to transport wheat toHawaii

The third issue raised by exceptions is whether 1atson s rate reduc

tion unfairly distort s the exisbing rate structures thereby resulting in

unfair discrimination among shippers

This issue is raised by exception of the State of Hawaii and the

essence of their argument is that by allowing large shippers such as

the mainland mills selective rate reductions which return less than full

costs without affording similar reductions to smaller shippers of

other commodities Matson places an undue burden on the shippers of

the other commodities to cover costs of carria ge Such lack ofprecision

in ratemaking and allocation of costs to specific classifications results

in undue discrimination among shippers according to the argument

of the State ofHawaii

This argument however is not valid in view of our conclusion that

Matson s reduced rate does in fact return a net to vessel contribution

of 78 59 per container This means that although the shipments of

flour did not return fully distributed costs t

hey do retunl a sufficient

amount to cover the extra expenses incurred as a result of the particu

lar flour shipment and they also contribute an additional 78 5V per

container toward administrative and vessel expense Inother words if

Matson did not carry these flour shipments a likely result if no rate

reduction is effected the shippers of other commodities would have

to bear an even larger burden in enabling Matson to meet its adminis

tr tive and vessel expenses

In view of this it cannot be said that the rate reductions distort the

rate structure in such a way as to result in discrimination among

shippers

Finally we will determine whether theExaminer gave proper con

sideration to the public interest aspects ofthe rate reduction

The State of Hawaii and petitioner both state that the Examiner

failed to properly consider whetherthe rate reduction wascontrary to

the public interest

There can be no question that the Examiner did consider the public

interest The only question is whether he gave proper consideration to

the proper aspects ofthe public interest

10 F M C
154 FEDERAL MARITIME COMMISSION

The Examiner in determining whether the reduction is contrary t

public interest would restrict himself to a consideration of transporta

tion conditions and the effect the reduction might have thereon Hear

ing Counsel endorses this position and we accept it as sound

Each ofthe parties to this proceeding advanced its theory as to wha

a consideration ofthe public interest should entail and as to why thi

reductionis not compatible with suchconsiderlttions

In the final analysis each Of the public interest factors urged by th

parties except one urged by the State of Hawaii discussed infra

involves transpo11tation considerations and need be considered herei

to determine ifthe rate reduction is reasonruble

Petitioner and the State of Hruwaii fear that ifNIatson prevails i

the ratemaking theory here advanced Matson will be able to preven

the entry of any new water carrier in the trade This conclusion 

based on lthe assl1mption that approval of the rate reduction involve

here would amount to a condonation by this Commission of arbitrar

rate reductions below compensatory levels and that Matson could i

the future employ such reductions to keep new carriers from compe

ing in the trade In view of our earlier determinrutions that the reduc

tion here is compelled by competition and that it returns 3n amoun

in excess of out of pocket costs such an assumption is unwarrantec

and the fears expressed by Harwaii and petitioner in this regard ar

unfounded

Petitioner and the State of Hawaii also feel that this rate reductio

will result in an unreasonable rate structure in Hawaii in which on

commodity will be subsidized by another

The effect of a rate reduction on other commodities and the over a

rate structure is important to a consideration of the public interes

However we demonstrated earlier how this reduction since it return

a net to vessel contribution does not distort the rate structure in suc

a way as to place an undue burden on one commodity or one shipper

We do not deny that Matson s rate reduction on flour affects its rate

an other commodities Every change in one rate causes a change i

relationships or differentials with other commodity rates At time

the public interest may require a

change in rates because of the

adverse effect on other rates on essential commodities This Commis

sion infact has determined in a particular case that the public intere

required that rates on a certain commodity be increased to return mo

than full costs in order that such rates might subsidize rates on bas

foodstuff commodities which weresorely needed in Puerta Rico 12

U

See Reduced Rates on Automobiles North Atlantic Porta to Puerto Rico FMC Doc

No 1145 and 1167 dated Feb 4 1965 Reduoed Rates on MacMnery and Tractors A

lantic Ports to Ptlerto Rico FMC Docket No 1187 and 11l87 1 9 F M C 465

10 F 1IC
REDUCED RATES ON FLOUR PACIFIC COAST PORTS TO HAWAII 155

A third public interest factot urged by petitioner and the State of

Hawaii is that if Matson prevails in allowing aspecific commodity

rate reduction at the request of a large shipper large influential ship

pers will always be able to gain similar concessions at the expense of

smaller shippers

We cannot assume that Matsonwill make indiscriminate rate reduc

tions to please large shippers in view of Matson s treatment of the

shipper srequest here Matson s traffic department would not even

discuss rate reductions with the mainland mills untilthe new mill and

barge werein operation and then Matson gave theshippers only a rate

of 17 30 per ton instead of the requested 15 per ton rate and then

only when it wasapparent they wouldlose cargo

This argument also overlooks the fact that the reduced rate is justi

fied because it returns an amount in excess of out of pocket costs and

because as the Examiner found if the reduction was not effected it is

probable thatMatson would losemost of its flour traffic

We now turn to the final public interest consideration urged by

the State of Hawaii one that does not involve a transportation

consideration

Hawaii contends that the rate reduction will effectively deter the

establishment of new industry in the State ofHawaii This conclusion

is based on the testimony of the Executive Vice President of the

Hawaiian Manufacturers Association who feels that if the spot rate

reduction made here by Matson is approved Matson will be able to

control industry expansion in Hawaii in the future by making similar

spot rate reductions on whatever commodities a new industry is seek

ing to market there This witness related an instance where a manu

facturer refused to locate a new industry in Hawaii because ofMatson s

rate policy as to flour

We need only say that this manufacturer s fears cannot be based on

petitioner s experience in Hawaii with Matson since petitioner in

spite of Matson s reduction has not lost its competitive position in

Hawaii In fact the President ofthe petitioner testified that his com

pany will continue to make inroads into the market of the mainland

mills even at the reduced flourrate

In view of our determination that the record will not support a

conclusion that Matson s reduced rate will prevent the entrance of new

industry in the State of Hawaii petitioner and Hawaii are in no

way prejudiced by limiting the public interest consideration 10

transportationfactors

10 F M C
156 FEDER1 L MARITIMECOMMISSIO

CONCLUSION

Itis found and concluded that Matson s reduced rate on flour does

not result in undue preference or prejudice to any shipper that it is

necessitated by unregulated carrier competition is compensatory does

not disturb the e

xisting rate structure is not contrary to the public

interest and therefore is not an unreasonable rate withinthe meaning

of the provisions of the Shipping Act 1916 or the Intercoastal

ShippingAct 1933

This proceedingis hereby discontinued

By the Commission

Sib 11ed THOMAS LISI

Secretary

10 F M C
FEDERAL MARIT IME COMl1ISSION

SPECIAL DOCKET No 399

JAVA PACIFIC RATE AGREEMENT

1

NUMEROUS SHIPPERS IN THE TRADE FROM INDONESIA

DecidedSeptember O 1966

Application forleaveto waive collection of undercharges denied

REPORT

By THE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairman George H Hearn Oorrvmissioner

Java Pacific Rate Agreement the Conference an inbound confer

ence with office and principal place ofbusiness at Djakarta Indonesia

appliedon behalf of its memhers for permission pnrsuant to Hule 6 b

of the Commission s Rules of Practice and Procedure 46 CFR 502 92

towaive collection ofundercharges representing the difference between

rates on filewiththe Commission and lesser rates charged uniformly to

all shippers during certain periods in 1964 The numerous shippers

are the persons from whom undercharges would otherwise be collected

and are nominal respondents in this proceeding The application was

verified before a United States Vice Oonsul in Djakarta

An initial decision was issued by Examiner Walter T Southworth

denying the application for leave to waive collection of undercharges

as inappropriate but finding that undercharges were properly collec

tible Noexceptions or replies to exceptions to this decision were filed

and no oral argument was heard

FACTS

1 On November 2 1963 theConference published from its Dj akarta

office and transmitted to the Commission a one page circular to ship

pers No 13 announcing a general increase of 10 percent to become

10 F M C

157
158 FEDE RAL MARITIME OOMMLSSION

effective February 1 1964 The circular stated that in due course amend

ments to the freight tariff showing the new rates would be issued to

tariff holders and exporters ltot possessing a tariff might obtain further

details from the Secretariate

2 On November 14 1963 a

copy of this circular was received and

placed on file by the Commission

3 On December 20 1963 the Commission originally received and

placed on file Conference Addendum No 89 to Freight Tariff No 10

issued as of December 1 1963 and effective February 1 1964 setting

forth in detail the rate increase 1

4 On February 1 1964 the increased rates were put into effect

pursuant to the circular to shippers

5 On March 10 1964 the Director of the Bureau of Foreign

Regulation addressed a letter to the Conference as follows

Gentlemen

Reference is made to circular to Shippers No 13 dated November 2 1963

relating to a 10 general increase in tariff rates and to the filing of revised

pages reflecting the increased rates effeetive February 1 1964 in your currently

effective Freight Tariff No 10

In view of the fact that this tariff provides both contract and non contract

rates in accordance with Agreement No 191 it is thought advisable to inform

you of the position adopted by the Commission with respect to changes in rates

involving a dual rate contract system as reflected in your tariff so that such

changes may be made in accordance with the provisions of Section 14 b 2

and the tariff filing requirements of Section 18 b Shipping Act 1916

Section 14 b 2 reads as follows

provides that whenever a tariff rate for the carriage of goods

under the contract becomes effective insofar as it is under the

control of the carrier or conference of carriers it shall not beJ

increased before a reasonable period but inno case less than ninety

days

In accordance with the cited Section of the Act none of the contract rates

subjected to the increase effective as of February 1 1964 may be further

increased prior to the expiration of tJ1e 90 day period or prior to May 1 1964

Since the spread between contract and non contract rates may not exceed

15 of the non contract rates nor be altered without the approval of this

Commission as required by Section 14 b any change in contract rates must

also be reflected in the corresponding non contract rates Howev r an increase

in contract and non contract rates may become effective if the previously

effective lower rate has been in effect for the required 90 days and providing

an appropriate revision to the tariff is received by the Commission at least 30

days inadvance of the effective date of the increase inrates in accordance with

the requirements of Section 18 b Section 14 b does not preclude reductions

in contract and noil contract rates at any time providing an appropriate

1

Final filing of the addendum was accomplished Februar 13 1964

10 F M C
JA VA PACIFIC RAl E AGRlE Eo MENT 159

amendment to the tariff is received by theCommission on or prior to the effective

date of such reduction in accordance with the requirements of Section 18 b

Itis noted that on occasion your conference files certain emergency contract

rates which are reductions from the rates contained in the tariff but these

emergency rates are filed for a limited period of time generally less than the

required period of ninety days Upon expiration of such emergency rates the

rates would then revert to the higher tariff rate In such instances these emer

gency rates must remain in effect for the minimum period of 90 days otherwise

they would contravene the requirements of Section 14 b 2 In other words

temporary special or emergency rates which are lowerthan the standard tariff

rates areconsidered to be the rates lawfully in effect and applicable to shippers

and such rates must remain in effect for a period of least 90 days before they

may be increased lurther reductions of such emergency contract and non contract

rates may become effective upon the proper filing of a tariff revision as pointed

outabove

We trust that the foregoing information will assist your conference in

snbmittinp tariff matter in accordance with the statutory reouirements

6 The Conference construed the foregoing letter to mean that 90

days prior notice to the Comnlission was required before its rate in

crease could become effective and that its circular and Addendum No

89 had been rejected as not submitted in accordance with statutory

requirements The Conference therefore published and transmitted to

the Commission for filing

1 Circular to Shippers No 16 dated April 15 1964 which

referred to Circular No 13 and stated that the general increase

contained therein would become effective as per August 1 1964

instead of February 1 1964

2 Agents Circular No 173 which was to the same effect

and

3 Addendum No 93 to the tariff which stated that it was

issued in lieu of Addendum No 89 rejected by the Commission

Addendum No 93 showed the issue date of May 1 1964 and effec

tivedate ofAugust 1 1964

7 On April 23 1964 the aforementioned three documents were re

ceived by and placed on file with the Commission

8 On June 8 1964 the Director Bureau of Foreign Regulation

returned Addendum No 93 and addressed a letter to the Conference

stating that the rates reflected in Circular No 13 and Addendum No

89 were the lawful rates effective February 1 1964 and are the only

rates which could thereafter be assessed except as may

have

been altered by subsequent revisions to the tariff consistent with

Section 18 b Shipping Act 1916 The letter further stated that the

Bureau s former letter was intended merely as a means of informing

you oftheposition of thisComm ission with respect to the requirements

of Section 14 b 2 Shipping Act 1916 as it appeared to relate to

10 F M C
160 FEiDERAL MARITIME OOMlSSION

the general increase and should not have been construed as a

rejection ofthe rates involved in Circular No 89 Full particulars were

requested with respect to the rates assessed by the member lines since

February 1 1964

9 In the meantime the Conference had reverted to the rates in

effect prior to February 1 1964 which it maintained through July 31

1964 2The member lines had made adjustments in rates applied to ship

ments made between February 1 1964 andApril 15 1964 so that all

relevant shipments made during that period were made under rates

which had been in effect prior to February 1 1964

10 On July 21 1964 the Conference refiled Addendum No 93 The

Commission did not return this addendum but notified the Conference

that it could not accept it and that the rates effective February 1 1964

were still in effect

11 On July 29 1964 the Conference wrote the Commission request

ing a dispensation to apply the increased rates effective August 1

1964

12 On September 3 1964 the Commission notified the Conference

that the increased rates were in effect and had been in effect since Feb

ruary 1 1964 and notified the Conference of the procedure for appli

cation for waiver of collection of undercharges

13 On September 9 1964 such application was filed with the

Commission

THE INITIAL DECISION

The Examiner treated the question ofwhatrates wereon file with the

Commission and duly published and in effect between February 1

1964 and July 31 1964 as the sole issue in this proceeding Hence he

treated Mueller v Peralta Shipping Oorp 8 F MC 361 1965 and

other cases dealing with circumstances under which collection of un

clerchargeson rates in effect at thertime might bewaived as inapplicable

The Examiner concluded that the publication and filing of the new

rates contained in Circular No 13 was treated by the Commission as

a sufficientfiling ofa new tariff in compliance with section 18 b 2

and that Circular No 16 and Addendum No 93 were sufficient as evi

denced by the Bureau s conduct to constitute an amendment to the

Conference tariff in conformity with section 18 b 2 insofar as it

effected a reduction in existingrates from the date offiling to August 1

The adjustments against the rates paid orcharged for shipments made

between February 1 andApril 15 the Examiner concluded were made

pursuant to tariffs published and filed when the adjustments were

2

This reversion was made pursuant to Circular No 1

6 and Agents Circular No 173

10 F M C
JAV A PACIFIC RATE AGRE EiMEN 161

made These tariffs were unlawful insofar as their retroactive dates

were concerned and the adjustments therefore constituted unlawful

rebates under section 18 b 3 The rates contained in them were

nevertheless he concluded the applicable rates because they were the

only filed rates citing Ohicago M St P P R 00 v Alouette Peat

Products 253 F 2d 449 1957 Moreover heasserted a shipper cannot

be required to pay a rate higher than the filed rate even though the filed

rate is unlawful because improperly filed Therefore the Examiner

concluded that no sums could be collected on account of freight ship

ments made duringthe period February 1 1964 through July 31 1964

in excess of amounts based upon the rates in effect imnlediately prior

to February 1 anddenied the application for leave to waive collection of

undercharges as inappropriate

DISCUSSION AND CONCLUSIONS

The original filing of the increased rates was accomplished either on

November 14 1963 the date of receipt of Circular No 13 by the Com

mission or December 20 1963 the original date ofreceipt by the Com

mission ofAddendum No 89 toFreight Tariff No 10 Itis unnecessary

for us to determine which ofthe above dates to consider for this pur

pose Either of them fulfills the requirements of 18 b that rate in

creases in the foreign commerce of the United States not be effe tive

until the passage of 30 days from the dates of publication and filing

In addition both documents plainly indicated the changes proposed

to be made in the tariff then in force and the time when the rate in

creases were to become effective 3

The rates filed through Circular No 13 and Addendum No 89 thus

were the rates specified in the tariff on file with the Commission and

duly published and in effect as of February 1 1964 4

They were ac

a

Section 18 b 2 provides

No change shall be made In rates charges classifications rules or regulations which

results in an increase in cost to the Shipper nor shall any new or initial rate of any

common carrier b water in foreign commerce or conference of such carriers be Instituted

except b the publication and filing as aforesaid of a new tariff or tariff which shall

become effective not earlier than thlrtr

8 safter the date of publication and tiling thereof

with the Commission and each such tariff or tariffs shall plaloly show the changes

proposed to he made In tllf ta rlllor tarills then In force and the tiJlle when the rates

charges classifications rules or re ulatlons as changed are to bccome etfecth e Provided

however That the Commission may in its discretion and for good cause allow such

chnnges nnd such new or Initial rates to become effective UpOIl Ii s than the period of

thirty days herein I edfied Any change in the rates charges or classifications rules or

re ula tlons which ri 1I1ts In a If crcased cost to the sh ippcr may become effelt ve upon

the publication and tiling with the Commission The term tariff as used In this paragraph

shnll include any amendment supplement or reissue

4

It Is unnece sary for us to determine whether or not the rate filings involved in this

proceeding would have complied with our regulatlons published pu rsuant to section 18 b

4 governing filing of tariffs by common carriers in our foreign commerce 46 CPR 536

as such regula tions did not become effective untll July 1 1965

10 F M C

299 843 0 68 12
162 FE DERAL MARITlME G01VIMlSSION

cordingly the rates which were required by the statute to be charged

and collected by the Conference as ofthat date 5

Similarly the same rate increases when contained in Circular No

16 and 173 and Addendum No 93 which werereceived by the Commis

sion on April 23 1964 became the lawful rates as of August 1 1964

the effective date named in these publications having been publishe

and on file with the Commission for more than 30 days prior to tha

date

The problem arises with respect to the effect of the filings ofApr

23 1964 upon the rates then in effect The attempted result of thes

documents was to cancel the earlier filings reinstate the rates on fil

and in effect prior to February 1 1964 and postpone the rate increas

untilAugust 1 1964

The filings never legally accomplished this result They were effec

tive insofar as they attempted to become the filed rates as ofApril 2

1964 the date of their receipt by the Commission They were withou

effect insofar as they altered the rate to be charged and collected wit

respect to the pedod from February 1 1964 to April 23 1964 Althoug

the Examiner correctly cites Ohicago M St P P R 00 v Alouett

Peat Products 253 F 2d 449 as supporting the proposition that i

legally filed rates are nevertheless the applicable rates simply becaus

they are the filed rates we are aware of no case in which retroactiv

rates wereheld to be the applicable rates The Alouette case involve

increased rates which were published on 5 days notice rather than th

30 days notice required by the Interstate Commerce Act G That Ac

like the Shipping Act 1916 allows carriers to obtain permission to e

fectuate rate increases upon less than 30 days notice if certain statu

tory requirements are met No provision is made however in either th

Interstate Commerce Act or our own statute for the effectiveness o

fi Section 1 8 11 3 provides

No common tarrier by water in forei n

cOlllmerce 01 conference of such carriers sh

charge or demand 0 collect or receive a greater or Ie or different compensation for t

tranRportation of property 01 fOl any crvice in connection therewith than the rat

and charges which are specified in its tariffs on file with the Commission and duly pu

lished and in eiTect at the time nor shall any such carrier rebate refund or remit 

any manner or by any device any portion of the ate or charges so speci 1e l nor exte

or deny to any person any privilege 0 facility except in accordance with such tariffs

6

Section of the In tel sta te Commerl Act pl ovi s

ill pel tinent pa rt

3 No change shall be made in tile rates fare alltl l har eor oint rates fares a

charges which have been filed and publi hed by any common ealTier in compJiance w

the requirements of this section except fter thirty da s notice to

the Commission a

to the public published as aforesaid P ol idccl That the commission may in 

discretion and for good cause shown allow changes lIpon less than the notice her

speCified

10 F M C
JAVA PACIFIC RATE AGREEMENT 163

retroactive rates In fact section 18 b 2 clearly nullifies the retro

active application of rates by requiring that increased rates shall

become effective not earlier than thirty days after the date of publica

tion and filing thereof with the Commission and any c1mngc

in the rates which results in a decreased cost to the shipper may be

effective upon the publication and filing with the Commission Em

phasis supplied iVe will not extend the proposition of the Alouette

case 8upra to cover retroactive changes in rates for in our view such

an extension would circumvent the clear meaning of section 18 b

Therefore the increased rates remained in effect until April 23 1964

The refunds made to shippers for the period between February 1

1964 and April 23 1964 were thus refunds of a

portion of the rates

duly published and in effect during this period within the meaning

of and contrary to section 18 b I

Iowever because the illegal

lnanner of filing was the result at least in part of the adions of the

Commission as reasonably i fnot accurately interpreted by the Con

ference the Commission will not seek penalties from respondent for

the refunds made under the erroneous filing

The application for leave to waive collection of undercharges is

denied

CO MIIISSIONER JAMES V DAY CONCURRING

In this case the Conference refunded part of its charges to shippers

in reliance upon the validity of a change in its tariff which it had filed

with the Commjssion Then the Government whose prior position re

garding the Conference s tariff was misleading to the Conference de

dared the tariff change inval ieI Thus faced with the impractieal task

ofhaving to persuade its shippers that they should pay a higher rate

after all and that they must return the refunds the Conference has

sought our permission to waive recapture of the refunds

The majority deny the relief the ConferCllCe has sought They affirm

that the tariff change was invalid and the original higher rates should

have been charged

However they also state that they will not seef penalties from the

Conference for the refunds made

Administrative discretion may be exercised to achieve an equit able

result Cf Mueller v Peralta 8 F 1 C 361 dissent Tank Oarl Jo rp

v Terrminal 00 308 U S 422 432 The majority decision would ac

complish this No further determination on my part is necessary I

thus concur in denying the application

10 F M C
164 FEDERAL MARfrIME OOMMLSSION

COMMISSIONER JOHN S PATTERSON DISSENTING

In the absence of exceptions the decision of the Examiner shou

become the decision ofthe Commission and his findings that no unde

charges are collectible on the facts shown should be sustained

By the Commission

Signed THOMAS LISI

Secretary

10 F M C
FEDERAL MARITIME COl1l1ISSION

DOCKET No 66 52

IN THE MATTER OF THE PETITION OF NEW YORK FREIGHT BURE U

HONG KONG FOR A DECLARATORY ORDER

Decided October 3 1966

Where conference voting rules require unanimity whenever a change in the basic

conference agreement is contemplated and where one of the original parties

to such an amended conference agreement filed for approval under section 15

of the Shipping Act 1916 withdraws from such agreement prior to the

Commission s approval thereof the effect of such withdrawal is to remove

the document so filed from the Commission s consideration

Approval accorded by the Commission to an amended conference agreement filed

pursuant to section 15 is void ab initio where one of the parties thereto had

withdrawn from such agreement prior to approval

Oharles F Warren and John P Meade for New York Freight

Bureau Hong ICong

George F GallaJnd and Amy Scupi for States Marine Lines

REPORT

By l HE Co IMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairman James V Day George H Hearn Oommis

sioners

This matter comes before us on petition of the New York Freight

Bureau Hong Kong for a declaratory order pursuant to section 5 d

of the Administrative Procedure Act 5 U S C section 1004 d and

rule 5 h of the Commission s Rules of Practice and Procedure 46

C F R 502 69

THE CONTROVERSY INVOLVED

The New York Freight Bureau Hong Kong hereafter called

the Bureau serves the inbound trade between lIong ICong and U S

Atlantic and Gulf ports Ithas been in existence since 1924 and since

10 F M C 165
166 FEDERAL MARIT1ME COMMISSION

1937 has operated under approved Agreement 5700 Until 1964 thi

agreement remained substantially unchanged such changes as wer

made dealt with the rotation of the Chairmanship and minor change

in the geographic scope of the greement etc The modificatio

approved on July 29 1960 was designated Agreement No 5700 4

As a result of the 1961 amendments to section 15 of the Shippin

Act Act of October 3 1961 Public Law 87 346 section 2 75 Sta

763 and our General Orders 7 and 9 conference agreements wer

required to contain reasonable provisions for the admission with

drawal and expulsion of members and an adequate system of se

policing The Bureau submitted two agreements to accomplish th

purpose Agreement No 57006 filed on February 10 1964 provide

for a system ofself policing which generally conlplied withthe require

ments of section 15 and General Order 7 Agreement No 57007 file

on June 17 1964 contained amendments designed to bring their agre

mentwithinthe requirements ofGeneral Order 9

These agreements were never approved because after analysis o

them the staff suggested to counsel for the Bureau that certain clar

fying and conforming changes be made and that the two agreemen

be consolidated in one In response to these suggestions counsel fo

the Bureau withdrew Agreements 5700 6 and 5700 7 and filed a thi

agreement designated 5700 8 which contained the changes suggeste

by the f

taff and repeated the remaining provisions of 57006 an

57007 We issued an order of conditional approval of this latt

agreement in which the Bureau members were given 60 days with

which to accept the modifications Additional time for acceptan

wassought by theBureau and grantedby us The OrderofCondition

Approval as extended was due to expire on May 2 1966 Howev

on March 1 1966 States Marine Lines sent a telegram to the Comm

sion which stated in pertinent part States 1arine opposes t

agreement and hereby withdraws same from Commission s consider

tion as far as States Marine is concerned On May 2 1966 t

Order of Conditional Approval expired by its own terms since 

notification had been received by the Commission of the acceptan

by the Bureau membership On May 13 1966 at the Bureau s

reque

we approved Agreement 57008 in part i e as to those portions whi

were deemed noncontroversial because they had not been objected 

by States Marine and issued an order ofinvestigation Docket 663

with respect to the controversial portions The original order ofinve

tigation set down three issues for determination 1 the expans

ofthe conference trade area to include the Great Lakes 2 the voti

provisions and 3 modification of the self policing provisions 

10 F M C
NIDW YORlK FREIGHT BUlREAU RONG KONG 167

include provision for reference of certain arbitration matters to the

Federal Maritime Commission On June 13 1966 States Marine filed

a petition to reconsider our order of May 13 supra and after con

sidering this petition and the Bureau s reply dated June 20 1966

we issued an amended order in Docket 6632 in which the issues raised

in States Marine s petition for reconsideration were also set down for

investigation These amendments broadened the original order of

investigation to include the following issues 1 whether Agreement

5 700 8 was properly before the Commission for its approval under

section 15 2 ifAgreement 5700 8 was properly before the Commis

sion for approval should the approval granted in our order ofMay 13

1966 be continued 3 if Agreement 57008 wasnot properly before

the Commission for approval and the approval thereto was without

force and effect were Agreements 5700 6 and 57007 properly with

drawn and ifnot what is their present status as representing true and

complete agreement of the parties and 4 whether there is in exist

ence a presently approved agreement to which all the parties signatory

theretonow agree and should approval thereto be continued or should

the agreement be modified disapproved orcanceled

Hearings are now scheduled in Docket 6632 to commence on Oc

tober 13 1966 and itappears that at least one witness is coming from

as far away as Hong Kong The Bureau feeling that several of the

issues specified in the amended order of investigation are pure ques

tions of law involving no genuine issues of material fact filed its

petition for declaratory order for the summary resolution of legal

issues This petition was filed on September 9 1966 and areply filed

by States Marine Lines was received September 26 1966 States Ma

rine Lines joined the Bureau in requesting a declaratory order on

one of the questions raised in the petition Neither party requested

oral argument andboth urged a speedy resolution of the issues

The question both parties agree is Did States arine Lines tele

gramprotest ofMarch 1 1966 filed prior to approval operate to with

draw Agreement No 5700 8 from the Commission s consideration

In its reply States Marine Lines relies entirely upon the Commis

sion s

report in Hong Kong Tonnage Oeiling Agreement Docket 66

29 involvingthe same parties decided September 19 1966 after the

Bureau s petition for a declaratory order but before States Marine s

reply We there held substantially that where one ofthe parties to an

agreement which has been filed for approval with the Commission

under section 15 withdraws from said agreement prior to the time

approval is given the agreement ceases to exist

10 F MC
168 FEDERAL MARITIME COMlHSSION

DISCUSSION

States Marine Lines argues that It withdrew from Agreement 5700

8 by its telegram dated arch 1 1966 and that this was complete an

unqualified opposition to the entire agreement We agree While th

telegram in question goes on to oppose particularly certain specif

provisions in the agreement a fair reading of the telegram suppor

States Marine s contention that its opposition to the whole agreeme

was unqualified and that its withdrawal was complete It appea

therefore that States Iarine s position with respect to applicabili

ofour report in Docket 66 29 supra is well taken

While it is true that in Docket 66 29 the agreement in question wa

found to be a new agreement and not a modification of an existIn

agreement as is the case here we feel that this is a distinction withou

a difference particularly in view ofthe fact that the voting provision

of Agreement 5700 4

require unanimity whenever a change in th

arrangement is contemplated

Itappears that Agreements 57006 and 57007 were withdrawn b

counsel for the Bureau at the same time as Agreement 5700 8 wa

offered for approval In any event States Marine s

reply to the insta

petition states on page 8 we do not understand that either 57006 o

5700 7 is presently before the Commission for approval Ifthey a

before the Commission States Marine Line now withdraws them

Thus if these two earlier agreements had any residual sparks of life

the above quoted statementwould effectively extinguish them

Itfollows thatAgreement 5700 4as approved on January 20

is presently in full force and effect and constitutes the basic agreeme

underwhich the New York Freight Bureau Hong Kong is permitte

to operate l

The otherissues raised in the petition for declaratory order are mo

as a result of our holding with respect to the effect of States Marine 

telegram protest of Maroh 1 1966 Our holding aiso is entirely di

positive of the issues now pending in Docket 66 32 and that proceed

ing will therefore be discontinued

The entire relationship between the Bureau and States Marine Line

has presented and does presen a

continuing problem to the Commis

sion The 1961 amendments to section 15 supra clearly require us t

disapprove any agreement in which no proper provisio s for 

policing or admission or withdrawal have been made SimIlarly Gen

eral Orders 7 and 9

require appropriate amendments to existing agre

1 Agreement 5700 5 was a temporary celling tonnage agreement which expired by 

own terms in Januar r 1965

10 F M C
NEiW YORK FREIGHT BUREAU HONG KONG 169

ments in order to effect these changes if continued approval is to be

had

Agreement 5700 4does not meet the criteria imposed by amended

section 15 and General Orders 7 and 9

We can only conclude from past history in this matter that the

Bureau and States Marine Lines are either incapable orunwilling to

resolve their differences On the other hand the Bureau has been in

operation for over 40 years vVe therefore will issue an order to show

cause why Agreement No 5700 4should not be modified by us so as

to include amendments providing for an adequate system of s lf

policing and acceptable standards for admission withdrawal and ex

pulsion The language of such amendments will be taken from the rele

vant portions of Agreement 5700 8 since all of the members of the

Bureau including States Marine Lines agreed to it up to 1arch 1 of

this year

CONCLUSIONS

Insummary weconclude that

1 States Marine Lines telegram protest of 1arch 1 1966 filed

prior to approval of Agreement 5700 8 operated to withdraw Agree

lnent No 5700 8 from theCommission s consideration

2 Our order of Iay 13 1966 which approved Agreement 57008

in part wasvoid ab initio since said agreement was not properly before

theCommission for approval

3 Agreements 5700 6 and 5700 7 had been withdrawn prior to

approval

4 That Agreement 5700 4 as approved on July 29 1960 is pres

ently in fullforce and effect and constitutes the basic agreement under

which the New York Freight Bureau Hong Kong is permitted to

perate

5 Agreement 5700 4does not satisfy the requirements of section

15 and General Orders 7 and 9 promulgated thereunder in that it does

not contain a satisfactory system ofself policingand does not meet the

required criteria for admission withdrawal and expulsion of

members

6 Proceedings in Docket No 66 32 shouldbe discontinued

7 Th t the members of the New York Freight Bureau Hong

Jeong should be required to show cause why Agreement No 5700 4

should not be modified by us or in the alternat ve why continued

approval of said agreement should notbe withdrawn

An appropriate order will be entered

By the Commission

n10 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 6652

IN THE MAITER OF THE PETITION OF NEW YORK FREIGHT BUREA

HONG KONG FOR A DECLARATORY ORDER

ORDER

Upon consideration of the petition of the New York Freigh

Bureau Hong Kong for adeclaratory order and the reply of State

Marine Lines a member of said conference there having been n

request for oral argument and the Commission on this day havin

made and entered of record a report stating its findings conclusion

and decisions thereon which report is hereby referred to and mad

a

part hereof

Therefore itis ordered anddeclaJred That

1 States Marine Lines telegram protest of March 1 1966 file

prior to approval of Agreement No 57008 operated to withdra

Agreement No 57008 from the Commission s consideration

2 The order of May 13 1966 which approved Agreement N

57008 in part was void ab initio since said agreement was not prop

erly before the Commission for approval

3 Agreement Nos 57006 and 5700 7 were withdrawn prior 

approval

4 Agreement No 5700 4as approved on July 29 1960 is present

in full force and effect and constitutes the basic agreement und

which the New York Freight Bureau Hong Kong is permitted 

operate

By the Commission

170

Signed THOMAS LIS

Secretary

10 F M C
KEW YORK FREIGHT BUREAU HONG KONG 171

NOTICE OF INTENT To MODIFY AGREEMENT No 5700 4AND ORDER To

SHOW CAUSE WHY SUCH MODIFICATIONS SHOULD NOT BE INCOPO

RATED INTO SAID AGREEMENT

Deeided October 3 1966

By declaratory order served this date l

we decided that

1 States Marine Lines telegram protest of March 1 1966 filed

prior to approval of Agreement 57008 operated to withdraw Agree

ment 5700 8 from theCommission s consideration

2 Our order of May 13 1966 which approved Agreement 57008

in part was void ab initio since said agreement was not properly be

fore the Commission for approval

3 Agreements 57006 and 57007 have been withdrawn prior to

approval

4 That Agreement 5700 4as approved on July 29 1960 is pres

ently in full force and effect and constitutes the basic agreement under

which the New York Freight Bureau Hong Kong is permitted to

operate

5 Agreement 5700 4does not satisfy the requirements of section

15 and General Orders 7 and 9 promulgated thereunder in that it

does not contain a

system of self policing and does not meet the re

quired criteria for admission withdrawal and expulsion of members

The members ofthe New York Freight Bureau Hong Kong were

able to agree upon amendments to this conference agreement which

would satisfy the requirements of General Orders 7 and 9 Agree

ments 5700 6 and 5700 7 received the unanimous support of all the

Bureau members Similarly Agreement 57008 was approved unani

mously by the Bureau Nevertheless States Marine Lines has chosen

to withdraw from these amended agreements prior to approval

thereby removing them from the Commission s consideration

There are only two courses of action now open to the Commission

The first would be to withdraw approval of Agreement 5700 4Un

less satisfactory self policing and membership provisions are added

to the agreement this course is clearly necessary under section 15

The second would be to modify Agreement 5700 4

by adding amend

ments which would give the conference an adequate system of self

policing and proper provisions for the admission withdrawal and

expulsion

In the Matter of thePetition of New York Freight Bureau Hong Kong for a Declara

tory Order

10 F MC
172 FoE DERA L MARLTIME COMMISSION

Under section 15 we are empowered by order after notice and

hearing to modify or disapprove any agreement found to be iIi

violation of the act

Accordingly the members of the New York Freight Bureau Hong

l

ong are hereby notified pursuant to our authority under section

15 of the Shipping Act 1916 that we intend to modify Agreement

5790 4 by deleting subparagraphs 10 b 10 c 10 d and 10 e

and by adding ne paragraphs 12 through 16 as set forth in the

Appendix A hereto

Ve see no need for the taking of evidence in this proceeding

since no genuine issues of material fact are presented The modifica

tions to Agreement No 5700 4 which the Commission proposes to

lnake as specified in his notice have twice been considered and ap

proved by the Commission as satisfying the requirements of section

15 and General Orders 7 and 9 Should any of the parties to this

proceeding consider that there are disputed issues of fact which are

relevant to this proceeding such facts shall be specified with partic

ularity by means of affidavits setting forth such facts

together with

a statement of their relevance to the issue in quest on Should any

other parties dispute these facts by a similar affidavit the disputed

issues of fact if relevant will be set down for an evidentiary hearing

N ow therefore pursuant to sections 15 and 22 ofthe Shipping Act

1916 as amended

Itis ordered That the common carriers by waterdesignated in Ap

pendix B hereto show cause why Agreement No 5700 4should not be

amended in the manner proposed in this notice or in the alternative

why approval of Agreement No 5700 4should not be withdrawn on

the grounds that

1 Itfails to provide reasonable and equal terms and conditions for

admission and readmission to conference membership of other quali

fied carriers in the trade or fails to provide that any member may

withdraw from membership upon reasonable notice without penalty

for such withdrawal as required by section 15 of the act and General

Order 9 and

2 Fails to contain provisions for adequate policing of the obliga

tions under it as required by section 15 of the Shipping Act 1916

and General Order 7 of the Federal Maritime Commission promul

gated thereunder

Itis further ordered That this proceeding shall be limited to the

ubmissioil pf affidavits and memoranda and oral argument The affi

dayits of fact and memoranda of law shall be filed by respondents no

later than close of business October 18 1966 replies thereto shall be

10 F M C
NIDW YORK FREIGHT BUREAU HONG KOING 173

filed by Hearing Counsel and interveners if any no later than close

ofbusiness October 28 1966 An original and 15 copies of affidavits of

fact memoranda of law and replies are to be filed with the Secretary

Federal Maritime Commission Washington D C 20573 Copies of

any papers filed with the Secretary should also be served upon all

parties hereto Oral argument if granted will be heard at a date and

time to be announced later

Itis furthe1 ordered That the carriers indicated in Appendix B axe

hereby made respondents in this proceeding

Itis further ordered That this order be published in the FEDERAL

REGISTER and a

copy of such order be served upon each respondent

Persons other than respondents and Hearing Counsel who desire

to become a party to this proceeding shall file a

petition for leave to

intervene in accordance with Rule 5 1 46 CFR 502 72 of the Com

mission s Rules of Practice and Procedure no later than the close of

business October 11 1966 with a

copy to respondents

By the Commission

Signed THOMAS LISI

SeC1etary

10 F M C
174 FEDERAlL MARITIME COMMISISION

APPENDIX A

12 Copies of theminutes of all meetings including meetings of the committe

authorized to take final action as well as those of the conierenceshall bepromp

furnished to the Federal Maritime Oommission These minutes shall be authe

cated by the Chairman Secretary or other duly authorized New York Freig

Bureau Hong Kong official

13 Faithfu PerfoNnOlnce Bond As a guarantee of faithful performan

hereunder and of prompt payment of any liquidated damages which may acc

against them orof any award orjudgment which may be rendered against th

hereunder the parties hereto agree to deposit withthe New York Freight Bure

Chairman Secretary the sum of US 30 OOO thirty thousand or its equivale

inHong Kong currency or a confirmed irrevocable letter of credit insuchform 

may be approved by the New York Freight Bureau in the aforesaid sum of 

30000 thirty thousand orits equivalent inHong Kong currency established 

a bank being a member of theHong Kong Exchange BanksAssociation and wh

is acceptable to the New York Freight Bureau providing that itmay be draw

upon by draft signed in the name of the New York Freight Bureau by t

Chairman Secretary and by the authorized representatives Oif any two memb

lines and payable to the New York Freight Bureau to which there shall be 

tached a certificate signed by the Chairman Secretary to the effect that the

has been assessed or adjudged against the party who shall have deposited t

said letter of credit a penalty or penalties in the amount of the said draft Su

depositing party undertakes and agrees in the event of the payment of thes

draft to cause a new letter of credit in the sum of US 30OOO thirty thousan

or its equivalent in Hong Kong currency similar in its terms to be issued i

mediately in replacement for that upon which the draft has been made Amo

other such proviSions as the New York Freight Bureau may require the N

York Freight Bureau may insist upon provisions in such letter of credit wh

willrender itmost certain that payment must be made by the bank immediate

upon the compliance by the Ohairman Secretary with the aforesaid conditio

14 8eZf PoUoing 8ystem 1t isthereby agreed and declared by and between 

parties hereto that

a A report shall immediately be made inwriting to theChairman Sec

tary in respect of any information which appears to such party hereto 

be reasonably reliable of the commission by any other party hereto of 

violation of thisagreement

b A report shall immediately be made in writing to theChairman Sec

tary in respect of any information which such party hereto shall have 

ceived from any Shipper or from any other source considered to be relia

that any party heret has committed a violation of this agreement

c It shall be the duty of the Ohairman Secretary to inves

te i

mediately all such reports submitted by parties hereto in addition to a

such reports in writing he may receive direct from shippers or fro

any other source considered to be reliable for which purpose the Cha

man Secretary shall hereby be authOrized to engage the services of su

qualified persons as he may consider necessary for a

thorough and compl

investigation to be made

d It shall also be the duty of the Chairman Secretary to ascerta

on his own initiative whether or not the parties hereto have strictly co

plied with the terms of this Agreement the provisions incorporated in 

10 F M C
NEiW YORK FREIGHT BUREAU HONG KONIG 175

New York Freight Bureau tariff and all other decisions regularly and prop

erly made by the parties hereto and in the event that there is any reason

to believe that there has been a violation of any of the aforesaid obligations

he shall file a

complaint with respect thereto as above provided

e The Chairman Secretary shall be furnished such pertinent records

of the parties hereto their agents sub agents affiliates subsidiaries freight

brokers compradores and or Chinese Freight Agents wherever located as

may be required in the enforcement of this Agreement and the decisions

of theNew York Freight Bureau and thefailure of any party hereto either

on their own behalf orthe aforementioned additional parties shall constitute

a violation of thisagreement

f

Upon t e completion of such investigations the Chairman Secretary

shall lay before the membership his written report thereon and such report

shall include all relevant particulars th reto other than the identity of the

party hereto or other person from whom thereport originat d

g Such written reports shall constitute and are hereafter referred to as

complaints A copy thereof shall be furnished to the accused party notless

than 20 days prior to thetime that the matter is submitted to a vote of the

parties as provided in subparagraph h of the paragraph

h All such complaints shall be submitted to a vote of theparties hereto

other than the party charged with the violation after giving the party

charged in the respective complaint an opportunity to adduce evidence in

its defense Ifthe parties hereto other than the party so charged shall by

a threefourths affirmative vote of all parties entitled to vote determine that

the violation or violations alleged in the complaint have been proved the

party charged with the violation or violations shall be subject to liquidated

damages as hereinafter provided in respect of each and every violation so

proved but ifthe party accused is dissatisfied with the decision reached as

aforesaid such party shall have the right to appeal it being incumbent upon

the accused party to make any such appeal within 10 days following the

aforementioned determination In which event the question of violation shall

be left to the determInation of a majority of three arbitrators one arbitrator

to be nominated by the accused the second by a three fourth affirmative vote

of the remaining parties and the third arbitrator to be nominated by the

arbitrators so cbosen it being incumbent upon the parties concerned to

nominate the first and second arbitrators within 30 days of the appeal

being made by the accused party In the event the accused party does not

appoint an arbitrator within the said 30 days the accused party will thereby

forfeit its right to appeal Such al lbitrations shall take place in Hong Kong

and any decision so arrived at shall be binding and final and the parties

hereto agree that such decision shall be equivalent to a

legal jUdgmentgiven

by the highest court of law and theparties to this agreement hereby waive

and abandon every right to take any legal action to obtain a review or

reversal of the decision so made

However it shall notbe a breach of this agreement for any line to refer

any matter arbitrated to the Federal Maritime Commission for a decision

as to whether ornot the matter arbitrated was withinthejurisdiction of the

arbitrators in the terms of this agreement or as to whether or not any

decision rendered constitutes amodification of this agreement

i

Inasmuch as it will be impossible to ascertain or measure theamount

of damages which the parties hereto will suffer by reason of the breach of this

10 F M C
176 FEiDERAL l1ARI TIME CO ISSION

Agreement the parties hereto expressly agree that the damages suf

thereby by each party hereto shall be assessed on the basis of a threefo

majority vote as above provided but that in any event such damages 

be subject to the undernoted maxima exclusive of any arbitration 

Which may accrue to the accused party

i Firstoffenceup to a maximum of US 10 000 00 or its equiv

in H K currency

ii Second offenceup to a maximum of US 15 000 00 or its eq

lent inH K currency

iii Third offenceup to a maximum of US 20000 00 or its eq

lent inH Kcurrency

iv Fourth and any subsequent offences up to a maximu

US 30 000 00 or its equiv lent inH K currency

j

The Chairman Secretary shall notify in writing the party ag

whom aviolation shall have been found of the decision against it an

amount of liquidated damages which shaH have been assessed again

In the absence of any appeal by such notified party in accordance wit

provisions of Article 14 h hereof the party thus notified shall pa

amount of such liquidated damages within a period of ten 10 day

the event that it shall fail or refuse to make such payment within said p

the other parties may h ve resort to the performance bond which 

party shaH have deposited in accordance with the provisions contain

Article 13 of this Agreement and each party hereto hereby authorize

Chairman Secretary in case that a decision shall be made against it t

effect that it has violated this Agreement and in caseliquidated damage

a ssesse l gainst it and it shall fail to pay said damageS within the p

of ten 10 days after such notice has been given to it by theChairman 

retary to pay the amount of said liquidated damages to the other pa

hereto from the cash which it s all Jhave deposited or if its perform

bOJ l

d shall be by way of aconfirmed irrevocable letter 9f credit to 

upon the letter of credit and p y the amount of such liquidated dam

to the other parties from the proceeds thereof such payments to the 

parties Qeing on a pro rata basis e costs incurred in arbitrat on pro

ings shall be dealtwithinthe award

k Itis hereby agreed and declared by and between the parties h

tha each party hereto shall be funy responsible for the acts and omis

of its parent companies agents sub agents affiliates subsidiaries fr

brokers eompradores and or Chinese Freight Agents and an act do

omitted to be done by an gent sub agent affiliate subsidiary freight br

compradore and Qlii Chinese Freight Agent wbich would constitute a 

lation of this Agreem nt ifdone or omitted to be done by the party i

shan for all purposes hereof constitute a violation of thisAgreement by 

party for which such party shaH be liable for damages in the same am

as ifit had done oromitted thesaid act

1 In theevent of thetermination of thisAgreement or the expuls

voluntary withdxawal of any of the parties hereto th performance 

d posited by the parties concerned shall be returned to them tqgether 

accrued interest but only after any eomplaints which may be pending ag

the parties concerned at the time of its expulsion or withdrawal r a

time of the termination of this Agreement as the case may be have 

satisfied

10 F M 
NEIW YORK FREIGHT BUREAU HONG KONlG 177

15 A dmission to Membership a ny cornmon carrier by water which has

been regularly engaged as a common carrier in the trade covered by this Agree

ment or who furnishes evidence of ability and intention in good faith to insti

tute and maintain such a common carrier service between ports within the scope

of this Agreement and who evidences an ability and intention in good faith to

abide by all the terms and conditions of this Agreement may hereafter become

a party to the New York Freight Bureau promptly following written application

to the New York Freight Bureau for membership such application to set forth

evidence demonstrating compliance with the foregoing requirements by affixing

its signature hereto or to a counterpart hereof and by payment to the New

York Freight Bureau of any outstanding financial obligation arising from prior

membership of the New York Freight Bureau and by posting with the New York

Freight Bureau security for faithful performance of its obligations as provided

inArticle13 hereof

b Every application formembership shall be acted upon promptly

c No carrier which has complied with theconditions set forth in paragraph

a of this Article shall be denied admission or readmission to membership

d Prompt notice of admission to membership shall be furnished to the Fed

eral Maritime Commission and no admission shall be effective prior to the post

mark date of such notice

e Advice of any denial of admission to membership together with a state

ment of the reasons therefor shall be furnished promptly to the Federal

Maritime Commission

16 Withdrawal and EXp1Jsion of MembersMp a A ny party may withdraw

from the Conference withoutpenalty by giving at least sixty 60 days written

notice of intention to withdraw to the Conference Provided however That ac

tion taken bythe Conference to compel the payment of out tanding financial

obligations by the resigning Member shall not be construed as a penalty for

withdrawal

b Notice of withdrawal of any party shall be furnished promptly to the

Federal Maritime Commission

c No party may be expelled against its will froIQ this Conference except

fo failure to maintain a common carrier service between the ports within the

scope of this Agreement or for failure to abide by all t e t rms and conditions

of thisAgreement

d No expulsion shall become effective until a detailed statement setting

forth the reason 01 reasons therefor has been furp isJ1ed to the expell Member

nd a copy of such notification submitted to the Federal Maritime Commission

1

0 F M C

00 Ad rLhA 1
178 FEIDERAL MARITIME COM MlSSION

APPENDIX B

New York Freight Bureau HongKong

D Parker Chairman Secretary

P 0 Building

Des VoemRoad Oentral

Hong Kong B C C

American President Lines Ltd

29 Broadway

New York New York10006

Barber Wilhelmsen Line Jolnt

Service

c o Barber Steamship Line IDe

17 Battery Place

New York New York 10004

Blue Sea Line

c o Funch Edye Co

25 Broadway

New York New York 10004

Central Gulf Steamship Corporation

One Whitehal1 Street

New York New York 10004

Japan Line Ltd

c o A L Burbank Co Ltd

120 WallStreet

New York New York 10005

Kawasaki KisenKaisha Ltd

c oKerr Steamship Company

51Broad Street

New York New York 10004

Lykes Bros Steamship Co Inc

17Battery Place

New York New York 10004

Marchessini Lines

c o P D Marchessinl Co IDe

26 Broadway

New York New York 1

Maritime Company of the PhiUppines

Inc

c o Furness Withy Co Ltd

34 Whitehall Street

New York New York 10004

Mitsui O S K Lines Ltd

17 Battery Place

New York New York 10004

Moller Maersk Lines A P

c oMoller Steamship Company Inc

67 Broad Street

New York New York 10004

Nedlloyd Lines Inc

25 Broadway

New York New York 10004

Nippon Yusen Kaisha Ltd

25 Broadway

New York New York 10004

States Marine Lines Joint Service

c o States Marine Isthmian Agency

Inc

90 Broad Street

New York New York 10004

United Philippine Lines Inc

c o Stockard Shipping Co Inc

17 Battery Place

New York New York 10004

United States Lines Company Ameri

can PioneerLine

One Broadway

New York New York 10004

Yamashita Shinnihon Steamship Co

Ltd

c o Texas Transport Terminal Co

Inc

52 Broadway

New York New York 10004

10 F M C
NEW YORK FREIGHT BUREAU HONiG KONG 179

IN THE MATi ER OFTHE MODIFICATION OF AGREEMENT 5700 4

A conference self policing system mustprovide specific and realistic guarantees

against arbitrary and injurious action

Where a seJi policlngsystem allows the conference itself to sit in judgment

upon the accused member both the question CYf violation of the conference

agreement as well as the penalty to be imposed must be subject to review

upon arbitration

Oharles F Warren and John P Meade for New York Freight

Bureau HongKong

George F Galland andAwy Scupi for States Marine Lines

Donald J Brwnner and SawueZ B Nemirow Hearing Counsel

SUPPLEMENTAL REPORT

Deoided August 11 1967

By THE COMMISSION John Harllee Ohai lfWn George H Hearn

Vice Ohairman Ashton C Barrett James V Day Oommis

sioners

In our order served May 19 1967 we reopened this proceeding for

the limited purpose of reconsideration of the amendments to Agree

ment 5700 4contained in our report served February 1 1967 in the

light ofthe guidelines set down by the U S Court of Appeals for the

District of Columbia Circuit in States Marine Lines and Global Bulk

001 p

v F M O et al 376 F 2d 230 Dec d March 8 1967

The parties were invited to file memoranda and if appr priate

affidavitsoffact

In response to this invitation memoranda were filed by Hearing

Counsel the New York Freight Bureau Hong Kong and States

Marine Lines No affidavits purporting to raise factual issues were

filed

Hearing Counsels position is that the self policing provisions con

tained in our report served February 1 1967 conform fully with the

standards prescribed by the Court of Appeals Therefore they rec

ommend no further modifications

States Marine Lines 1

agrees with Hearing Counsel with one excep

tion and that is the apparent lack of authority of the arbitrators to

consider the equity of the fine imposed This deficiency could be

CommIssioner Fanseen dId not partlclpate

1 In so doIng States Marine Lines does not abandon orwaIve its earlier position that

the CommIssIon may not directly modify the terms of an agreement

10 F M C
180 FEDERAL MARITIME COMMISSION

remedied according to States Marine by adding appropriate lan

guage to Article 13 h ofthemodified agreement

The New York Freight Bureau Hong Kong filed a memorandum

containing a number of suggested modifications These changes had

previously heen submitted to the conference membership as a proposed

amendment to the basic conference agreement Two members States

Marine Lines being one of them voted against the proposal and it

was therefore defeated 2

These amendments form the basis of the

Bureau s suggested chang s to bring Agreement 5700 4in conformity

with the court s guidelines

Unlike the single change suggested by States Marine Lines the

Bureau s proposals would go far beyond merely bringing Agreement

5700 4into compliance with the guidelines of the court Among other

things they would completely change the arbitration procedure

severely limiting the scope ofreview by the arbitrator to a determina

tion of whether the membership could have reasonably reached the

result set forth in its decision applying the standard of com

mon sense The arbitrator would be forbidden to make any decision

on the level of assessment of penalties In addition the Bureau

proposes a great number of so called clarifying housekeeping

changes

In our order served May 19 1967 we reopened this proceeding for

the limited purpose ofconsidering whether the amendments to Agree

ment 5700 4prescribed in our report of February 1 1967 comply with

the guidelines of the U S Court ofAppeals in the States Marine Lines

arnd Global Bulk Tramport case supra The memoranda of the

parties were to belimited to that question The Bureau s memorandum

goes far beyond the limited scope ofthis issue

It seems that the major concern of the Court of Appeals in the

Global Bulk case supra wasthat this kind of self regulatory process

must provide specific realistic guarantees against arbitrary and in

jurious action 376 F 2d at 236

Arbitrary and injurious action can flow equally from an unsup

ported finding of guilt or an unconscionably large penalty Ve be

lieve that both the finding of violation as well as the level of the

penalty should he included in the arbitrator s scope of review While

there is language in the court s opinion whicp tends to support the

view that an independent check of the disclosed evidence is suffi

oeient it is our conclusion that a fair reading of the court s opinion

as awhole requires the result we have reached

The New York Freight Bureau Hong Kong requires unanimity under its voting pro

cedure In Agreement 5700 4 whenever a

change In the basic conference agreement 18

contemplated

10 F M C
NEIW YORK FREIGHT BUREAU HONG KONG 181

There are important differences between the self policing systems

in the Global Bulk case supra and the instant case In Global Bulk

the tribunal in the first instance is a neutral body while in the

system under consideration here the conference itself sits in judg

ment upon the accused member Since the conference members are

clearly interested parties it is essential to provide a safeguard against

arbitrary action both as to afinding that a member has violated the

conference agreement as well as the penalty to be imposed

CoNCLUSION

Ve conclude upon reconsideration that the modifications to the

self policing system prescribed in our report and order served on

February 1 1967 should be further modified by adding the words

and the amount of the fine subject to the maxima set forth in

Article 13 i after the word violation contained in the third sen

tence ofArticle 13 h

An appropriate orderwill be entered

10 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 6652

IN THE MATrER OF THE MODIFICATION OF AGREEMENT 5700 4

ORDER UPON RECO SIDERATION

This proceeding having been reopened by the Commission o

its own motion the Commission having received memoranda of law

and having pursuant thereto issued on this date a supplemental re

port in this proceeding which in addition to the report and orde

served on February 1 1967 is hereby referred to and incorporate

herein by reference

Therefore it is ordered That Agreement No 5700 4be and th

same hereby is further modified by adding the words and the amoun

ofthe fine subject to the maxima set forth in Article 13 i after th

word violation contained in the third sentence of Article 13 h

as set forth in theAppendix A of the report served February 1 1967

Bythe Commission

182

Signed THOMAS LISI

Secretary

10 F M C 10
FEDERAL MARITIME COMMISSION

DOCKET No 65 17

TRANSSHIPMENT AND APPORTIONMENT AGREEMENTS FROM INDONESIAN

PORTS TO US ATLANTIC AND GULF PORTS

Decided October 13 1966

The entire movement of cargo on a through bill oflading transported

from an Indonesian outport by originating carriers First Car

riers and transshipped at an Indonesian base port or at Singa

port Penang and on carried to a U S port by JNYRA members

Second Carriers found to constitute the transportation by water

of property between the United States and a foreign country in

the import trade within the intent and meaning of the Shipping

Act sec 1

First Carriers which engage in the movement of through cargo from

Indonesian outports to base ports whether in Indonesia or at

Singapore Penang held to be common carriers by water in foreign

commerce within the intent and meaning of sec 1 of the Shipping

Act where such movement forms a

part of a continuous line over

which through traffic flows from a foreign country to the United

States

An exclusive transshipment a

greement between originating or First

Carrierp and Second Carriers whereby a continuous line for the

movement of through cargo from a

foreign country to the Uniteel

States is formed held to constitute an agreement which must be

filedunder sec 15 ofthe ShippingAct

Exclusive dealing provisions in a

transshipment agreement found to

be contrary to the public interest where the effect of such pro

visions is or may be to eliminate the possibility ofcompetitio by

carriers not a party to the agreement in the tradeinvolved

Provisions of section 15 agreements relating to transshipment of In

donesian cargo at Singapore Penang where such transshipment

has ceased due to strained political relations held not to be con

trary to the public interest here there is a reasonable probability

of resumption of normal relations and where the cessation was

due to a sovereign act

10 F MC 183
184 FEDERAL MARITIME COMMISSION

The proposed transshipment agreement No 9222 if modified foun

not to violate any of the standards or section 15 and it is ther

fore approved

Agreements among Second Carriers to enter into a transshipme

agreement round not to be subject to section 15 of the act

The proposed agreement No 9202 providing for the apportionme

of cargo originating at Indonesian outports and transshipped 

SingaporejPenang found not to violate the standards of secti

15 and it is therefore approved

Elkan Turk Jr for respondents designated as Second Carriers

Leonard G James and F Oonger Fawcett for intervenor Hollan

America Line

Donald J Brunner and Roger A McShea IIIHearing Counsel

REPORT

By THE CoMMISSION John Harllee Ohairman Ashton C Barre

Vice Ohairman James V Day George H Hearn Oommissioner

This proceeding involves two agreements which have been filed f

approval under section 15 of the Shipping Act 1916

Agreement No 9222 calls for an exclusive transshipment arrang

ment between four carriers which served the coastwise and interisla

trade in Indonesia First Carriers and the members of the Jav

New York RateAgreement 1

Second Carriers

Agreement No 9202 provides for the apportionment among 

Second Carriers of some or the transshipment cargo carried und

above arrangement

DESCRIPI ION OF THE INDONESIAN TRANSSHIPMENT TIMDE

Indonesia is a vastisland nation stretching from New Guinea on 

East beyond the Malay peninsula on the West It is composed 

hundreds or islands including Sumatra Java and the Celebes 

donesia was formerly a part or the Netherlands until it gained 

independence in 1949 Among Indonesia s maj or export commodi

are rubber coffee tea spices andtin

Because of its geography Indonesia relies heavily upon transpo

tion by water both in its foreign and interisland coastwise trad

Many of the commodities which Indonesia exports originate in pla

which are remote rrom good harbor facilities As a result a large p

tion or the goods which move into Indonesia s export trade can 

transported initially only by shallow draft vessels which can be 

1

Agreement No 90

10 F M 
TRANSSHIPMENT AGREEMENT INDONEsrA UNITED STATES 185

commodated at the small ports serving the areas where the cargo

originates Such ports are called outports The harbor or river

depth is insufficient for the draft of ocean going vessels and in most

cases dock and warehouse facilities are also inadequate Up river out

ports usually have no harbor facilities and cargo is lightered directly

to the vessel These shallow draft ships which originally lift cargo at

the Indonesian outports are referred to in Agreement No 9222 as

First Carriers

The First Carriers transport the cargo from the outport to a trans

shipment port or base port These ports have harbors sufficient to

accommodate ocean going vessels as well as good storage and terminal

facilities Among the base ports located in Indonesia are Surabaja

Tanjang Priok and Belawan Agreat volume of transshipment was

formerly done at ports ofSingaporeand Penang

Upon arrival at the base port the cargo is normally lightered from

the First Carrier vessel directly onto the slings of an ocean freighter

which in turn completes the transportation of the cargo to a port

located in the United States The lines operating these ocean freighters

are the members of the JavalNew York Rate Agreement and are

referred to in Agreement No 9222 as Second Carriers

Because of their geographic convenience and excellent harbor facili

ties the ports of Singapore and Penang have traditionally been the

base ports for much of the Indonesian export cargo destined for the

United States However in September 1963 Indonesia severed all

trade relations with the Federation of 1alaysia which then contained

the ports of Singapore and Penang Since that time there have been

no transshipments ofIndonesian cargo at either Singapore orPenang

Instead Indonesian through cargo has been transshipped exclusively

at base ports located in Indonesia In the latter part of 1965 Singa

pore broke away from Malaysia and became independent

Since the date of the initial decision on August 11 1966 Indonesia

and 1alaysia entered into an agreement of which we take official

notice formally ending the period of confrontation between the

two nations Moreover we are advised that Singapore is now per

lnittingIndonesian vessels to use some of its harbor facilities

Transshipment cargo is shipped on a through bill of lading issued

by the First Carrier and covers the transportation from the outport

beyond the transshipment port to the ultimate destination in the

United States Through cargo is considered by all the nations in

volved the carriers the purchasers and the sellers as a direct export

to the United States Indonesian regulations governing export li

10 F M C
186 1EDERAL MARITIME COMMISSION

renses exchange control and customs require that the foreign ex

change and letter of credit covering the shipment emanate from th

United States The same requirements existed when Singapore o

Penang were the transshipment ports At Singapore through carg

from Indonesia entered under a transshipment permit requiring n

entry declaration or export formalities Under the foregomg system

the merchandise is considered to move directly to the United State

and is never deemed to have entered into a third country

Local cargo differs from transshipped or through cargo in that 

originates in an outport ofIndonesia and is destined either for anoth

outport or a base port Atthe base port local cargo is usually processe

or warehoused instead of being transferred to a Second Carrier If 

is shipped to a foreign destination a new bill of lading is issued wit

the base port as the port of origin When shipped to Singapore loc

Indonesian cargo also required an export permitfrom the Indonesia

Government The exporter was required to obtain foreign exchang

from Singapore and to export on a Singapore local bill of lading 

this cargo was shipped from Singapore it had to be exported as loc

merchandise and foreign exchange was required to pay for it

Up until 1960 the transshipment arrangements between the Jrir

Carriers and Second Carriers were handled on an individual letter 

intent basis Each member of the Java New York Rate Agreeme

actively solicited the various First Carriers for transshipment carg

This system was utilized prior to World War II and resumed aft

the war By 1960 the members of JNYRA felt that it would be mo

orderly to enter into a formal agreement with the First Carriers 

a group rather than continue on an individual letter of intent has

After negotiations a preliminary agreement was executed and file

with the Commission in March 1962 as FMC Agreement No 891

InAugust 1963 Agreement No 9222 was filed with the Commissio

for approval under section 15 of the Act replacing No 8916 8UJpra

This agreement provides that the First Carriers will present all t

cargoes which they lift at Indonesian outports for transshipment 

US Atlantic and Gulf ports exclusively to members of JNYR

The members ofJNYRA in turn agree to use the services ofthe Fir

Carriers exclusively The individual First Carriers which execut

Agreement No 9222 were P N Pelajaran Nasional Indonesi

Pelni Straits Steamship Co Ltd Kie Hock Shipping Co Lt

al1d Guan Guan Ltd Pelni is owned by Indonesia and maintains 

fleet of about 90 vessels Atthe time ofthe execution of the agreeme

2

Action on Agreement No 8916 was closed before approval in July 1963

10 F M C
TRANSSIDPMENT AGREEMENT INDONESIAUNITED STATES 187

these carriers transported all o fthe transshipment cargo from the

Indonesian outports

After September 1963 when Indonesia proclaimed its confronta

tion policy with regard toMalaysia thetransshipment of Indonesian

through cargo at Singap re and Penang ceased Trade between the

United States and Indonesia continued but through cargo was trans

shipped at Indonesian base ports only As a direct result ofthis change

First Carriers Straits Steamship Kie Hock and Guan Guan left the

Indonesia trade They either sold theirships oremployed them in other

trades By the time of the hearing Pelni remained as the only First

Carrier serving the Indonesia trade

Second Carriers also decided to enter into Agreement No 9202 as

a means of distributing the through cargo equitably among the

JNYRA members This agreement deals with trade between the US

Atlantic ports and Indonesia excluding U S Gulf ports and affects

only through cargo which is transshipped at Singapore and Penang

The apportionment is made among the Second Carriers based on

their respective sailing frequencies

ISSUES INVOLVED

In our order of investigation dated May 17 1965 we specified the

followingeight issuesfor determination

1 Whether First Carriers parties to Agreement No 9222 are co

mon carriers by water in the foreign commerce ofthe United States as

defined in section 1 of the Shipping Act 1916

2 Whether Agreement No 9222 is subject to the requirements of

section 15 of the Shipping Act 1916

3 Whether Agreement No 9222 if subject to section 15 should be

approved disapproved or modified pursuant to section 15

4 Whether the arrangement between Second Carriers to enter into

Agreement No 9222 is an agreement subject to the requirements of

section 15

5 Whether the arrangement between Second Carriers to enter into

Agreement No 9222 if subject to section 15 should be approved dis

approved or modified pursuant to section 15

6 Whether Agreement No 9202 should be approved disapproved

or modified pursuant to section 15

7 Whether Agreements No 9222 and 9202 represent the complete

understanding between the parties

8 Whether Agreement No 9222 Agreement No 9202 or the ar

rangement between the Second Carriers to enter into Agreement No

10 F M C
188 FIDDE RAL MARITIME COM1fISSION

9222 have been carried out in whole or part without approval of th

Commission as required by section 15

THE INITIAL DECISION

The Hearing Examiner Benjamin A Theeman did not pass o

whether or not the First Carriers are common carriers by water in th

foreign commerce ofthe United States within the meaning of sectio

1 oftheShipping Act on the grounds that such a decision was neithe

essential nor necessary but held that Agreement No 9222 was su

ject to the requirements of section 15 for other reasons

s

The Examiner reasoned that since Agreement No 9222 is an agre

ment signed by each ofthe Second Carriers individually all of who

are clearly subject to the act it is subject to the requirements 

section 15 of theShipping Act 1916 The fact that other persons w

mayor may not be subject to the act also signed is of no consequenc

In considering whetherAgreement No 9222 should be approved 

not the Examiner pointedout that theonly protest wasfiled by Orie

Overseas Line which is not engaged in the Indonesian trade Th

protest wasrejected and the Examiner approved the agreement exce

as to those portions dealing with transshipment at Singapore a

Penang These were disapproved as being contrary to the pub

interest since transshipment of Indonesian cargo at these ports h

ceased

The Examiner rejected the proposition advanced by Hearing Cou

sel that the arrangement entered into by the Second Carriers to co

clude a transshipment agreement with the First Carriers was subje

to section 15 on the grounds that the effects of such an arrangeme

were only potential and that further negotiations with the First C

riers were necessary before an agreement came into being

Thb Examiner decided that Agreement No 9202 should be disa

proved in toto since it deals only with transshipment at Singapo

and Penang and no Indonesian cargo is transshipped at these po

at the present time However he round that the agreement was oth

wise approvable

Finally he concluded thatAgreements No 9222 and 9202 represen

the complete understanding of the parties and that there was ins

ficient evidence to support a finding that either agreement was carr

out in whole or in part without Commission approval

8

In a discussion found in the initial decision however the ExaminEr indicates 

he would bold that tbe First Carriers are common carriers by water within the mea

of section 1 if a decision on this iSSUf werefound to bE nesary

10 F M C
TRANSSHIPMENT AGREEMENT INDONESIAUNITED STATES 189

EXOEPTIONS OF THE PARTIES

The exceptions of the parties to the initial decision may be sum

marized as follows

Intervenor Intervenor Holland America Line excepts to the Ex

aminer s failure and refusal to rule on the issue of whether the First

Carriers are common carriers by water in the foreign commerce ofthe

United States withinthe intent and meaning of section 1 Its position is

that the Commission has no jurisdiction overtheFirst Carriers because

they do not come within the meaning of section 1 of the act

Intervenor also contends that the Examiner erred as amatter of law

in concluding that Agreement No 9222 is subject to section 15

Second Oa1riers Respondents Second Carriers except only to the

Examiner s disapproval ofAgreement No 9202 and those portions of

Agreement No 9222 which deal with transshipment at Singapore and

Penang They contend that there is nothingto indicate that these agree

ments are not in the public interest and moreover that there is a likeli

hood that the transshipment of Indonesian cargo at Singapore and

Penang willresume in thenear future

Hearing Oounsel Hearing Counsel except to the Examiner s failure

and refusal to make an affirmative ruling on the question of whether

First Carriers come within section 1 ofthe act and arguethat this rul

ing should be in the affirmative on the basis of Restrictions on Trf lt8

shipments at Oanal Zone 2 U S MC 675 1943 which holds that the

Commission has jurisdiction overthe entire through movement How

ever Hearing Counsel oppose actual assertion of this jurisdiction

Itis urged rather that the COlnmission should assert its jurisdiction

overthe arrangement and not the agreement itself relying on AngZo

OClllUldian Shipping 00 v U S 264 F 2d 405 9th Cir 1959 and

Isb1 andtsen v U S 211 F 2d 51 D C Gir 1954 in support of this

positjon

Hearing Counsel opposethe Examiner s approval of Agreement No

9222 under any theory of jurisdiction on the grounds that it effec

tively precludes independent competition with the parties to the agree

ment They reach the same conclusion with respect to Agreement No

9202 because ofits predatory effect on independents

Finally Hearing Counsel urge that since Agreement No 9222 is a

mere formalization of a practice that has long existed through the

device ofletters of intent between individual parties to the agreements

the record shows that parties have implemented a section 15 type

arrangement wi hout prior Commission approval

10 F M C
190 FEIDID RAL MAR1TIME COMMlSSFON

DISCUSSION

1 First Oa1 1iers AreOommon Oarriers by Water in the Foreign Oo

merceof the United States

We believe that itis both essential and necessary in this case to dete

mine whether the First Carriers satisfy the definition of comm

carrierby water in the foreign commerce ofthe United States In th

respect we differ somewhat with the Examiner However we agr

with the conclusion con ained in his discussion of this question th

these

activities may be interpreted to make Pelni a common carrier within 

meaning of thelanguage insection 1 reading engaged intransportation by wa

of property between the United States and a foreign country in 

import or export trade This finding is supported by long standing Commiss

decisions

In Restrictions on TraJn88hipmwtat Oanal Zone 2 U S MC 6

1943 the United States Maritime Commission held that

Section 15 applies to every common carrier by water This term as defined 

section 1 of the Shipping Act 1916 includes a common carrier by water 

foreign commerce which is defined as a common carrier engaged in 

transportation by water of passengers orproperty between the United States 

any of its Districts Territories or possessions and a

foreign country wheth

in the import orexport trade Tbe transportation in question does not e

at Cristobal Itis through transportation from Colombia and Ecuador to Unit

States ports on theAtlantic or Gulf When the lines operating up to the Ca

enter into the carriage of commerce of the United States by agreeing to rece

the goods by virtue of through bills of lading and to partiCipate in throu

rates and charges they thereby become part of a continuous line not ma

by consolidation with theon carrying lines butmade by an arrangement for 

continuous carriage or shipment from a

foreign country to the United Stat

Cincinnati N O T P Ry Co v Interstate Commerce Commission 162 U 

184 192 Clearly therefore the former being part of the continuous line ov

which the through traffic moves are engaged in the transportation by wa

of property between the United States and a

foreign country N

folk WesternR R Co v Pennsylvama 136 U S 114 119 Indeed they arenol

a factor in such transportation than the on carrying lines

We do notrely upon any language contained in the Interstate Co

merceAct to support our view that the First Carriers come withint

definition of a common carrier by water in the foreign commerce of t

United States The reason for the inclusion of the language conce

ing continuous carriage in the Interstate Commerce Act is as inte

venor correctly points out

to deprive the individual states of jurisdiction over transportat

wholly intrastate wherever intrastate carriers participate in transportation 

tween the states under an arrangement for continuous carriage

10 F M C
TRANSSHIPMENT AGREEMENT INDONESIA UNITED STATES 191

Absent thislanguage theremight have been a question of dual jurisdic

tion by the states and theFederal Government

Since the S ipping Act deals with the foreign commerce of the

United States this problem does not arise since the Constitution has

always vested the plenary power overforeign commerce in the Federal

Government

Under the plain language of the act and the decisions cited there

is no doubt that the First earriers are engaged in the trans

portation of property between the United States and a

foreign

country iThere there exists a unitary contract of affreightment such

as a through bill of lading by which two or more carriers or con

ferences of carriers hold themselves out to transport cargo from a

specified foreign point to a point in the United States with trans

shipment at one or more intermediate points from one carrier to an

other each of the carriers so involved is engaged in transporting

cargo by water from a foreign country to the United States

Intervenor contends that the First Carriers cannot be subject to the

act because they are foreign and that it would be impossible to obtain

in personam jurisdiction over them since they do not actually bring

cargo to ports in the United States But there is no need for us to do so

in order to carry out our regulatory obligations under section 15 ofthe

act It is enough that the First Carriers satisfy the definition formu

lated by Congress i e being engaged in the transportation by water

of property between a foreign country and the United States in order

for such carriers to be subject to the act at least to the extent that they

are so engaged

Of critical importance is the fact that we are able to discharge our

regulatory duties over those activities of legitimate interest to us

without attempting to exercise personal jurisdiction upon a foreign

entity The only activities of the First Carriers with which we are

concerned are their contracts agreements or understandings of the

type speeified in section 15 with other carriers or persons subject to

the act over whom we do have in personam jurisdiction

Agreement No 9222 is Subject to the Requirements of Section 15

Having determined that the First Carriers come within the defi

nition of common carrier by water in the foreign commerce of the

United States we turn to Agreement No 9222 to see if it is the kind

of agreement which must be filed for approval under section 15 of

See The DanleZ Ban 77 U S 10 Wall 557 565 1870 cited with approval In Nor

Jol fg cE Western R R 00 V Pennsylvanw supra

10 F M C
192 FE DERAL MARITIME COM MISSEON

the Shipping Act We hold that it is subject to the requirements 

section 15 forthreereasons

a Agreement No 9222 is an agreement between First Carriers a

Second Carriers Since both of these groups are subject to the a

any agreement among them meets the criteria of section 15 as 

parties to the agreement

b Agreement No 9222 is an agreement fixing or regulati

transportation rates or fares preventing or destroying comp

tition allotting ports and providing for an exclusiv

preferential or cooperative working arrangement It is manifes

the type of agreement which is contemplated by section 15 and

c Since the Second Carriers actually serve ports located in t

United States under Agreement No 9222 effective practical reg

lation of the agreement can be achieved without in per80nam jur

diction overtheFirstCarriers

The Commission in the exercise of its regulatory duties und

section 15 of the Shipping Act directs its attention more to t

agreement ares and not so much to the parties to that agreeme

As long as the parties satisfy the definition of common carriers 

water engaged in the transportation of goods from a foreign count

to the United States we have jurisdiction over the agreement

The Examiner was correct in concluding that we have jurisdictio

overAgreement No 9222 We have gone somewhat further than t

Examiner in defining our reasons why this jurisdiction exists W

do this in order to prevent any misunderstanding on the part of t

shipping industry 9

nd to insure that transshipment agreements co

cluded between individual carriers are also filed for approval und

section 15

Actually there is nothing new about requiring the filing of tran

shipment agreements In Intercoastal Rate8 From Berkeley 

U S S B B 365 367 1935 theBoard held that transshipment agre

ments must be filed under section 15 See also Oommonwealth of M08

8achusetts et al v Oolombian SS 00 et al 1 U S MC 711 1938 a

the Oanal Zone case supra In Oommon Oarriers by Water 6 F M 

245 1961 the Federal Maritime Board noted that if responden

were held to be common carriers a through transportation agreeme

would requiresection 15 approval 5

Under long established policy and consistent practice the Comm

sion and its predecessors have always required approval of tran

IS The case of B M Arthur Lumber 00 Inc v American Hawaiian 88 00 2 U S M C 

1939 cited by Intervenor as contrary to OanaZ Zone is inapposite The Shipping Act a

the Intercoastal Shipping Act were not mutually exclusive The shipment in question 

that case was foreign commerce and at thesame time intercoastal

10 F M C
TRANSSHIPMENT AGREEMENT INDONESIA UNITE D STATES 193

shipment agreements under section 15 The fact that in many instances

the carrier or carriers on one side of the agreement do not touch

United States territory is immaterial There are more transshipment

agreements on file and presently in operation under section 15 than

any other type of agreement and many of them involve arrangements

where the carriers on oneside never can at ports in the United States

This consistent administrative construction of the act is entitled to

great weight Federal Trade Oommission v Mandel Brothers Inc

359 U S 385 391 1959 6

3 Agreement No 9131313 if J odified is Approved

Inhis initial decision theExaminer found thatAgreement No 9222

wasapprovable under the criteria of section 15 except for those por

tions dealing with transshipment at Singapore and Penang We reject

these conclusions for the following reasons

As we have noted above there has been a decided relaxation of the

tensions between Indonesia and Malaysia since the date of the initial

decision and there is every reason to believe that normal trade relations

will he resumed in the very near future The same holds true for

Singapore which is now independent Itwould serve no useful purpose

to disftpprove those portions of the agreement dealing with trans

shipment at Singapore and Penang in these circumstances and would

on the contrary place an lmreasonable burden on the carriers involved

to require them to wait until transshipment at these ports has again

become an accomplished fact This same reasoning applies to Agree

ment No 9202 which the Examiner also disapproved for the same

reasons although finding itotherwise approvable

Moreover in Docket No 6614Agreements No 4188 No 4189

No 5080 No 7550 No 7650 and No 7997 served August 17 1966 we

held that where a cessation of a trade is brought about by a sovereign

act this fact will not constitute grounds for modification or disap

proval of an otherwise acceptable agreement involving that trade We

believe that this rationale is equally applicable here

However we do have a grave difficulty with another portion of

Agreement No 9222 These are the exclusive dealing requirements

found in paragraphs 2a and 2b of the agreement which read as

follows

2a Second carriers undertake not to accept cargo from nor close contracts

with other Shipping Companies for the conveyance of through cargo to ports

6 Intervenor argues that the inclusion of the phrase

u

on its own route or any through

route which has been established in section 18 b added in 1961 shows Congress intent

to exclude jurisdiction over such through routes in the original act Such an inference

is unwarranted See Federa Maritime Oommission v Jud ow Corporation 2nd Cir

decided August 29 1966 slip opinion p 16

10 F M C

299 843 0 68 14
194 FEIDIDRAL MARlI lIME COM MISION 

within the JavaNew York Rate Agreement sphere without the written cons

of FirstCarriers

b First Carrier undertakes not to close contracts for the conveyance 

through cargo to ports withinthe Java New York Rate Agreement sphere fro

ports in Indonesia with other Shipping Companies not members of the R

Agreement Jl

r to deliver such through cargo to other Shipping Companies 

membersof theRate Agreement withoutthewritten consent of Second Carriers 

The limitation onSecond Carriers expressed in paragraph 2a 8up

is meaningless Pelni is a state owned monopoly and no transshipme

cargo is now available from any other First Carrier There is nothi

in the record to indicate that any other First Carriers will be pe

mitted in the trade in the foreseeable future Indeed there were fo

First Carriers when Agreement No 9222 was executed Now there 

onlyone

Since Pelni is the only First Carrier in the trade if it agrees 

patronize the JNYRASecond Carriers exclusively the possibility 

any independent Second Carrier s entering the trade is utterly p

cluded We believe that this provision goes far beyond the permissi

limits ofsection 15 unduly prevents competition and is there ore co

trary to thepublic interest

Ifwe are to discharge our regulatory obligations under section 

we must be especially wary of any agreement which places restrain

upon third parties The Supreme Court in Federal Maritime Boa

v Isbrandtsen 00 356 U S 481 491 493 1958 stated

Freedom allowed conference members to lagree upon terms of competition s

ject to Board approval is limited to freedom to agree upon terms regulat

competition among themselves

In the particular factual circumstances of this case the exclus

dealing paragraph would achieve for the Second Carriers an absol

monopoly of an important segment of the foreign commerce of t

United States We would be derelict in our duties if we wereto sa

tion such an arrangement by approving it under section 15

As we said recently in our Report in Docket No 873 Investigat

of Passenger Steamship Conferences Regarding Travel Agent

served July 20 1966 offset report pp 9 10

In determining whether to approve initially or to allow continued approva

an agreement under section 15 we are called upon to reconcile as best we c

two statutory schemes embodying somewhat incompatible policies of our co

t

ry the antitrust laws designed to foster free and open competition and 

Shipping Act which permits concerted anticompetitive activity which in virtua

every instance if not unlawful under the antitrust laws is repugnant to 

basic philosophy behind them

10 F M C
TRANSSIDPMENT AGREEMENT INDONESIAUNITED STATES 195

Thus before we legalize conduct under section 15 which migbt otherwise be

unlawful under the antitrust laws our duty to protect the public interest re

quires that we scrutinize the agreement to make sur tbat the conduct

thUB legalized does not invade the prohibitions of the antitrust laws any more

than is necessary to serve the purposes of the regulatory statute Isbrandtsen

00 v UrlIited States 211 F 2d 51 57 C A D C 19M cert denied sub nOm

JapanrAtlalntic Gulf Oemf v U S 347 U S 990

In a companion case also decided this date Transshipment ami

Through Billing Arrangement Between East Ooast Ports of South

Thailand and Us Ports Docket No 65 19 we approved a similar

exclusive dealing provision between the First and Second Carriers

The critical difference between the two cases lies in the fact that in

the ThailaJnd case supra there are a number of other First Carriers

serving the trade which may be utilized by any independent Second

Carrier which seeks to compete withthe New York LinesAgency mem

bers Inthe instant case there are no other First Carriers

Even though we approved the exclusive dealing provisions in the

Thailand case the language of the Examiner whose initial decision

we have adopted is extremely guarded

The exclusive arrangement goes far beyond the elimination of iJl

traconference

competition usually accomplished by section 15 agreements d attempts to

restrict the competition of independent carriers Without sUJrveillance under

section 15 such predatory devices are obviously ca pable of being discriminatory

of detriment to our foreign commerce and contrary to the p

ublic interest

The fact that no independent competitors of JNYRA members ap

peared to protest the approval of Agreement No 9222 is not control

ling Indeed ifJNYRA now enjoys a de facto monopoly of the trans

shipment cargo originating in Indonesia there is no need for an exclu

sive arrangement clause in their contractwith PelniBut the inclusion

C fsuch a clause leads inescapably to the conclusion that the JNYRA

members are concerned that some independent competition may be

inaugurated We find therefore that there is no present need for

this provision in Agreement No 9222 and that its only purpose is to

foreclose completely the possibility of any independent competitor s

everentering this trade To approve uch a provision would be clearly

contrary to the public interest At best the provision is meaningless

at worst it would constitute our sanction of an absolute monopoly in

an important segment of a trade in the foreign commerce of the

United States

We recognized that conditions may change and that other First

Carriers may one day again compete with Pelni for the transportation

of transshipment cargo destined for the United States from Indo

nesian outports to transshipment ports In that case if JNYRA should

10 F M C
196 FEIDElRAL MARlITIME COMlSiSION

desire to enter into an exclusive arrangement with one or the other 

such competing First Carriers we would be willing to reexamine o

position The principle which must control is that we will not perm

any greater invasion of the antitrust laws than is necessary to serv

the public interest with due recognition of the fact the shippin

industry world wideis regulated by meanS of conference arrangemen

4 The Arrange ment Among Seoond Oarriers to Enter Into Agre

ment No 9 is Not Subject to the Reqwirements of Section 1

In this case as well as in Docket 6519 supra we specified in o

order of investigation the question of whether the arrangement b

tween Second Carriers to enter into Agreement No 9222 is an agre

ment subject to the requirements of section 15 and if so whether 

should be approved

Both Examiners concluded and we agree that the arrangemen

is in the nature of an agreement to agree a mere preliminary st

which may lead to a section 15 agreement but which in and of itse

does not constitute such an agreement Itis only when a final agre

ment has been concluded with the First Carriers that the requiremen

of section 15 come Into play The question of approving such arrang

IDents under section 15 of course becomes moot

0 The Apportionment Agree TMTJt No 9 O is Approved

We agree with the Examiner that the apportionment agreeme

No 9202 does not violate the standards of section 15 and should 

approved The Examiner disapproved the agreement solely because 

the non existence of transshipment of Indonesian cargo at Singapo

and Penang As we pointed out above there is a strong probabil

that this trade will resume in the immediate future and that in a

event we will not disapprove an agreement which cannot be imp

mented where the reason for this impediment is a sovereign act 7

We reject Hearing Counsels contention that the agreement sho

be disapproved because of its predatory effects on independent co

petitors This agre ment is of atype which by its very nature ope

ates almost entirely upon the agreeing parties It can have little 

no effect upon an independent competitor This is in sharp contra

to the exclusivity portions of Agreement No 9222 discussed abo

where the very reason for these provisions is to keep independe

eompetitors out of the trade

There has been an adequate showing on the record that Agreeme

lOur Report in Docket No 66 14 was served on August 17 1966 and the treaty end

confrontation between Indone lla and Malaysia was dated August 11 1966 Both ev

ccurred lone after the date of the Initial Decision

10 F M C
SS

No 9202 will tend 00 eljminate wasteful practices and promote

orderly continuity in the flow of cargo in this trade It is therefore

approved

6 OtherIssues

N one ofthe parties contends that the agreements filed for approval

40 not represent the complete understanding among the parties

There is no evidence in the record that it does not We therefore con

clude as did the Examiner that the agreements in question represent

the complete understanding of the parties

Similarly there is insufficient evidence of record to warrant a con

elusion that either of the agreenlents have been implemented in whole

or in part prior to approval The individual letters of intent by which

transshi pment arrangements were handled by the parties in the past

were never introduced in evidence Whether they might have con

stituted agreements requiring filing under section 15 is beyond the

scope of this inquiry It is clear that they did not call for concerted

activity among the Second Carriers as do Agreements No 9222 and

9202

CoNCLUSIONS

1 First Carriers parties to Agreement No 9222 are common car

riers by water as defined in section 1 of the Shipping Act 1916 00

cause they are engaged in the transportation by water of property

between the United States and a foreign country in the import trade

2 Agreement No 9222 is subject to the requirements of section 15

oftheShipping Act 1916

3 Agreement No 9222 if modified as required herein is approved

pursuant to section 15

4 The arrangement among Second Carriers to enter into Agree

ment No 9222 is not subject to the requirements of section 15

5 Agreement No 9202 is approved pursuant to section 15

6 Agreements No 9222 and 9202 represent the complete understand

ing of the parties and neither agreement has been carried out in whole

or in part prior to Commission approval as required by section 15

An appropriate orderwill be entered

I

SEAL Signed THOMAS LISI

Secretary

10 F M C
FEDERAL MARITIME COMMISSION 

No 6511

TRANSSHIPMENT AND APPORTIONMENT AGREEMENTS FROM INDONESI

PORTS TO US ATLANTIC AND GULF PORTS

ORDER

The Federal Maritime Commission instituted the proceeding 

determine whether Agreements No 9222 and No 9202 should 

approved pursuant to section 15 of the Shipping Act 1916 and th

Commission having this date made and entered its Report stating 

findings and conclusions which Report is made a part hereof b

reference

Therefore itis ordered That 1 Agreement No 9222 be and t

same herf by is approved pursuant to section 15 of the Shipping Ac

i916 on condition that it be modified by deleting in its entirety par

graph 2b and 2 Agreement No 9202 be and tl1e same hereby 

approved

Itis further ordered That the approval herein ordered with respe

to Agreement No 9222 shall become effective at such time as th

Federal Maritime Commission receives written notice that the partie

have agreed to the foregoing modification except that such approv

shall become null and void unless the agreement so modified is file

with the Commission not later than sixty 60 days from the da

ofservice ofthisorder

By the Commission

198

THOMAS LISI

Secretary

10 F M C
FEDERAL MARITIME COMMISSION

DOCKEr No 6519

TRA 1lSSHIPMENT AND THROUGH BILLING ARRANGEMENT BETWEEN EAST

COAST PORTS OF SOUTH THAILAND AND UNITED STATES ATLANTIC

r

AND GULF PORTS

Decided October 13 1966

Ellcan Twrk Jr for respondent carriers designated Second

Carriers

LelU1r0 G James and P Oonger Fawcett for Intervener Holland

America Line

Jionatd J Brunner and Roger A McShea IIIHearing Counsel

REPORT

By T E COMMISSION John Harllee Ohai Tlnanj Ashton C Bar

rett Vice Ohairman James V Day George H Hearn

oomrnissioners

This is an investigation on our own motion to determine whether or

not an exclusive transshipment arrangement between a group of

originating or First Carriers which operate exclusively between

ports on the east coast of south Thailand and Singapore and a group

of Second or oncarriers which operate from Singapore to United

States Atlantic and Gulf ports is subject to the filing requirements of

section 15 of the Shipping Act 1916 and if so whether the agreement

shouldbe approved

In his initial decision Examiner E Robert Seaver concluded 1

that the First Carriers are common carriers by water in the foreign

commerce ofthe United States as defined in section 1 of theShipping

Act 1916 2 that a transshipment agreement between First and

Second Carriers is subject to the requirements of section 15 of the

ShippingAct 1916 3 that the agreement in question is not contrary

to the public interest and will promote a more efficient and orderly

shipment of rubber to the United States 4 that the arrangement

10 F MC 199
200 FE DERAL MARITIME COMMISSION

among the Second Carriers to enter into a transshipment agreemen

is not subject to the requirements of section 15 5 that Agreemen

No 9311 represents the complete understanding of the parties and

6 that Agreement No 9311 has not been implemented in whole o

in partwithout approval by the Commission

We have considered the exceptions of the parties and find that they

are essentially a

reargument of issues which were fully briefed and

treated by the Examiner in his initial decision Upon careful examina

tion of the record we conclude that the Examiner s disposition o

these issues was well founded and proper See also Docket 65 17 FMC

Reports 10 FMC 183 decided October 13 1966

Accordingly we adopt the Examiner s initial decision as our ow

and make it a part hereof and for the reasons stated therein Agree

ment No 9311 is hereby approved pursuant to our authority unde

section 15 oftheShippingAct 19 16 as amended

By theCommission

Signed THOMAS LISI

Searetary

10 FY O
FEDERAL MARITIME COMMISSION

No 65 19

TRANSSHIPMENT AND THROUGH BILLING ARRANGEMENT BETWEEN

EAST COAST PORTS OF SOUTH THAILAND AND UNITED STATES

ATLANTIC AND GULF PORTS

Agreement No 9311 betweep tw9 groups of carriers providing for transship

ment of rubber at Sin pore found to be subject to the requirements of sec

tlon15 of theShipping Act 1916

The proposed transshipment agreement notfound to violate any of thestandards

of section15 and itistherefore approved

Elkan Turk Jr for respo dent carriers designated Second

Carriers

Leonard G James and F Oonger FalWcett for Interven rHolland

America Line filed briefs but did not appear at hearing

Donald J B er and Roger A McShea III Hearing Counsel

INITIAL DECISION OF E ROBERT SEAVER PRESIDING

EXAMINER 1

1 THE INVESTIGATION

Agreement No 9311 was filed fOF Commission approv lunder sec

tion 15 2oftheShipping Act 1916 theAct The agreement creates an

exclusive arrangement between two groups of carriers for the carriage

of cargo rubber on through bills of lading from ports on the east

oast of south Thailand to ports on theAtlantic and gulf coasts ofthe

United States with transshipment at the port of Singapore The two

parties to the agreement are described therein as 1 the First Car

riers 8the steamship lines that bring the rubber to the roadstead at

Singapore and 2 the Second Carriers 4

those that transport the

rubber on to the United States

1

This decision was dopted by the Commission Oct S 1966

I Sec 15 Is set out In appendix A attached

3

These are Straits Steamship Co Ltd IStrait8 N V Konlnkl1jke Patketvaart

Maatschapplj N V K and Heap Eng Moh Steamship Co Ltd

These are the 9 member steamship l1nes of New Yor Lines Agency discussed later

10 F M C 201
202 FlE DERAL MAR TIME COMMISSION

The Commission instituted this proceeding under the authority 

sections 15 and 22 of the Act to determine whether the propos

agreement should be approved disapproved ormodified under sect

15 In its Order of Inve tigation the Commission also required inves

gation of the questions as to whether First Carriers the agreeme

itself or the arrangement among Second Carriers to enter into it a

subject to section 15 The questions to be investigated are set for

in the followinglanguage quoted from the Order

1 Whether First Carriers parties to Agreement No 9311 a

common carriers by water in the foreign commerce of the Unit

States as defined in section 1 of the Shipping Act 1916

2 Whether Agreement No 9311 is subjectto the requirements 

section 15 ofthe ShippingAct 1916

3 Whether Agreement No 9311 if subject to section 15 shou

be approved disapproved or modified pursuant to section 1

4 Whether the arrangement between Second Carriers to en

into greement No 9311 is an agreement subject to the requir

ments ofsection 15

5 Whether the arrangement between Second Carriers to en

inter Agreement No 9311 if subject to section 15 should be a

proved disapproved or modified pursuant to section 15

6 Whether Agreement N 0

9311 represents the complete unde

st ndingbetween the parties and

7 Whether Agreement No 9311 or the arrangement betwee

the Second Carriers to enter into Agreement No 9311 have be

carried out in whole orpart without approval of the Commissio

as required by section 15

Second Carriers appeared at the hearing represented collectively b

connsel presented evidence and filed a brief in support of appro1ral 

the proposed agreeinent 5

Hearing Counsel participated in the pr

ceeding and utg e

in their brief that whileFirst Carriers are not nece

sarily subject to section 15 section 15 approval is required They tak

the position that the standards of section 15 will not be violated an

that approval should therefore be granted Intervener Holland

America Line came into the proceeding because they participate 

transshipment arrangements in various trades and state that the

have an interest in the outcome They did not appear at the hearin

but counsel filed briefs urging that section 15 approval is not require

The disposition of these issues calls for a somewhat detailed c6

5

Second Carriers take the position that the agreement is not subject to sec 15 but sta

that If the Commission determines that sec 15 approval is required the agreement mu

be approved because Ithas not been shown that the agreement would violate the standar

of sec 15

10 F M O
TRAN SSHIPMEN TI AGREEMENT HETWEiE N 8 THAILAND AND U S 203

sideration of the facts surrounding the cargo the shippers and the

carriers involved in the trade that is the subject of Agreement No

9311 In order to provide the necessary backgrotilld of the proposed

agreement the following findings have been extended beyond those

facts that would be considered essential under a strict application or

the rules ofevidence

2 THE FACTS

During the season of the northeast monsoon which extends from

November through March considerable difficulty is experienced in

attempting to load cargo on large vessels at the ports on the east coast

of south Thailand Songkla Patani and Narahdivas At all times

the loading or large vessels at these ports is somewhat inefficient be

cause there are no docks with berths for loading Large ships stand

off the shore several miles at anchor where they are loaded from

lighters Rubber moves from these ports in about the same volume the

year around

Crude rubber is exported from these ports to Japan Europe and

the United States Today substantially all of the rubber destined for

the United States moves on the respective vessels of both groups of

respondents The lines which will make up the First Carrier group

under Agreement 9311 transport the rubber to Singapore 6There

itis discharged into lighters and reloaded onto vessels of one of the

Second Carriers for carriage to Atlantic and gulf ports The cargo

is not landed at Singapore lIt is intended to and it does move from

south Thailand to the United States in continuous carriage in a direct

through movement The carriers who make up the FirstCarrier group

as well as the Second Carriers are common carriers by water

Several nonconference lines operate vessels inbound to the United

States from Singapore who are ready and willing to serve the rub

ber exporters The three originating carriers are faced with even

greater potential competition because there are many other carriers

serving routes that include both Singapore and the ports on the east

oast of south Thailand Still others ply between Bangkok andSinga

pore Any of these could easily serve the ports on the east coast of

south Thailand because these ports are on nearly a direct line be

tween Bangkok and Singapore The success of the three First Carrier

lines over their competition in the rubber trade to the United States

apparently results from the fact that they actively solicit the cargo

from shippers and also because the conference carriers presently

patronize only these three lines for the first leg of the journey The

8

SIngapore today Is an Independent sovereign nation

10 F M C
204 FEDERAL MARITIME COMMISSION

American purchaser bids on the rubber on a cost and freight 

but he pays the freight charges on delivery The letter of credit is

therefore made out for the fo b price The shipper in Thailand does

not always nominate the carriers While the record is not entirely

clear on this point it would seem from this that the American cost

and freight purchaser would sometimes select the carrier as is usually

the case on cost and freight slipments

A conference presently made up of nine steamship lines serving

this trade who will make up the Second Carriers was formed in

1951 underAgreement No 8100 duly approved under section 15 In

1954 some of the lines resigned from the conference and reduced thei

rates The resultinginstability of rates led the conference lines in 1955

into Agreement No 8061 providing for the apportionment of rubbe

cargo among the members Under the terms of that agreement the

members each of whom must be a member of the conference dis

continued the use of their respective local agents in south Thailand

A joint agency was set up to serve all the members collectively with

its main office at Haadyai south Thailand which is near the port o

Songkla on the east coast and a branch at Singapore This agency

is referred to as New York Lines Agency NYLA The group o

carriers that are members of the apportionment agreement is also

referred to by that name The rubber shipments are apportioned

among the members by the Agency in accordance with fixed percent

age shares stated in the agreement but the arnings are not pooled

Atthe time NYLA was formed a much greater quantity of rubbe

was imported from Siam through Atlantic and gulf ports than i

imported today In 1956 the first year of operation under the NYLA

arrangement 106 147 long tons moved This dropped to 50 720 in

1960 14 166 in 1963 5 867 in 1964 and only 1 288 tons moved from

January to September 1965 The conference witness testified tha

this decrease occurred because of higher prices paid for rubber in

Japan and Europe There is no evidence in the record that the forma

tion or operation of NYLA led to this decrease in traffic The con

ference earners expect our imports of rubber from Thailand to in

crease in the near future They say the traffic has bottomed out

Rubber in Thailand is produced by sman holders as distinguishe

from the large plantations found in some places in Southeast Asia Th

shippers of rubber are normally consolidators who buy rubber from

the growers for export There are many ofthese shippers in Thailand

so that the ship of one of the First Carriers does not load only th

rubber of one shipper on one voyage nor even the rubber available a

one of the three ports The ships sail north from Singapore light an

10 F M C
TRANSSHIPMENT AGREEMENT BETWEEN S THAlLANID AND U S 205

normally load at all three ports in order to obtain sufficient cargo to

make the voyage worthwhile On each voyage then the rubber of

many shippers destined for many ports and consignees and covered

by separate shipping documents will be on board

The shipper usually books the cargo with one of theFirst Carriers

and notifies the NYLA office at Haadyai In somE P instances the cargo

is booked directly with NYLA The first carrier issues a mate s re

ceipt or boat note as a

receipt for the cargo rather than a bill of

lading This serves the same purpose as a dock receipt The NYLA

office at Haadyai notifies their Singa pore office of the movement and

itis then allocated to one ofthe Second Carriers under the apportion

ment agreement NYLA issues to the shipper a

transshipment bill of

lading of the designated Second Carrier in exchange for the mate s

receipt and the shipper then draws down from the thank about 70

percent of the purchase price covered by the letter of credit Under

Agreement 9311 the bill oflading will be issued by one of the Second

Carriers to cover the entire trip from south Thailand to the United

States Thus it is issued on behalf ofthe originating carrier as well as

the oncarrier

When the rubber has been loaded iboard one of the oncarrier s

ships at Singapore that carrier cables NYLA at Haadyai so advising

them and reporting any exceptions NYLA Haadyai then places the

onboard endorsement on the hill of lading and no any exceptions

The banK upon receipt of the onboard hill pays the balance to the

shipper under the letter of credit and sends the bill of lading on to

New York The shipment is made on a freight collect basis

The freight rate for the entire service from south Thailand to the

United States port is that shown in the tariff of the conference The

rate at present is 50 25 for 2 500 pounds of sheet rubber or 2 240

pounds of crepe The rate is the same when the conference line calls

direct at the south Thailand port during the open season The con

ference member presently pays freight charges of approximately

US 10 per ton to the line that brings the rubber to Singapore as well as

the cost of lighterage at Singapore The conference line charters the

lighters at present The apportionment of freight under Agreement

9311 will continue in this same proportion

Under Agreement 9311 theFirst Carrier will arrange and pay for

the lighterage at Singapore Second Carriers will reimburse First

Oarriers at the rate of 5 Malayan dollars per ton for thisservice This

is US 167 First Carriers are also required by Agreement No t311 to

sort the rubber hy marks bills oflading lots and destinations before

delivery to Second Carriers This is an important feature of the

10 F M C
206 1EDE RAL MARI T1ME COMMISSION

agreement and reflects one of the main reasons why the conferenc

members see aneed forit

On occasion in the past rubber cargo of various shippers that wa

transshipped at Singapore was hopelessly mixed In one instance 

vessel came into Singapore with 18 000 bales of rubber on board 10 00

of which were for transshipment to various American ports v

NYLA and 8 000 destined for ports in EUrope and Latin Americ

The NYLA carrier could not distinguish most of the marks and th

cargo was inextricably mixed so most of it was left behind This re

sulted in the payment of large claims to the importers UnderAgre

ment 9311 the sorting responsibility is that of the First Carrier o

whose vessel the cargo is loaded

Second Carriers testified that the arrangement will promote mo

orderly and efficient transshipment The agreement provides that th

Second Carriers shall receive rubber for transshipment in this trad

only from First Carriers and First Carriers agree to transship on

via Second Carriers Second Carriers are allowed to load direct at th

south Thailand ports during the open season and each of them ma

transship rubber at Singapore on its own vessels during the ope

season

The threelines that make up the First Carriers were selected by th

Second Carriers because they are the most experienced and dependab

carriers in this service Second Carriers are similarly the most ex

perienced carriers in the transportation of rubber in the second leg o

the route Experience in the transport ofrubber enables the carrier t

provide better service because it calls for special skill and experienc

The arrangement willtendto provide shippers with efficient and stab

service By dealing exclusively with First Carriers rather than dea

ing with all carriers in the trade indiscriminately Second Carrier

believe that they and the shippers will be assured of stability of serv

ice through thick and thin That is if the rubber trade diminishes

or more attractive cargoes are offered elsewhere these three carrier

will have a motive to stay in the trade There is no evidence to th

contrary and since this prediction accords with history in the field o

ocean transport itis accepted as valid

Speed of transshipment service is important to shippers because 

permits them to receive payment under letters of credit earlier an

avoid their working capital being tied up This cooperative workin

arrangement between the two groups of carriers will expedite th

transshipment service As noted above it will eliminate the problem

of resorting the cargo at Singapore Itwill also promote stability o

rates which is equally important to shippers There is no dual rat

system in effect in this trade NYLA vessels make 15 calls a mont

10 F M C
TRAN SSHIPME NT AGREEMENT BETWEEN 5 THAILAND AND U S 207

in this service No question was raised as to the adequacy of the con

ference service Due to their know how their length of service and

frequency of service they carryall the rubber in this trade It can be

concluded from this that they have found no need for a dual rate

system

The freight rate on rubber from south Thailand to Japanese and

European ports is roughly half of that to United States ports The

price of a ton of rubber is about 500 on a cost and freight basis It

seems unlikely that a 25 rate disparity would be the cause of the

decrease in the exports of rubber to the United States There is no

evidence in the record one way or the other as to whether the dif

ference is justified The relative distance would tend to justify it

of course The question of rate levels is not directly in issue here in

any event It is not expected that Agreement 9311 will result in a

change in the conference rate either upward or downward Orient

Overseas Line O O L one of the independent carriers in this trade

has a rate on rubber from Singapore of 42 per 50 cu ft plus an

arbitrary of 125 The conference rate is 45 50 They would come out

better on shipments from Singapore under this rate than they will

under the transshipment arrangement contemplated by Agreement

9311

The shippers who expressed themselves on the subject do not

oppose the approval ofthe agreement Central Gulf Steamship Co an

independent carrier in the trade stated that it did not oppose the

agreement However this carrier also said it soon may joiDthe con

ference so this position cannot necessarily be taken as typical of the

independent carriers O O L

opposes the agreement on the ground that

its exclusive provisions would prevent O O L

participation in the

rubber cargoes transported by First Carriers No other independents

have expressed a view in this proceeding The government of south

Thailand has not indicated an interest in the agreement either in

communications with the carriers or in the course of this proceedingL

3 DISCUSSION AND CONCLUSIONS

The first and second issues to be resolved as stated in the Order of

Investigation can be treated together

Question No1 Whether First Carriers parties to Agreement

No 9311 are common carriers by water in the foreign com

merce of the United States as defined in section 1 of the Ship

pingAct 1916

10 F M C
208 F EDERAL MARITIME OOMMISSION

Question No 2 Whether Agreement No 9311 is subject to th

requirements of section 15 of the Shipping Act 1916

Section 15 requires every common carrier by water or other perso

subject to this Act to file with the Commission for approval a

agreements of the type described in that section with another su

carrier or person Section 1 defines common carrier by water 

mean for our purpose in this proceeding a common carrier by wat

in foreign commerce which in turn is defined in section 1 to mea

A common carrier engaged in the transportation by water of passengers 

property between theUnited States and a

foreign country

First carriers are common carriers The record clearly establishe

this fact The Holland American brief contains an innuendo th

there is no such thing as a common carrier outside common law cou

tries For whatever relevancy this factor has every country reco

nizes the common carrier concept See Report of United Nation

Conference on Trade and Development January 28 1964 On pag

14 the reportstates

Whereas the tramp owner is only bound to carry a cargo from one place 

another after he has engaged himself by charter party to do so the liner 

legally defined as a common carrier inall countries

The point here in any event is that the First Carriers are acting 

common carriers within the meaning of section 1 so that part of th

definition is satisfied

The question then is whether these carriers are engaged in th

transportation of property between the United States and a

foreig

country either by virtue of their actual carryings or because of the

joint activity with Second Carriers covering the whole route from

south Thailand to the United States The answer is that they are s

engaged on both counts

In Restrictions on Transshipment at Oanal Zone 2 U S MC 67

1943 the US faritime Commission held unequivocally that ca

riers transporting cargo destined for the United States between tw

foreign ports the cargo being transshipped to other carriers at th

second port were engaged in the transportation of property betwee

the United States and a

foreign country within the meaning of se

tion 1 and that the agreement covering the transshipment was sub

jectto section 15

For rather wid ly varying reasons the parties herein argue tha

First Carriers are not so engaged In order to sustain these argument

the Oanal Zone case and a continuous line of other precedents goin

back to the beginning would have to be overturned even though ther

has been no change in the statutes or the circumstances Intervene

to F M e
TRAN SSlIIPMEi NT AGREEMENT BETWEEN S THAILANID AND U S 209

Holland America Line acknowledges that the Oanal Zone case is in

point but urges that the Commission should reverse its predecessor

Respondent attempts to distinguish the case on the ground that some

of the carriers involved in Oanal Zone made direct calls at US ports

on other routes and that the first carriers in the instant case do not

do so This is by no means a distinguishing feature The sole operation

of the carriers involved in the Oanal Zone ruling was the transship

ment service Other activities of the carriers have no bearing on the

legal status of the transshipment agreement Likewise the fact that

here the Second Carriers issue the through bill oflading rather than

the originating carriers does not distinguish the cases as contended

by counsel In most if not all transshipment agreements either the

originating carrier or the oncarrier issues a throughbill for the whole

trip but this has never been held to prevent the agreement being

subjectto section 15

Afterspeaking ofearlier decisions that such a transshipment agree

ment was subject to section 15 the Commission stated on page 678

These administrative determinations which have stood for years without

challenge rest upon sound reason

Section 15 applies to every common carrier by water This term as defined

in section 1 of the Shipping Act 1916 includes a common carrier by water in

foreign commerce which is defined as a common carrier engaged in the

transportation by water of passengers or property between the United States or

any of its Districts Territories or possessions and a foreign country whether

in the import or export trade Tbe transportation in question does notend

at Cristobal Itis through transportation from Colombia and Ecuador to United

States ports on the Atlantic or Gulf When the lines operating up to the Canal

enter into the carriage of commerce of theUnited States by agreeing to receive

the goods by virtue of through bills of lading and to participate in through

rates and charges they thereby become part of a

continuous line not made by

consolidation with the on carrying lines but made by an arrangement for

the continuous carriage orshipment from a foreign country to the United States

Oincinnati N O T P Ry 00 v Interstate Oommerce Oommission 162 U S 184

192 Clearly therefore the former being part of thecontinuous line over which

the through traffi moves are engaged in the transportation by water of

property between the United States and aforeign country Norfolk

Western R R 00 v Pennsylvania 136 U S 114 119 Indeed they are no less a

factor insuch transportation than theon carrying lines

The lawyers for Holland America argue in effect that the decision

was erroneous because the two Supreme Court cases cited in the

above quoted portion of the decision weredecided under the Interstate

Commerce Act and that therefore the Commission decision was based

on the Interstate Commerce Act rather than the Shipping Act This

argument is unacceptable because it is evident that the Commission

cited the Supreme Court cases as involving generally analogous situa

tions where the Supreme Court reiterated the well established prin

10 F lfC
210 FlEDERAL MARITlME OOMMISSION

ciple that any local carrier becomes a part of the continuous line of

carriage when he enters into a through route arrangement It is quite

evident that the Commission was aware of the applicable language

of the Shipping Act for they quoted the relevant portion of it in the

same passage The other cases decided by the Commission and its

predecessors and successors on this point do not even mention those

Supreme Court cases

flearing COlillsel urge that the arrangement between the Second

Carriers to enter into Agreement 9311 is a section 15 agreement They

say that the effect is practically the same as the result in Oana

Zone and that they are really doing through the back door wha

the Commission in that case Oanal Zone did so to speak through

the front door page 181 of transcript They state that Oana

Zone settled the proposition that First Carriers fall within the

definition of section 1 ofthe Act yet they say in their opening brief

that when that case is looked at with a

degree of penetration it can

be distinguished from the case at hand 1

They say the following factors distinguish the cases 1 In Oana

Zone the transshipment points were in territory leased and ad

ministered by the United States 2 The Oanal Zone agreement did

not involve exclusive dealings between the two groups and it in

cluded through movements by single member carriers as well as

transshipment

None of these points distinguish the instant case from the Oana

Zone case The two cases aTe on all fours The Commission treated the

Oanal Zone case as a situation where the originating carriers did no

touch a

port of the United States Commerce between the U S ports

and the Canal Zone has always been treated as foreign comnlerce

Sigfried Olsen v W S A and Grace Line Ino 3 F J1 B 254 259

1950 First carriers in the Oanal Zone case plied between foreign

ports just as they do in the instant case

The fact that the carriers who were parties to the agreement in

volved in Oanal Zone were permitted to carry cargo over the entire

route if they chose is not a distinguishing factor Under Agreemen

9311 any of the Second Carriers can make direct calls at south Thai

land ports during the open season The Oanal Zone agreement had

exclusive features too

T In their answering brief Hearing Counsel have apparently sensed the weakness of thi

position because they urge the Commission not to make a decision that would disclaim

Jurisdiction over the originating carrl rs In a through movement In Docket No 65 17

Transshipment and Apportionment Agreements From Indonesian Ports to United State

Atlantic and Gulf Ports decided by Examiner Benjamin A Theeman on Mar 24 1966

Hearing CouDsel take the pOSition that First Carriers are subject to sec 15

10 F M C
TRANiSSHIPMIDNT AGREEMENT HETWE EN S THAILAND AND U S 211

Other even less pertinent distinctions are att mpted to be made

but these need not be discussed further because the preoccupation of

counsel with attempts to distinguish this case from the anal Zone

case has caused them to miss or to obscure the point The briefs treat

the Oanal Zone case as an isolated and unique incident and treat the

whole area of transshipment agreements as rather novel innocuous

arrangements that really haven treceived much if any serious con

sideration until this proceeding came along The transportation of

property to and from the United States by means of transshipment

arrangements is in fact a major element in the foreign commerce of

the United States To remove it from regulatory control would ob

viously have a profound impact on our foreign commerce Holland

America even seems to argue that no transshipment agreement is a

section 15 agreement

The point is that under frequent rulings and decisions long estab

lished policy and consistent practice the Commission and its predeces

sorshave always required approval of transshipment agreements under

section 15 The fact that in many instances the carrier or carriers on

one side of the agreement do not touch U S territory has not been

deemed and is not now deemed to make a distinction in this policy or

these decisions The briefs of counsel except intervener Holland

America give the impression that th irauthors are unaware that the

regulatory supervision and processing of such agreements has been

and is today one of the largest areas of concern of this Agency More

transshipment agreements are on fileand presently in operation under

section 15 than any other type of agreement They constitute more

than half of the section 15 agreements presently on file and many

probably most of them involve arrangements where the carrier or

carriers on one side never call at ports in the United States The Ex

aminel ta kes official notice of the facts stated in this paragraph

Like Agreement 9311 some transshipment agreements contain ex

clusive features which prohibit either side dealing with other carriers

in through shipments in the particular trade Others do not contain

the exclusive feature Contrary to the contention of Holland America

all such agreements have been held to fall within section 15 See lnter

coastal Rates From Berkeley 1 D S S B B 365 367 1935 and the

cases cited later herein Such agreements are invariably cooperative

working arrangements under section 15 and like Agreement 9311

frequently cover aspects of rate fixing andlor provide for exclusive

dealing among the parties Agreement 9311 is patently subject to the

statute To treat it as an innocuous incidental facet of the overall

activities of these carriers would overlook the spirit as well as the

10 F M C
212 F1EDE RAL MARITIME oOMMLSSION

letter of the Act The exclusive arrangement goes far beyond the

elimination of intraconference competition usually accomplished by

section 15 agreements and attempts to restrict the competition of in

dependent carriers Without surveillance under section 15 suc

predatory devices are obviously capable of being discriminatory o

detriment to our foreign commerce and contrary to the public interes

The first time the matter wasmentioned in a formal decision was in

1935 in Interooastal Rates From Berkeley 1 US S B B 365 367 Thi

decision recognizes that transshipment agreements must be filed unde

section 15 Next came Oommonwealth of Ma8saohusetts et ale V Oolom

bian SS 00 et al 1 U S MC 711 in 1938 and the Oanal Zone case i

1943 Ifthe case ofB M Arthur Lumber 00 IM V Americwn Hawa

ian SS 00 2 U S M C 6 1939 cited by Holland America as contrar

to OanalZone has any bearing on thisproceeding itis thefact that th

through route transshipment arrangement involved there was file

and approved under section 15 as Agreement No 4970 The Examine

finds nothingin that decision that is at odds with the otherprecedent

cited here

The converse of the instant situation was present in Boston Woo

Trade Assn V Ooeanic et al 1 US S B 86 1925 where wool from

Australia destined for Boston wastransshipped at San Francisco to a

oncarrier who carried the wool through the Panama Canal to Bosto

The Shipping Board held that the San Francisco to Boston leg ofth

through transportation was foreign commerce rather than interstat

They looked at the whole through route as a unit This must be don

here as well witl 1 the result that the entire through transportation 

part of the transportation of property between the United State

and a foreign country As said in the Boston Wool case page 87 th

stop at thetransshipment point is only incidentally a part of the move

ment and does not change its character InCommon Oarriers by Wate

6 F MB 245 1961 the Federal Maritime Board noted that if r

spondents were held to be common carriers athrough transportatio

agreement would require section 15 approval The proposition wa

apparently deemed to be so well established that neither the Board no

any oftheparties raised anyquestion on thatscore

Recent actions of the Commission have confirmed this unvaryin

policy and decision On July 15 1964 the Commission mailed to a

affected carriers a notice ofthe delegation of authority to the Burea

of Foreign Regulation to approve under section 15 the more routin

transshipment agreements filed for approval A copy is attache

marked AppendixB This notice wasgiven pursuant to Commissio

Order No 1 which was amended at about that time to provide for th

10 F M C
TRANSSHIPMENT AGREEMENfl BETWEEN 6 THAILAND AND U S 213

delegation of authority to approve transshipment agreements This

recognizes of oo rse that suchagreements require section 15 approval

Nodistinction is made as to those involving only carriers that call at

US ports Obviously by their very nature such through shipment

arrangements normally involve transshipment at a foreign port with

one carrier or group of carriers plying between that port and other

foreign ports

Even more recently in Pacific Seafarers Inc v AGAFBO 8 FMC

461 the Commission recognized that section 15 jurisdiction would lie

if the carriers involved there who traded between ports in Thailand

and Taiwan had been transporting cargo transshipped from the

United States The decision states Further the record is bereft of

any evidence that the cement involved was cement transshipped from

the United States so theCommission determined that itdid not have

jurisdiction

Section 18 b added to theAct in 1961 requires common carriers in

foreign commerce and conferences of such carriers to file their rates

with the Commission for transportation to and from United States

ports and foreign ports between all points on its own route and on any

through rate that has been established and it gives the Commission

jurisdiction overtherates so filed Congress cannot be charged with the

futile action of assigning this responsibility to the Commission to

regulate rates on a throughroute if the Commission had no authority

over interoarrieragreements under the terms of which such rates are

established and applicable The Holland America argument that the

inclusion ofthe italicized words somehow shows a congressional inten

tion to omit them from sections 1 or 15 is unacceptable In the first

place we are considering the enactments of two different Congresses

Beyond this the 87th Congress can be deemed to have been aware of

the long and unvarying Agency policy decision and practice requiring

the filing of through transportation arrangements The 1961 amend

mentsdid nothingto bring thisdecision and practice into question they

confirmit Inany event the intention of a 1916 Congress can hardly be

ascertained by looking at a statute enacted in 1961

The effect of a contrary holding must be considered IfAgreement

9311 werenot subject to the Act the patties thereto would be at liberty

to engage in any discriminatory monopolistic predatory practice

they wish 8

at least in theSingapore Thailand leg of thiscontinuous

journey to the detriment of shippers andthe destruction ofcompeting

carriers in our foreign commerce who 0011 or may wish to call at these

8

To the extent that the antitrust laws might not be applicable Ifthey are considered

to be applicable this does not solve the problem since Congress intended the sec 15 stand

ards to apply to situations fa111ng within its coverage rather than the antitrust lawB

10 F M C
214 F1EDERAL MARIT IME iCOMMLSSION

Thailand ports direct This would be true in all trades where throug

transportation is practiced Itis not conceivable to the Examiner th

Congress intended such a result

First carriers are literally engaged in participating in th

t1lansportation f property between the United States and a

foreig

country within the meaning of section 1 when they carry the rubb

on the initial leg of the through route Equally important they a

also constructively engaged in the whole trip from Thailand 

New York by entering into Agreement 9311 because the carriage o

the entire tripthen becomes a joint and common undertaking betwee

the two groups ofcarriers Itis not open to question at this late dat

that the transport of cargo between the United States and Thailan

is part of the foreign commerce of the United States Switching th

cargo to a different vessel in the roads at Singapore does not chang

this

Counsel mistakenly look at the problem strictly as one of jurisdic

tion overthe person where the First Carriers are concerned and the

worry about theoretical aspects of enforcement Vhat we are prima

ily concerned with is jurisdiction over the agreement between thes

two groups Enforcement poses no problem for if the requirements o

the Commission are not met by the parties and the section 15 standard

are violated the agreement will be disapproved

For the foregoing reasons the first two issues are answered in th

affirmative

Question No 3 Vhether Agreement No 9311 if subject to se

tion 15 should be approved disapproved or modified pursuan

to section 15

The parties agree that there has been no showing that the agreemen

will be unjustly discriminatory or unfair that it will operate to th

detriment of the commerce of the United States be contrary to th

public interest or in violation of the Act On the positive side th

evidence shows that the agreement will promote a more efficient an

orderly transshipment of rubber in this trade It will tend to provid

service to shippers in lean timesbecause the threeFirst Carriers bein

assured of the exclusive transshipment of through cargo with th

conference lines will develop an interest in the trade and will b

motivated to stay there and serve the trade even though greener field

elsewhere might otherwise lure them away The arrangement fo

sorting the cargo by First Carriers will speed the transshipmen

process This will be of benefit to shippers as it will allow them to

recoup their investment sooner

There was no evidence that the agreement will result in increase

rates Importers of rubber did not oppose approval of the agreemen

10 F l1C
TRANSSHIPMENT AGREEMENT HETWE EN S THAILAND AND U S 215

One of the independent carriers in the trade between Singapore and

the United States O O L testified that the agreement is discrimina

tory as to it because it will be prevented from transporting through

cargo under transshipment arrangements with any of the First Car

riers There is no question that the agreement will place some restric

tions on competition but this factor alone does not prevent approval

under section 15 The First Carriers are not transshipping cargo at

present with O O L so that carrier will be no worse off under the

agreement except insofar as it eliminates the prospect of their doing

so in the future There is nothing to prevent O O L working out

transshipment arrangmnents with otherfirst carriers or calling direct

atThailand at least in theopenseason

Since the agreement will not violate any of the standards of section

15 and it will serve valid transportation purposes it should be

approved

Question 4 vVhether the arrangement between Second Carriers

to enter into Agreement No 9311 is an agreement subject to the

requirements ofsection 15

Question 5 Vhether the arrangement of Second Carriers to

enter into Agreement No 9311 if subject to section 15 should

be approved disapproved or modified pursuant to section 15

Question No 4 requires a decision as to whether apreliminary

agreement presumably entered into by the members ofthe conference

an agreement to agree has to be submitted for approval under sec

tion 15 The answer is in the negative Respondents argue with some

fervor and the Examiner agrees that a requirement that every pre

liminary agreement to negotiate be submitted for approval is not

contemplated by the statutes and would lead to the hopeless conges

tion of the Commission s docket Under a contrary rule every fime

a section 15 agreement between two groups were filed the separate

agreement between the members of each group also would have to be

filed In addition each separate agreement among the members of

each group would have to have section 15 approval as negotiations

progressed and as each side altered its position on various points

Such an absurd result was surely not contemplated

The short answer is that a mere agreement to negotiate among the

members of just one side of the ultimate bargain cannot standing

alone accomplish those things covered by section 15 and therefore

such an agreement does not come within the section It cannot fix

or regulate rates give special rates control competition pool earn

ings allot ports et cetera The colloquial expression It Takes Two

to Tango is so entirely appropriate that its use here hopefully will be

10 F M C
216 FEIDERAL MARITIME COMMISSION

excused For these reasons among others section 15 approval is n

required for the agreement if any between Second Carriers

However Hearing Counsel attempt to place some different interpre

tation on Question No 4and comparing transshipment arrangemen

to dual rate arrangements say that the decision among themselves o

Second Carriers to enter into Agreement 9311 requires section 

approval They cite Anglo Oanadian Shipping 00 v United State

264 Fed 2d 405 C A 9 1959 and Isbrandtsen v United Staters 2

Fed 2d 51 C A D C 1954 as authority for this point Insofar 

they may have any relationship with the situation here those tw

cases hold that the action of a group of carriers members of a co

ference in initiating a scheme of dual rates in a particular trad

requires Commission approval under section 15 before it can be carrie

out because the basic conference agreement does not provide a cov

of authority as decided by the Board to adopt such a scheme

By means of an alleged analogy with these cases Hearing Couns

seek to bring Agreement 9311 under section 15 through the baq

door as they say The foregoing decision on Question No 1 that th

agreement between the two groups of carriers is subject to section 1

makes it unnecessary to decide the back door question of course

However the Examiner is constrained to take it up since the questio

was included in the Commission s Order of Investigation or some

thinglike it

Hearing Counsel find themselves in a dilemma as a result of I

their conviction that transshipment agreements must be

and 2 their 

assertion which has been shown above to be erroneous

that First Carriers are not subject to section 15 Their attempt t

solve this dilemma has led them into further difficulty They seiz

upon the Isbrandtsen and Anglo Oanadian cases as authority for th

proposition that an arrangement can be one subject to section 1

even though there may be a party to itwho is not subject to theAct

This they apparently feel will get them off the first horn of the

dilemma This nonsubject party in the case of the dual rate

is the shipper they say The corresponding party in the 9311 Agree

lTlent would be theFirst Carriers assuming for the sole purpose o

this discussion that they are not subject to section 15 The analog

might be tenable if the shippers were party to the arrangement th

courts wereconsidering in the Isbrandtsen andAnglo Oanadian cases

However they were not parties Section 15 requires that common

carriers by water and other persons subject to theAct filefor approva

agreements with another such carrier or person The courts in

those two cases would have had to repeal the statute to reach the resu

ur edby Hearing Counsel

10 F M C
TRANSSHIPME lT AGREEMENT BETWEEN 5 THAILAND AND U S 217

The alleged analogy breaks down when the nature of a dual rate

system is compared with that of a transshipment arrangement Under

the sbra 1ultsen and Anglo Oanadian decisions the Commission

approves the scheme ofthe carriers entered into among themselves

to institute a dual rate system Thereafter the conference enters into

uniform dual rate contracts with the individual shippers thousands

of them under which each shipper is given a reduced freight rate in

exchange for his prolnise of exclusive patronage of the conference

members The act of entering into these individual shipper contracts

does not require approval That act is nothing more than a ministerial

function once the scheme is settled Approval of the scheme

gives blanket authorization for the execution of the individual

contracts

N ow it is certain that the Commission could not and would not give

such blanket authorization to a conference or any other group of

carriers to enter into any and all transshipment agreements there

after On the contrary unlike the individual shipper dual rate con

tracts the Commission must of necessity scrutinize each and every

proposed transshipment agreement in order to see if the special terms

of the particular agreement in the special circumstances of the trade

involved are compatible with the standards of section 15 The distinc

tion lies in the fundamental difference between these two categories of

section 15 undertakings

The heart of the dual rate situation lies in the arrangement between

the conference members to adopt the system itself Even the form of

uniform contract with shippers is appr ved as a part of this arrange

lllent Then this arrangement comes to the Commission all of the

ramifications of the plan are available for study and approval dis

approval or modification under section 15 The actual signing up of

the shippers thereafter is actually only incidental On the other hand

the mutual decision among a group of carriers to enter into a trans

shipment arrangement in a particular trade tells only a minor part of

the story At the heart of this transaction is the identity of the other

carrier or group of carriers that will sign the exclusivity of the par

ticular arrangement the form of the contract and other unique inci

dents ofthe arrangement that must be subjected to thetest of section 15

for ad hoc determination Ifblanket consent were given none of these

things would receive regulatory attention

Counsel for Holland America call thisapproach of Heating Counsel

the half agreement approach and correctly point out a result which

alone would render it unworkable and in violation of the spirit of the

1916 Act as well They point out that only those transshipment ar

10 F l1C
218 FEDE RAL MARITIME COMMISSION

rangements involving more than one carrier on a side would be

brought under section 15 Where one leg of the voyage that which

touches American shores was performed by a single carrier regard

less of the number of lines that might be acting jointly on the other

side of the agreement such arrangements would be utterly immune

from such control 9

In short they say individual carriers could

and would monopolize the transshipment business to and from the

United States a result which could hardly be considered condu

cive to the well being of the commerce of the United States The Ex

amIneragrees

Hearing Counsel are aware ofthisproblem They feel thattransship

ment agreements are at the most restrictive extreme of the spectrum of

theanticompetitive devices covered by section 15 and apparently they

do not wish to exclude from regulation every such device not having

multiple parties on a side In their reply brief they wisely urge the

Commission not to make a determination in this case which would

have the effect of disclaiming jurisdiction over originating local seg

ments of through movements to the United States And they

urge the Commission to adopt a flexible rule as to jurisdiction based

upon the exigencies of particular trades At another point they pro

pose that the Commission not make the broad determination in this

case that all first carriers are jurisdictional or nonjurisdictionaV

Hearing Counsel are perfectly correct that each and every trans

shipment agreement should be looked at on its own merits However

this cannot be achieved by a flexible and varying approach to Ques

tion No 1 as cases arise in the future The Act must be applied uni

formly to all carriers The dilemma seen by Hearing Counsel stems

from their attempt to treat a single transshipment agreement in the

same way as the adoption of an entire dual rate system The needed

flexibility is achieved by accepting Agreement 9311 for what itis a

single contract between a group of carriers acting as one as the party

of the first part and another group of carriers acting as one as the

party of the second part both of which groups are subject to section

15 Inthisway and no other the entire arrangement can be scrutinized

as intendedby Congress in theenactment ofsection 15

The incidental agreement between the members of each group first

to negotiate and then to sign are merged into Agreement 9311 and

every facet of those individual agreements can be examined by the

Commission as a part of its scrutiny ofAgreement 9311 The converse

does not hold true however for standing alone the greement among

9The initial decision served Mar 24 1966 in Docket No 6517 10 FMC 183 Trans

shipment etc From Indonesia would have this result

10 F M C
TRANiS5HIPMEINT AGREEMENT BETWEEN S THAILAND AND U S 219

the conference members to enter into Agreement 9311 is not the same

eontract as Agreement 9311 It is a different contract because it in

volves different parties the former does not necessarily contain or

reflect theterms and conditions of thelatter and under the erroneous

theory that First Parties are not subject to section 15 would cover

only a portion ofthe geographic area covered by Agreement 9311

Itcovers a different geographic area if First Carriers are held not

to be subject to theAct for this reason First Carriers can be found

not to be subjectto theAct only ifthey are deemednot to be participat

ing in the transportation of property between the United States and

a

foreign country Such a decision would require out of consistency

in the use oflanguage that Second Carriers not be deemed to be par

ticipating in the transportation of property between the Thai ports

and Singapore in their transshipment operations Thus the agreement

among each set of carriers would be confined to that route in which

they are said to be participating under thistheory Regulation would

necessarily start atSingapore eventhough thecargo never touches the

soil there but instead moves from south Thailand in acontinuous line

ofdirect transport to theUnited States

Ifit were possible in some way to isolate the arrangement between

the one set of the carriersrather if a case should arise where this

were required or permitted the arrangement would undoubtedly

be subject to section 15 In answer to Question No 5 then if the ar

rangement between Second Carriers could be isolated in this way it

would appear to be approvable under section 15 The Examiner is not

sure just how far such a limited and partial inquiry would go but

surely if the entire Agreement 9311 is approvable as decided under

question 3 one of its antecedent parts standing alone could not be

found to create evils that would contravene the statute This arrange

ment among Second Carriers if there was one has not been sub

mitted for approval of course Under this initial decision it need

not be

Question No 6 Whether Agreement No 9311 represents the com

plete understanding between theparties

None of the parties contend that the document filed for approval

does not represent the complete understanding between the parties

A conference witness testified that Agreement 9311 represents the

complete understanding of the parties There is no evidence in the

record that it does not This findinghas reference to the writtenAgree

ment 9311 between the First Carriers on the one hand and the Second

Carriers on the other The record is wholly inadequate to form the

basis for a decision as to whether there was some other agreement or

10 F M C
220 FEDE RAL MARITIME COMMISSION

agreements among the shiplines that m ke up Second Carriers o

what the terms of it might have been This matter was raised afte

the record was closed However the Examiner does not feel that this

raises any problem since the agreement among the Second Carriers

to negotiate and to enter intoAgreement 9311 was merged into Agree

ment 9311 Question No 6 is answered in the affirmative

Question No 7 Whether Agreement No 9311 or the arrangement

between the Second Carriers to enter into Agreement No 9311

has been carried out in whole or part without approval of the

Commission as required by section 15

There is no evidence in the record thatAgreement 9311 has been car

ried out in any way The conference witness testified that it has not

Under this initial decision no otheragreement between or among these

parties requires section 15 approval Therefore there has been no

violation of the Act on this score However this Question No 7 tends

to point up another weakness in the theory that an agreement to

agree agreement to negotiate or a half agreement among the

conference members is subject to the Act These so called agreements

necessarily have been carried out beforeAgreement 9311 waspresented

to the Commission for approval Inthiscase it is apparentthat none o

the evils sought to be prohibited by section 15 could be perpetrated at

least until there was a meeting ofthe minds and a contract arrived a

between the two groups of carriers These groups submitted their

Agreement 9311 for approval when this occurred and this must be

taken as timely submission That agreement has not been carried out

4 SPECIAL CoMMENT

The question at the core of thisproceeding is whether First Carriers

fall within the definition of section 1 of the Act so that the agree

ment between that group and the group known as Second Carriers

requires approval under section 15 before it lawfully can be carried

out The Examiner is convinced that this straightforward issue must

be answered in the affirmative Since there is no evidence that the

agreement will run afoul of the standards of section 15 this disposes

of the proceeding

The Order of Investigation does not disclose reasons for the in

clusion of Questions No 4 and 5 having to do with some agreement

other than No 9311 Such questions could le asked as appropriately

in any section 15 proceeding involving more than one carrier or person

on one side or the other Ithas been pointed out that the record herein

is inadequate to provide a basis for a meaningful decision as to such

questions

10 F M C
TRANiSSHIPMEN I

AGREE MENT BETWEEN S THAILAND AND U S 221

It would also be a mistake to attempt to joust with the strawmen

built up by the parties in connection with the question whether First

Carriers are subject to section 15 e g

whether terminal operators in

the Thailand ports fall within section 15 These questions are not

involved here and they only cloud the issue but there may be inci

dental problems of a corollary nature in this general area that need

answers For example some kind of rule might be devised whereby the

run of the mill transshipment agreement would be deemed to pass

muster under theAct if no objection to itis voiced perhaps some so

called transshipment arrangements where the originating leg falls

entirely within the domestic area of one foreign country and that are

actually concerned with little more than lighterage there could be

excluded This entire area might be an appropriate subject for an

evidentiary rulemaking proceeding where once the Commission lays

Question No 1 above to rest all interested parties could be heard

a proper record of the facts developed and these peripheral issues

resolved In the instant proceeding however it would involve con

siderable risk for the decision to go beyond the real issue The Exam

iner has attempted to decide all the questions included in the Order

simply because the questions were asked by the Commission or its

staff Hewould not otherwise have gone into Questions 4and 5

5 ULTIMATE CONCLUSION

First Carriers and Second Carriers are common carriers by water

within the meaning of section 15 of the Act Agreement No 9311 a

transshipment agreement between these two groups is subject to

section 15

Agreement No 9311 has not been shown to be unjustly discrimi

natory or unfair as between the interests named in section 15 to

operate to the detriment of the commerce of the United States to

be contrary to the public interest or to be in violation of theAct The

agreement should therefore be approved as it will serve valid trans

portationpurposes

Signed E ROBERT SEAVER

Presiding Eraminer

WASHINGTON D C March31 1966

10 F M C
ApPENDIX A

SEC 15 That every common carrier by water or other person subject to ths

Act shall file immediately with the Commission a true copy or if oral a true

and complete memorandum of every agreement with another such carrier or

other person subject to thisAct ormodification orcancellation thereo to which

it may be a party or conform in whole or in part fixing or regulating transpor

tation rates or fares giving or receiving special rates accommodations or

other special privileges or advantages controlling regulating preventing or

destroying competition pooling or apportioning earnings losses or traffic

allotting ports or restricting or otherwise regulating the number and character

of sailings between ports limiting or regulating in any way the volume or

character of freight orpassenger traffic to be carried or in any mannerprovid

ing for an exclusive preferential or cooperative working arrangement The

term agreement in this section includes understandings conferences and

otherarrangements

The Commission shall by order after notice and hearing disapprove cancel

or modify any agreement or any modification or cancellation thereof whether

or not previously approved by it that it finds to be unjustly discriminatory or

unfair as between carriers shippers exporters importers or ports or between

exporters from the United States and their foreign competitors or to operate to

the detriment of the commerce of the United States or to be contrary to the

public interest or to be in violation of this Act and shall approve all other

agreements modifications or cancellations No such agreement shall be ap

proved nor shall continued approval be permitted for any agreement 1

between carriers notmembers of the same conference or conferences of carriers

serving different trades that would otherwise be naturally competitive unless

in the case of agreements between carriers each carrier or in the case of

agreements between conferences each conference retains the right of in

dependent action or 2 in respect to any conference agreement which fails to

provide reasonable and equal terms and conditions for admission and re

admission to conference membership of other qualified carriers 1n the trade

or fails to provide that any member may withdraw from membership upon

reasonablenotice without penalty forsuch withdrawal

The Commission shall disapprove any such agreement after notice and hearing

on a finding of inadequate policmg of the obligations under it or of failure or

refusal to adopt and maintain reasonable procedures for promptly and fairly

hearing and considering shippers requests and complaints

Any agreement and MY modification or cancellation of any agreement not

approved ordisapproved by theCommission shall be unlawful and agreements

modifications and cancellations shall be lawful only when and as long as

approved by the Commission before approval or after disapproval it shall be

unlawful to carry outin whole orinpart directly orindirectly any such agree

ment modification or cancellation except that tariff rates fares and charges

and classifications rules and regulations explanatory thereof including Changes

in special rates and charges covered by section 14b of this Act which do not in

222 10 F M C
TRANSSHIPMENT AGREEMENT BETWEEN S THAILAND AND U S 223

vQlve a change in the spread between such rates and charges and the rates and

charges applicable to noncQntract shippers agreed upon by approved cQnferences

and changes and amendments thereto ifQtherwise in accQrdance with law shall

be permitted to take effect withQut priQr apprQvai upon cOmpliance with the

publicatiQn and filing requirements Qf sectiQn 18 b hereof and with the pro

visions of any regulatiQns the CQmmissiQn may adQpt

Every agreement mQdificatiQn Qr cancellation lawful under this sectiQn or

permitted under sectian 1 sh llbe excepted fram the prQvisiOns Qf the Act

apprQved July 2 1890 entitled An Act to prQtect trade and CQmmerce against

unlawful restraints and mQnQpolies and amendmentS and Acts supplementary

theretO and the pravis O ns Of sectiQns 73 to 77 both inclusive Qf the Act ap

prOved August 27 1894 entitled An Act to reduce taxatiOn to provide revenue

for the GQvernment and fQr Qther purposes and amendments and Acts supple

mentary thereto

Whoever viOlates any prQvision Ofthis section Qr Qf sectiQn 14b shall be liable

tQ a penalty CJf nQt mare than IOQO far each d y such viQlatian cQntinues to be

recov red bY the United States ina civil ctiOIl

APPENDIX B

FEDERAL MARITIME COMMISSION

Washington D O

IN REPLY REFER TO

FOreign Trade

Circular Letter NO 641

TO All carriers subject to sectiOn15 andQr 18 b Ofthe Shipping Act 1916

Subject DelegatiOn Of authOrity by theFederal Maritime CO mmissiOn to approve

unprotested transshipment agreements

In an effOrt to expedite the handling Of

requests fOr apprOval O frOutine trans

shipment agreements under SectiOn 15 Qf the Shipping Act 1916 the Federal

Maritime CommissiQn has delegated authQrity to theDirectQr Bureau Qf FQreign

RegulatiQn to approve such agreements under SectiQn 15 when they cOntain

certain prQvisions and are fQund not incOnsistent with the standards fOr ap

proval containedinthat sectiOn

The DirectQr of the Bureau Qf FCreign RegulatiQn is delegated authority to

approve transshipment agreements which contain the fQllQwing prOvisions

1 Complete name Qf the parties entering into thearrangement and specifi

cally setting fQrth the portiQn O fthe trade that each party will cover in

cluding ports or areas of origin and destination cargo to be carried and

PQrts Qr ranges of ports at which cargO will be transshipped

2 ResponSibility of parties for establishing and filing the applicable

through rates rules regulations and Qther tariff matters

3 Provisions fQr the apportionment af the thraugh revenue and trans

shipment expenses stated in percentages Qr specific dQllar amQunts

4 When applicable pravisiOns for application and apportiQnment of Qther

expenses such as wharfage special handling lighterage tOnnage dues sur

charges and other such charges assessed by a governmental authority

10 F M C
224 FEDE RAL MARITIME OOMMISSION

5 When desired by theparties provisions for indemnification between the

parties for liabilities incurred from Joss damage delay or misdelivery of

goods

6 Provision for the termination of the agreement within a stated notice

period and

7 Provisions for the submission to the FederRil Maritime Commission for

approval of any modification or addition to the agreement

Toqualify foraction under this delegation of authority transshipment agree

ments should not contain any additional substSintive provisions or provisions

which create any eXclusive rights orwhiCh inany manner restrict competition

If carriers engaged in the foreign commerce of the United States desire to

have the processing of routine transshipment agreements under Section 15 of

the Shipping Act 1916 handled expeditiously under thisnewly delegated author

ity they should make every eirort to see that their filed transshipment agree

ments C6mply withtheabove criteria Any such agreements which fail to include

any of the require provisions or which include exclusive or anti competitive

provisions beyond those listed above will require exchanges of correspondence

between the stair and the parties andor final action by the Commission itself

rather than themore expeditious dling at the staff level

Sincerely yours

WILLIAM A STIGLER Director Bureau of ForeignReguZation

JULY 15 1964

10 F M C
FEDERAL l1ARITIME COl1l1ISSION

DOCKET No 100 7

PACIFIC COAST EUROPEAN CONFERENCE EXCLUSIVE PATRONAGE DUAL

RATE CONTRACT

SUPPLEMENTAL ORDER ON REMAND

Decided October O 1966

On March 27 1964 we issued our report entitled The Dual Rate

Cases 8 FMC 16 together with an order in Docket No 1007 which

approved a form of dual rate cont act to be used by the Pacific Coast

European Conference for the purpose of according contract rates

On February 3 1965 the US Court of Appeals for the Ninth Cir

cuit in PMifio OOa8t Ewropean Oonference v United States 350 F 2d

197 set aside our order and remanded the proceeding with directions

to allowrespondent to be heard as to certain provisions which we had

required in the contract The court concluded in its opinion that

opportunity must be afforded petitioners to participate in rule making in

such manner as the Commission may direct pursuant to S 4 b of the Adminis

trative Procedure Act such participation however to be limited to such clauses

of the proposed contract as were not in subject matter dealtwith in the hearings

inpetitioners adjudicatory dockets or in Docket 1111 350 F 2d at 206 1

The court added however that

as to that portion of thecontract inwhich petitioners have already partic

ipated the Commission is of course free fqrthwith to promulgate rules and

establish the substance of approved contracts as to petitioners 350 F 2d at 206

On June 24 1965 pursuant to the direction of the court of appeals

we issued a Notice of Proposed Rulemaking and an Order on Remand

in Docket No 1007 The Notice of Proposed Rulemaking allowed

opportunity for comment by interested parties on two contract provi

J

By order dated May 28 1963 we severed 5 issues common to all dual rate proceedings

from the issues In Docket No 1007 and other simllar proceedings The Commission directed

that these issues be consolidated for hearing before a panel of 5 examiners in Docket No

1111 Dual Rate Contracts 1963 Adjudicatlon of Major ISBues

10 F MC 225

299 843 0 68 16
226 FEDERAL MARITIME COMMISSION

sions which we found had not been noticed according to the requi

ments of the Administrative Procedure kct 2

The Order on Rema

reapproved for use by respondent a dual rate contract in the sam

form appended to our order in The Dual Rate Cases supra le

the two clauses which were the subject of our proposed rulemaki

notice

On July 26 1965 respondent filed a Petition for Reopening a

Reconsideration of Orders on Remand Respondent alleged there

that the Commission had misinterpreted its duty on remand 

that 1 the court had directed the Commission to forthwith prom

gate rules and the Commission had instead issued orders and 

contract clauses which had not been the subject of prior Commissi

proceedings had been included in the prescribed contracts In ord

to be as completely informed on the subject as possible the Comm

sion on FeJbruary 16 1966 invited the Conference to submit co

ments and to specify just what clauses in its opinion had not be

dealt with in either Docket No 1007 or Docket No 111l

In response to the Commission s invitation the respondent specif

three clauses which in its opinion were not dealt with according 

the la v conceding however that the clauses were dealt with in 

purely lay sense in Docket 1111

3

By order served on September 22 1966 the Commission den

respondent s petition to reopen and reconsider the Order on Rema

The Commission determined that all three clauses which the Conf

encecontends were not dealt with in the administrative proceedi

were indeed dealt with and according to law The Commissi

however concluded that final action on the matter would be held 

abeyance for 20 days to allow respondent the opportunity to file a

appropriate comments relative to the two clauses noticed in the Co

mission s Notice or Proposed Rulemaking of June 24 1965

Subsequently by telegram dated and received on October 11 19

Conference counsel informed the Commission that there were 

objections to clauses proposed in rulemaking of June 24 1965

THEREFORE IT IS ORDERED That the agreement submitted to the Co

mission hy the respondent in the above proc eding is hereby approv

by us in theform attached to this order the Commission having fou

for reasons stated in our report entered on 1arch 27 1964 t

2 The only response to our notice was aletter from U S Borax Chemical Corp w

favored the adoption of the 2 clauses set out in the notice The Conference submitte

comments

3The 3 clauses specified by respondent related to 1 the provision for exclusion 

cargo carried In merchant owned vessels where the term of the charter Is for 6 month

longer 2 those provisions dealing with termination for breach and 3 the prov

deallng with the opening of rates

10 F l

J 
PACIF1C COAST EUROPEIAN OONFERENOE ExOLUSLVEi 227

approval should be conditioned on the inclusion of certain modifica

tionsmade by the Commission and

IT IS FURTHER ORDERED That the terms of the agreement attached

hereto subject to our order of July 31 1964 making certain enumer

ated clauses opti nalrather than mandatory be used by therespondent

to the exclusion of any other terms and provisions for the purpose of

according contractrates

By the Commission

Signed THOMAS LISI

Secretary

10 F M C
APPENDIX A

APPROVED CONTRACT FORM

Docket 1007

PACIFIC COAST EUROPEAN CONFERENCE

417 Montgomery Street SanFrancisco 4 California

SHIPPER RATEAGREEMENT

THIS AGREEMENT made as of the day and date set forth below by and

between the SHIPPER named below and the several steamship lines named a

theend hereof hereinafter called theCARRIERS

WITNESSETH

1 a The Shipper undertakes to ship or cause to be shipped all of its ocea

shipments for which contract and non contract rates are offered from Pacifi

Coast ports of the States of Washington Oregon and California to ports o

call in the United Kingdom of Great Britain and Northern Ireland Ireland

the Scandinavian Peninsula Continental Europe including ports on and in the

Baltic and the Mediterranean Seas as well as theseas bordering thereon excep

the Black Sea and Morocco on vessels of the Carriers unless otherwise pro

vided inthisagreement

The term Shipper shall include the party signing this contract as shippe

and any of his parent subsidiary or other related companies or entities wh

may engage in the shipment of commodities in the trade covered by this con

tract and over whom he regularly exercises direction and working control a

distinguished from the possession of the power to exercise such direction an

control in relation to shipping matters whether the shipments aremade by o

in the name of the Shipper any such related company or entity or an agen

or shipping representative acting on their behalf The names of such relate

companies and entities all of whom shall have theunrestricted benefits of thi

contract and be fully bound thereby are listed at the end of this contract Th

party signing this contract as Shipper warrants and represents that the lis

is true and complete that he will promptly notify the Carriers ih writing o

any future changes in the list and that he has authority to enter into this con

tract on behalf of the said related companies and entities so listed

In agreeing to confine th e carriage of its their shipments to the vessels o

the Carriers the Shipper promises and declares that it is his their intent t

do so without evasion or subterfuge either directly or indirectly by any mean

including the use of intermediaries or persons firms or entities affiliated wit

or related to the Shipper

The Carriers agree that they will not provide contract rates to anyone n

bound by a shippers rate agreement with the Carriers The Shipper agrees tha

he will not obt3in contract rates for any person not entitled to them includin

related companies not bound by this contract by making shipments under th

contract on behalf of any such person The contract rates shown intheapplicab

tariff shall be less than the non contract rates by 15 of the non contract rate

b This Agreement excludes cargo of the Shipper which is loaded and carrie

in bulk without mark or count except liquid bulk cargoes other than chemica

228 10 F M C
PACIFIC COAST EUROPEAN CONFERENCE EXCLUSIVE 229

and petroleum products in less than full shipload lots or cargo carried in

merchant owned vessels or merchant chartered vessels where the term of the

charter isfor six months or longer

c 1 Ifthe Shipper has the legal right at the time of shipment to select

a

carrier for the shipment of any goods subject to this Agreement whether by

the expressed or implied terms of an agreement for the purchase sale or trans

fer of such goods shipment forbis own account operation Yf law or other vise

the Shipper shall select one or more of theCarriers

2 IfShipper s vendor or vendee has the legal right to select the carrier

and fails to exercise that right or otherwise permits Shipper to select the carrier

Shipper shall be deemed to have the legal right to select the carrier

3 It shall be deemed a breach of this Agreement if before the time of ship

ment the Shipper with the intent of avoiding his obligation hereunder divests

himself orwith thesame intent permits himself to be divested of the legal right

to select the carrier and theshipment is carried by a carrier not a party hereto

4 For the purposes of this Article the Shipper shall be deemed prima facie

to have the legal right at the time of shipment to select the carrier for any

shipment

a with respect to which the Shipper arranged or participated in the ar

rangements for ocean shipment or selected or participated in the selec

tion of the oceancarrier or

b with respect to which the Shipper s name appears on the bill of lading

orexport declaration as shipperor consignee

5 Nothing contained in this Agreement shall require the Shipper to refuse

to purchase sell or transfer any goodS on terms which vest the legal right to

select the carrier inany other person

d This agreement does notrequire the Shipper to divert shipments of goods

from natural transportation routes notserved by conference vessels where direct

carriage is available Provided however that where theCarriers provide service

between any two ports within the scope of this contract which constitute a

natural transportation route between the origin and destination of such ship

ment the Shipper shall be obligated to select the Carriers service A natural

transportation route is a traffic path reasonably warranted by economic criteria

such as costs time available facilities the nature of the shipment and any other

economic criteria appropriate in the circumstances Whenever Shipper intends

to assert his rights under thisarticle to use a carrier who is nota party hereto

and the port through which Shipper intends to ship or receive his goods is within

the scope of this Agreement Shipper shall first so notify the conference in ac

cordance withthe provisions of Article4 hereof

2 a If at any time the Shipper shall make any shipment or shipments in

violation of any provision of this Agreement the Shipper shall pay liquidated

damages to the Conference in lieu of actual damages which would be difficult

or impractical to determine Such liquidated damages shall be paid in the

amount of freight which the Shipper would have paid had such shipment or

shipments moved via a Conference Carrier computed at the contract rate ineffect

at the time of the shipment less the estimated cost of loading and unloading

which would have been incurred had the shipment been made on a Conference

vessel

b 1 Upon the failure of the Merchant to payor dispute his liability to

pay liquidated dalllages as herein speCified for breach of the contract within 30

days dterreceipt of notice by registered mail from the Conference that they are

10 F M C
230 FEDl RAL MARITIME COMMISSION

due and parable the Conference shaH suspend the Merchant s rights and oblig

tions under thecontract until he pays such damages

2 If within 30 lays after receipt of such notice the Merchant notifies t

Conference by registered mail that he disputes the claim the Conference sh

within 30 days thereafter proceed in accordance with Article 9 to adjudica

its claim fordamages and ifit does not do so said claim shall be forever barre

Ifthe adjudication is in the Conference s favor and the damages are not pa

within 30 days after the adjudication becomes final the Conference shall su

pend the Merchant s rights and obligations under the contract until he pays t

damages

3 No suspension shall abrogate any cause of action which shaH have arise

prior to the suspension

4 Payment of damages shall automatically terminate suspension

5 The Conference shall notify the Federal Maritime Commission of ea

suspension and of each termination of suspension within 10 days after the eve

c Except as hereinabove provided damages for breach of this Agreeme

shall be actual damages to be determined after breach in accordance with t

principles of contract law

d In order that theconference may investigate the facts as to any shipme

of the Shipper that has moved or that the Shipper or the conference believ

has moved via a nonconference carrier and upon written request clearly 

specifying the Shipper at his option 1 will furnish to the conference cha

man secretary or other dUly authorized conference representative or attorne

such information or copies of such documents which relate thereto and are 

his possession or reasonably available to him or 2 allow the foregoing perso

to examine such documents on the premises of the 8hipper where they arereg

larly kept Pricing data and similar information may be deleted from the doc

ments at the option of the Shipper and there shall be no disclosure of a

information in violation of section 20 of the Shipping Act 1916 as amended

e Within ten 10 days after the event in any transaction in which t

Merchant is a party and the legal right to select the carrier is vested in a perso

other than the Merchant and if he has knowledge that the shipment has bee

made via a nonconference carrier the Merchant shall notify the conference 

writing of this fact giving the names of tQe merchant and his customer th

commodity involved and the quantity thereof and the name of the nonconfe

ence carrier Provided however That where the activities of Merchants are 

extensive in area or the nature or volume of his sales makes it impracticab

to give notice within ten 10 days the Merchant shall give notice as prompt

as possible after the event

3 This agreement is notand shall notbe construed to be a contract of carriag

with the Carriers or anyone of them Shipments under this Agreement are su

ject to all the terms and conditions of thecurrent Conference Tariff on file wi

the Federal Maritime Commission and the respective Carrier s engagement not

permit dock receipt mate s receipt and bill of lading regularly in use by th

individual Carrier when shipments are tendered With respect to contracts 

carriage made between the Shipper and one of the Carriers noneof the other com

panies referred to as Carriers shaUbe liable jOintly or severally or in any wa

or to any extent

4 The Carriers severally agree to furnish from time to time when requeste

at the applicable contract rates and subject to the conditions hereafter state

space forthe aforesaid shipments of the Shipper to the discharging ports of th

10 F M C
PACIFIC COAST EUROPEAN CONFERENCE EXCLUSIVE 231

Carrier s provided that such space is available when the Shipper makes

application therefor In the event that none of the Carriers is able to furnish

reasonably prompt space for specific shipments when requested by the Shipper

the latter will be free to forward such shipments by any vessel other than those

of the Carriers without violating this Agreement provided that the Shipper

first notifies the Conference at San Francisco inwriting of its inability to obtain

space required and allows theConference forty eight hours after receipt of such

notice to confirm that the space is notavailable

5 For the purpose of giving Shipper notices of changes in rates the Shipper

may furnish the Conference a list of commodities in which the Shipper is inter

ested Ifrequested by the Shipper but not otherwise the Shipper shall there

after receive written notice of changes of rates applicable to said commodities

6 a The Carriers shall make no change in rates charges classifications

rules or regulations which results in an increase or decrease incost to the Ship

per except as provided by Section 18 b 2 of the Shipping Act 1916 and

the Rules of the Federal Maritime Commission Provided however the rates

of freight under this agreement are subject to increase from time to time and

the Carriers insofar as such increases are under the control of the Carriers

will give notice thereof not less than ninety 90 calendar days in advance of

the increases by publishing them ninety 90 calendar days in advance in the

Pacific Coast European Conference Tariff Should circumstances necessitate

increasing the rates by notice as aforesaid and should such increased rates be

not acceptable to the Shipper the Shipper may tender notice of termination of

this Agreement to become effective as of the effective date of the proposed

increase by giving written notice of such intention to the Conference within

thirty 30 calendar daYs after the date of notice as aforesaid of the pro

posed increase Further provided however that the Carriers may within thirty

30 calendar days subsequent to the expiration of the aforesaid thirty 30

calendar day period notify the Shipper inwriting that they elect to continue

this Agreement under the existing effective rates and in the event the Carriers

give such notice this Agreement shall remain in full force and effect as if the

proposed increase had never been made and the Shipper s notice of termination

had never been given

b The Conference shall offer to the Shipper a subscription to its tariffs at a

reasonably compensatory price however the Shipper shall be bound by all

notices accomplished as aforesaid without regard to whether it subscribes to

the Conference tariff Tariffs shall be open to the Shipper s

inspection at the

Conference offices and at each of the offices of theCarriers during regular business

hours

c The rates initially applicable under this Agreement shall be deemed to

have become effective with their original effective date through filing with the

Federal Maritime Commission rather than to have become effective with the

signing of this Agreement and notices of proposed rate increases which areout

standing at the time this contract becomes effective shall run trom the date

of publication in the tariff rather than from the date of this agreement

7 a In the event of war hostilities warlike operations embargoes block

ades regulations of any governmental authority pertaining thereto or any other

official interferences with commercial intercourse arising from the above con

ditions which affect the operations of any of the carriers in the trade covered

by this Agreement the carrier or carriers may suspend the effectiveness of this

Agreement with respect to the operations affected and shall notify the shipper

10 F M C
232 FEIDERAL MARITIME COMMISSION

of such suspension Upon cessation of any cause or causes of suspension s

forth in this article and invoked by any carrier or carriers said carrier 

carriers shall forthwith reassume its or their rights and obligations hereund

and notify the Shipper on fifteen 15 days written notice that its suspensio

is terminated

b In the event of any of the conditions enumerated in Article 7a the carri

or carriers may increase any rate or rates affected thereby in order to me

such conditions in lieu of suspension Such increase or increases shall be 

notless than 15 days written notice to the Shipper who may notify the carri

or carriers inwriting not less than 10 days before increases are to become effe

tive of its intention to suspend this Agreement insofar as such increase or i

creas s is or are concerned and insuch event the Agreement shall be suspend

as of the effective date of such increase or increases unless the carrier 

carriers shall give written notice that such increase or increases have be

rescinded and cancelled

c In the event of any extraordinary conditions not enumerated in Artic

7a which conditions may unduly impede obstruct or delay the obligations 

the carrier or carriers the carrier or carriers may increase any rate or rate

affected thereby in order to meet such conditions provided however that not

ing in this article shaH be construed to limit the provisions of Section 18 b 

the Shipping Act 1916 in regard to thenotice provisions of rate changes T

Shipper may not less than 10 days before increases are to become effectiv

notify the carrier or carriers that this agreement shall be suspended insof

as the increases are concerned as of the effective date of theincreases unle

thecarrier or carriers shall give notice that such increase or increases have be

rescinded and cancelled

8 a The Shipper and the Carriers recognize that mutual benefits arederiv

from freedom on the part of the Carriers to open rates where conditions in t

Trade require such action without thereby terminating the dual rate system 

applicable to the commodity involved therefore it is agreed that the Conferenc

to meet the demands of the Shipper and of the Trade may suspend the applicati

of the contract as to any commodity through the opening of the rate on su

commodity including opening subject to maximum or minimum rates p

vided that none of the Carriers during a period of ninety days after the da

when the opening of such rate becomes effective shall quote a rate in exce

of the Conference contract rate applicable to such commodity on the effecti

date of the opening of the rate and provided further that the rate shall n

thereafter be closed and the commodity returned to theapplication of the co

tract system on less than ninety days notice by the Carriers through the filin

of contract non contract rates intheirtariff

b Additional commodities may be placed on a contract rate basis from tim

to time

9 Should the Carriers during the period of this Agreement reduce rates 

any commodity on which contract rates areapplicable the Shipper shall be giv

the full benefit of such reduced rates during the periOd same remains ineffect

10 In case of dispute the Shipper and the Carrier s each agree to subm

the matter under dispute to arbitration each appointing an arbitrator and t

two so chosen shall select an umpire to which Arbitration Committee all da

requested in connection with the matter in dispute shall be made availab

Decision of two ormore members of the said Committee shall be binding on t

parties and the arbitration shall Je

made under and pursuant to the terms a

conditions of the United States Arbitration Act 9 u s a 1 et scq all of wh

10 F M C
PACIFIC COAST EUROPEAN CONFERENCE EXCLUSIVE 233

terms and conditions shall be binding upon the parties hereto Nothing herein

shall deprive the FederalMaritime Commission of its jurisdiction

11 Unless earlier terminated as herein provided this Agreement shall remain

in effect indefinitely provided however it may be terminated by either party

giving to the other ninety 90 days written notice of intention to terminate the

same

12 This agreement shall be construed in the light of the Shipping Act 1916

and the Rules and Regulations of the Federall1aritime Commission

13 This agreement may be amended from time to time with the permission

of the Federal Maritime Commission

SHIPPER Show full Corporate Company or

IndIvidual Name

Street Address

City PostalZone and State

By 1

Signature of Company Official and Title

Typed Name of Official and Title

Dated as of

For and on behalf of theCarriers shown on the reverse

hereof

By

SHIPPER is requested to fill in the required data in spaces indicated by

stars

CARRIERS

Referred to on face hereof List of Conference Members

10 F M C
FEDERAL MARITIME CO IMISSION

DOCKET No 1153

TRUCK AND LIGHTER LOADING AND UNLOADING PRAC nmS

AT NEW YORK HARBOR

Decided December 15 1966

Agreements between respondents and ocean carriers whereby revenue collecte

from Lightermen isrefunded to carriers found to exist

Agreements between respondents and ocean carriels whereby revenue collecte

from lightermen is refunded to carriers do not violate Article 2 of respond

ents conference agreement

Record is not adequate to determine whether agreements between responden

and ocean carriels whereby revenue collected from lightermen is refunde

to carriers aresubject to section 15 of theShipping Act

Mark P Schlefer John Ounningham Richard J Gage and Robe

J Nolan for respondents

Herbert Burstein SCl1nuel B Zi1ulm and A1 thwr Liberstein fo

intervenor Empire State Ilighway Transportation Association In

Arthur Liberstein and Oharles La1ulesman for intervenor Wm

Spencer Son Corporation

Ohristopher E Hec7c11wn for intervenors Harbor Carriers of t

Port of New York James Hughes Inc Henry Gillen Sons Lighte

age Inc McAllister Lighterage Line Inc and Petterson Lighterag

Towing Corporation

Thomas M Knebel for intervenor Middle Atlantic Conference

James M Hende1 son Douglas lV Binns and Jacob P Billig f

intervenors Port ofNew York Authority andExport Packers Asso

ation of New York Inc

D J Spee1 tfor intervenor Brooklyn Chamber ofCommerce

Leo A Larkin and Sa11 uel Mandell for intervenor The City 

New York

Thomas R Matias Robe1 t J Blackwell Roger A McShea a

Donald J Brunner as Hearing Counsel

234

10 F M C
TRiUCK AND LTGHTKR LOAIYING AND UNIJOADING AT NEW YORK 235

SUPPLE J1ENTAL REPORT

By THE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairmanj James V Day George H Hearn

oommi88ioners

On May 16 1966 we served ourreport in the above entitled docket

Our report culminated an extensive investigation into the practices

of the New York Terminal Conference respondent in regard to the

loading and unloading services its members provide for trucks and

lighters at the various terminals in the port of New York In our

report we condemned certain practices and tariff provisions of re

spondents as contrary to sections 16 and 17 of the Shipping Act

1916 Act

We reserved decision however on certain aspects of the investi

gUition This report disposes of those issues upon which decision was

previously reserved

FACTS

The issues upon which we deferred decision in our previous report

are raised by part 6 of the order of investigation They are 1

Whether agreements exist between respondent terminal operators

and the ocean carriers using respondent s facilities whereby part of

the revenues collected by respondents from lighter operators is re

funded to the carriers 2 whether such agreements are subject to

section 15 ofthe Act and 3 whether such agreements violate Article

21 of respondents conference agreement which prohibits refunds in

any mannerorhy any device

Intervenor Empire State Highway Transportation Association

Inc Empire sought to obtain certain terminal and stevedoring

contracts from respondents in an attempt to gain information con

cerning any such refund agreements Upon the request of Empire the

Examiner issued a

subpena to respondents which requested

all contracts and agreements with or between any steamship company

concerning or dealing in any way with terminal operators terminal service

and or the loading and unloading of trucks and lighters in New York Harbor

In response to the subpena respondents conference chairman

Richard J Gage produced seven stevedoring contracts Mr Gage

stated that he considered this to be compliance with the subpena The

Examiner however ruled that since there was evidence that as many

First Report Vol 9 FMC Reports p 505

1

The pertinent part of Article 2 of respondents conference agreement No 8005 states

and no rates or charges assessed or collected pursuant to such tariffs shall be

directly or indirectly refunded or remitted in whole or in part in any manner or by any

device

10 F M C
236 FEmEHAL MARITIME COMMISSION

as 500 such contracts were in existence this could not be deem

compliance with the subpena The Commission therefore sought fu

ther enforcement of the subpena in the District Court for the Distr

of Columbia On July 28 1965 the court dismissed the petition f

pnforcement without stated reasons

Subsequently on January 28 1966 upon request of Empire n

subpenas were issued to certain respondents requiring them to p

duce the same documents which had been requested in the original su

pena The new subpenas were issued to remedy certain alleged proc

dural defects in connection with the original subpena

Respondents failed to comply with the new subpenas Thereafte

on February 15 1966 a petition was filed in the U S Dictrict Co

for the Southern DistrictofNew York requesting enforcementthere

This proceeding subsequently was transferred to the U S Distr

Court for the District of Columbia The later court by order dat

April 29 1966 denied the petition while assuring the Commissio

that it would no be precluded from issuing new subpenas narrow

in scope and more specific with respect to the documents sought Em

pire however advised the Commission that it would not request t

issuance of any further s bpenas in this proceeding

Upon the conclusion of the subpena enforcement proceedings t

Chief Examiner ordered that a decision be reached on the remaini

issues and ordered that briefs be filed by all parties

Examiner A L Jordan subsequently issued his supplemental init

decision and the proceeding is now before us upon exceptions to h

decision

DISCUSSION

The Examiner concluded 1 There are agreements between 

spondents and the ocean carriers whereby certain revenues colleyt

from lighter operators are refunded to the carriers 2 such agre

ments are not subject to section 15 of the Act and 3 such agre

ments do not violate Article 2 of respondents conference agreeme

No party to this proceeding excepts to the Examiner s conclusio

1 and 3 vVe are also in agreement with the Examiner on the

twoconclusions and adopt them as our own

InterveJ orsEmpire and Middle Atlantic Conference however bo

except to the Examiner s conclusion that the refund agreements a

not subject to section 15 ofthe Act Alternative exceptions have be

offered by these parties They suggest first that the record in th

proceeding is inadequate for making a determination about the app

cability of section 15 to these refund agreeInents They suggest in th

alternative that if the Commission finds the record to be adequate 

10 F M C
TRUCK AND LIGHT H LOAD1NiG AND UNlJOADING AT NEW YORK 237

rcquires a finding that thc refund agreements are subject to section 15

Upon review we find the rccord to be inadequate to determine the

applicability of section 15 to these agreements We conclude that the

Examiner erred in determining th3Jt the agreements were not sub

ject to section 15

There has been some confusion among the parties and also by the

Examiner as to how many or what kind of contracts are in the record

and also as to which contract provisions are the subjeot of this

proceeding

Itshould be stressed that the order of investigation refers specifi

cally to agreements concerning refund of revenue collected from

lighter operators 2

Accordingly we are not here concerned with any

contract provisions which pertain to disposition of money collected

from truck operators

The Examiner refers to seven contracts which have been furnished

by respondents and quotes provisions from them It is true that re

spondent produced seven contracts in compliance with the subpena 3

However none of these seven contracts contains provisions for refund

to a carrier of money collected from lightermen In fact six of the

seven specifically provide for the collection and retention by th ter

minal operator of all revenue provided in connection with loading and

unloading lighters The seventh contract is not between a terminal

operator and a steamship line and therefore is not of the type under

investigation here 4

Even though none ofthe contracts produced in comp iance with the

subpena contain provision lor refund of lighter revenue nevertheless

the record does contain some evidence that such refund arrangements

exist At the prehearing conference Hearing Counsel requested re

pondents to produce all contract provisions which vary from the

normal provision whereby a

respondent retains the money collected

under the lighterage tariff Counsel for the respondents agreed to pro

vide copies of such contract provisions but declined to provide the

entire stevedoring contracts In response toHearing Counselsrequest

counsel for the respondents producedExhibit 24 This exhibit purports

to contain all existing provisions which provide for refund of lighter

revenue by any respondent Two such provisions are quoted in the

exhibit as follows

Income from handling lighters to be remitted to Steamship Line when collected

by Coil tractor terminal

aThe order reads Whether any agreements exist whereby part of the revenues

collected from lighter operators Is refunded to the carriers Emphasllil suppUed

8

These seven contracts were Introduced as Exhibits C 3 C4 C 5 C 12 C 13 C 14

and C 15

4 Exhibit C3 Is the contract which Is not of tbe type under Investigation

10 F M C
238 FElDEIRAL MARITIME COMMISSION

All monies received as reimbursement or compensation for the use of la

on lighters 4 it shall accrue to the Steamship Company and shall be refun

to the latter indue course

Another respondent has an arrangement by which ljghterage ta

revenues are refunded to the ocean carriers less 10 percent for bo

keeping expense This arrangement has not been reduced to a contr

provision however

It is also stated in this exhibit that these provisions are employ

because the stevedoring and terminal services in these instances 

performed by the terminal operator for the ocean carrier on a cost p

basis Remissions of lighter revenue are said to be made to the oc

carrier because the ocean carrier has paid the terminal operator 

this service in its cost plus arrangement and is believed tobe entit

to reimbursement The exhibit contains no other part of any contr

except the bare refund provisions above quoted Nowhere does 

record contain any contracts which include this type of provisi

vVe can conclude from the record that some stevedoring contracts 

exist between respondents and the ocean carriers whereby money c

lected from lighter operators is refunded to the ocean carriers We ha

not seen such contracts however Ve have seen the refund provisio

but have not seenthem in the context ofthe entire stevedoring contr

Ve are unable to determine the effect of such provisions until we 

the context in which they actually appear and are used To say o

way or another what competitiveeffeot such a provision has on a lig

erman or an ocean carrier would be pure conjecture at this po

The Examiner offered no reasons for his conclusion that the refu

agreements are not subject to section 15 We do not agree with t

conclusion The record will not support a findingthat the refund agr

ments are subject to section 15 Neither will the record support a fi

ing that the agreements are not subject to section 15 Accordingly 

can make no finding on thispoint

Additional justification exists for making no findings as to sect

15 applicability to the refund agreements In our previous report 

this same docket we found the provisions of respondents Lightera

Tariff No 2 which imposed direct transfer loading and unload

charges on lightermen to be contrary to section 17 ofthe Act We a

ordered respondents to delete this charge from their tariff The reven

collected pursuant to this tariff is the same revenue which is the subj

of the refund arrangements between respondents and the ocean c

riers Since respondents should no longer assess a charge against 

lightermen for this service it followE quite simply that responde

should not receivethis revenue from lightermen Consequently no r

10 F MC
TRUCK AND LIGHTER LOADING AND UNLOADING AT NEW YORK 239

enue can be refunded to the ocean carriers pursuant to the refund

agreements involved here Since no future refunds can be made pur

suant to these agreements the question of the applicability of section

15 to these agreements becomes moot

CONCLUSION

We agree with the Examiner s

findings that agreements exist be

tween respondents and steamship lines whereby certain revenues col

lected from lighter operators are to be refunded to the ocean carriers

and that such agreements do not violate Article 2 ofrespondents con

ference agreement Ve do not make a finding however on the question

ofthe applicability of section 15 to such agreements The Examiner s

finding that section 15 is not applicable is reversed

Since this report disposes ofall the remaining issues the proceeding

in DocketNo 1153 is hereby discontinued

SEAL Signed THojfAs LISI

Secretary

10 F M C
FEDERAL MARITI 1E COMMISSION

No 1166

AGREEMENTS No 6200 7 6200 8 AND 62008

UNITED STATES ATLANTIC GULF AuSTRALIA NEW ZEALAND

CONFERENCE

DecidedDecember 16 1966

A modification to the basic agreement of a conference operating outbound fro

U S Atlantic and Gulf ports to Australia New Zealand which provides 

the establishment of a separate Great akes section to establish rates fro

the Great Lakes upon the affirmative vote of three fourths of the memb

of the section is ap rovable pnder section 15 of the Shipping Act 1

because the arrangement will ffect administrative economies by bring

separate trades under a single conference administration

A provision in a modification to a conference lgreement establishing a separ

section to covertheGreat Lakes trade which requires that a rate establish

by the Great Lakes section lowerthan the comparable rate from the Atlan

and Gulf must be approved by a two thirds vote of the membrs of the 

ference is detr1mEmtai to the commerce of tlie United States and contra

to publiC interest because it is harmful to shippers using the Great Lak

and would handicap the gr owth and devel opment of theGreat Lakes trade

Elmer O Maddy Paul F McGuire and BaldvinEinarson for U

Atlantic Gulf Australia New Zealand Conference respondent

Jerome H Heckman Robert Tiernan and Vincent D Simmons f

the Dow Chemical Company and Dow Chemical International S A

interveners

James M Henderson Arthur L Winn Jr Samuel H Moerma

and J Raymond Olark for the Port of New York Authority a

North Atlantic Ports Association interveners with Sidney Go

stein General Counsel and F A Mulhern Attorney for the Port 

New York Authority

WarrenA Jackman Stuart B Bradley and DtmielK SchlOTt f

Federal Commerce and Navigation Company Limited and Feder

Commonwealth Line interveners

240 10 F M C
AGREEMENTS U S ATLANTIC GULF 241

Robert Jorgensen for International Association of Great Lakes

Ports intervener and Ronald Parizek for Port of Chicago a member

of said association

J Scot Provan and Robert J Blackwell Hearing Counsel

REPORT ON REMAND

By THE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairman James V Day and George H Hearn Oommis

sioners

This proceeding is before the Commission upon remand from the

U S Court of Appeals for the District of Columbia Circuit in U S

Atl 1Gulf Australia N Zea Oon v F Jf O 364 F 2d 696 D C Cir

June 30 1966 The Commission instituted this investigation on De

cember 23 1963 to determine whether three amendments to the

organic agreement of the U S Atlantic Gulf Australia New Zea

land Conference Agreement No 6200 should be approved under

section 15 ofthe ShippingAct 1916 46 U S C S 814 and whether the

conference should be permitted under section 14b of the Shipping Act

1916 46 U S C S 813 a to extend its dual rate contr ct system to

include shipments throughGreat Lakes ports

Agreement No 6200 covers the establishment of rat es charges and

practices for the carriage of eargo from Atlantic and Gulf ports of

the United States to ports in Australia New Zealand and certain

South Pacific Islands The amendments to the basic agreement would

1 Add Great Lakes and St Lawrence River ports of the United

States to the trade covered by the conference and extend the scope

of the dual rate contract to shipments from these ports Agreement

No 62008

par 1

2 Establish a separate Great Lakes section withinthe conference

to be composed ofmember lines operating regular services or member

lines demonstrating an intent to operate in the Great Lakes from

Great Lakes ports which would establish rates and conditions appli

cable to carriage from Great Lakes ports subject to the consent of

two thirds of all conference members to any rate lower than the cor

responding rate from any other conference area

1

Agreement No

6200 8 par 2 jand

3 Change the present requirement of unanimous assent to any

action under the agreement to two thirds assent except as otherwise

1

As orIginally submItted the consent of three fourths of the conference members was

requIred The Examiner however whlle approvIng this provision in principle saw no

reason for reqUiring a

greater majority to ratify a lower rate from the Lakes than for

ordinary conference action Accordingly his recommend approval was subject to the

conference s mOdifying their agreement to require approval only by a two thirds majority

The conference has iudlcated their usent to this modification

10 F M C
242 FEDERAL MARITIME COMMISSION

specifically provided and except that any modification of the basic

agreement would require unanimous consent Agreement No 6200 7

par 2

In our previous decision Agreement U S Atlantic Gulf AU8

tralia N Zealand Con 9 F M C 1 1965 we recognized that mem

bers of steamship conferences could effect certain administrative

economies by bringing eparate trade areas under a

single conference

administration thereby permitting the use of one office and one staf

where several might otherwise be required Thus the Commission

approved the establishment of a single administration the U S

Atlantic and Gulf Australia New Zealand Conference to handle

both the Atlantic and Gulf trade and the Great Lakes trade How

ever the Commission found that the trade from the Great Lakes to

Australia New Zealand was naturally competitive with the trad

from the Atlantic and Gulf and that section 15 required that th

rates from each area should be set independently In addition the

Commission refused to extend to the Great Lakes the dual rate con

tract applIcable at Atlantic and Gulf ports because the extension o

the contract system would be detrimental to the commerce of th

United States discriminatory against Great Lakes ports in favor o

Atlantic and Gulf ports and contrary to the public interest Th

Commission also refused to approve thethree fourths voting provision

within the Great Lakes section and substituted a two thirds vot

because the Atlantic and Gulf section of the conference utilizes a two

thirds vote and a three fourths vote since it appeared that only thre

carriers would be eligible for membership in the Great Lakes section

was tantamount to a veto in the hands of a

single member 2

Upon appeal respondents argued that the Commission erroneousl

interpreted section 15 Respondents argued that section 15 does no

require the right ofindependent action by carriers in the Great Lake

because the Atlantic and Gulf trade and the Great Lakes trade ar

supplementary not competitive Secondly the conference argued tha

the Commission failedto make proper findings as a basis for changin

the three fourths voting provision to two thirds in the Great Lake

section Finally the conference argued that the Commission erre

in disapproving Agreement No 6200 8 and in refusing to permit th

use of one dual rate contract in all trades covered by the conferenc

The Court of Appeals sustained the Commission s refusal to allo

the conference to extend the coverage of the established dual ra

system to the Great Lakes However the court held that with respe

2 As a result of these findIngs the CommIssion approved Agreement o 6200 7 par 

and disapproved Agreement No 62008 with permission to the conference to submit 

new amendment consistent with the CommIssIon s report for consideration

10 F M C
AGREEME TS U S ATLANTIC GULF 243

to the disapproval of the three fourths voting rule the Commission

failed to identify which of one or more of the statutory standards in

section 15 is transgressed by the voting rule The court therefore

remanded the issue to the Commission for reconsideration

Similarly the court had difficulty with the handling of the proposal

that the Atlantic and Gulf section ofthe conference retain the right to

veto any rate set by the Great Lakes section which was below the

Atlantic and Gulf rate Since the court had remanded the case with

respect to the voting requirements in the Great Lakes section it

decided also to remand the independent action issue to the Commis

sion to make more explicit findings and conclusions

In this report we shall reconsider the two remanded issues as

directed by the court

FACTS

In the past Great Lakes ports of the United States were a relatively

unimportant shipping area because of adverse conditions inherent

in the Lakesinadequate port facilities a short navigation season

and limited common carrier service Vith the opening of the St

Lawrence Seaway in 1959 however the Lakes became the fourth

sea coast of the United States Since the opening of the Seaway the

movement of cargo has steadily increased

At present many shippers move their goods from the Great Lakes

Nevertheless certain inherent disadvantages limit the ability ofLakes

ports to attract cargo Goods can move from Lakes ports only during

a 6 7 month sailing season Consequently when the Lakes are closed to

navigation all shippers regardless oftheir loyalty to or preference for

L kes ports must look to the Atlantic or Gulf for service In addi

tion transit time from Atlantic ports to Australia and New Zealand

varies depending upon the ports involved from 25 to 35 days while

transit time from Chicago to the first port in Australia is about 54 days

and from Detroit it is about 43 days And the length of voyages from

the Lakes may be increased by congestion in the lock Where speed

is essential therefore shippers must rely on the Atlantic orGulf

Despite these difficulties however Lakes ports have certain advan

tages overtheAtlantic and Gulf Shippers with plants on or near the

Lakes find that common carrier service at their doorstep saves the

cost ofinland transportation to Atlanticor Gulf ports a factor which

is a strong indu ement to ship from the Lakes despite the lengthy

transittime ridlimited service

At the close of the ec rdin this proceeding the conference had

s ix members Three f th A B Atlanttrafik American and 1us

tralian Steamship Line Joint Service A A and Port and ASo

10 F M C
244 FEDERAL MARITIME COMM1SSION

ciated Lines Jo nt Service Port would be eligible fQr membershi

in the proposed Great Lakes section according to the eligibility re

quir ments set forth in Agreement 6200 8 The individual tariffs file

by these lines for transportation of cargo from the Lakes to Australi

and New Zealand generally provide for a differential orarbitrary ove

conference rates applicable at Atlantic and Gulf ports of 5 00 pe

ton for ports in the Detroit Toledo range and 6 00 for ports in th

Chicago Milwaukee range Ifthe conference is extended to the Lake

the members will maintain as a general rule some differential ove

Atlantic and Gulf rates to compensate for theadditional steaming tim

and othercosts incurred in serving the Lakes

Of the three conference lines who have expressed an intent to serv

the Lakes only Atlanttrafik has actually made a

sailing During 196

it made 11 sailings out of the Great Lakes port of Detroit Of thes

8 also called at Chicago Atlanttrafik however has not attracted sui

cient cargo to fill its vessels from Lakes ports alone and it has foun

it necessary to call at Montreal other St Lawrence River ports an

U S AtlanticCoast ports

A A and Port collecti vely propose to provide monthly service from

the Lakes through a sailing arrangement pursuant to FMC Agreeme

No 7996 3 Inconjunction with thisproposed Lakes service A Aan

Portwill call at Montreal and Canadian ports east thereof but will no

call at U S Atlantic orGulf ports A A and Port would continu

their present separate service from U S Atlantic and Gulf ports

Although A A and Port have filed tariffs covering the Grea

Lakes and have solicited cargo they have not as yet secured carg

sufficient to justify a

sailing from the Lakes Most of their solicitatio

has been directed to automobile shippers who account for about 70 o

the revenue in the Great Lakes trade Competition for this cargo 

keen bet een the conference members and with independent carrier

as well

Carriers in the Lakes compete for the same types of cargoes a

carriers serving seaboard ports Indeed practically all commoditie

moving through the Lakes are also exporte through other ranges I

many instances shippers located at interior points may have a choic

ofmoving cargo from theLakes or seaboard Frequently a

shipper w

use both the Lakes and theAtlantic and Gulf during the navigatio

season Whiie some shippers require this flexibility other shippe

prefer to use the Lakes on a regular basis even though the rates from

this area might be higher than seaboard rates In fact some produc

move on y during the navigation season On the other hand som

shippers frorrrinterior points rely entirely on

the AtIantic and Gu

10 F M C
AGREEMENTS U S ATLANTIC GULF 245

to take advantage Qf the tter service and faster transit even though

overland transpprtation costs are higher In summary there is direct

competition between the Great Lakes and the Atlantic and Gulf from

the viewpoint of carriers shippers and ports B cause ofthis compe

tion cargo is diverted from one range to another to take advantage of

various savings in the cost of transportation including lower ocean

rates

DISCUSSION

We will consider initially the provision of Agreement No 6200 8

par 2 which provides that rates shall be established within the

Great Lakes section upon the affirmative vote of three fourths of the

nlemoors Qf that section In our previous decision we altered the

agreement to provide for a two thirds rather than a three fourths

vote The Court ofAppeals stated 364 F 2d at 699

The rationality of the Commission s disapproval of the voting requirement

within the Section is not however so readily apparent The Commission s dis

cussion of this matter is as sparing in detail as it is flat in conclusion After

noting that the record disclosed three carriers as potential members of the

Section the Commission observed that the requirement permits one carrier

to exercise a practical veto over the rate making decisions of that section

Ve cannot approve such an agreement This says no more to us than that

where unanimity is made the order of the day approval must be withheld In

particular the Commission does notidentify which one or more of the statutory

standards is transgressed by this provision and those standards are embedded

ina statute which says in terms thatthe Commis on shalldisapprove those agree

ments which conflict with the enumerated standards and shall approve all other

agreements modifications or cancellations

Our further review of the record discloses little evidence upon

which the Commission could find that a three fourths voting rule for

the Great Lakes section might be expected to perate in violation of

section 15 Under the circumstances we shall reverse our holding that

the voting requirement within the Great Lakes section be changed

Accordingly we approve the establishment of a Great Lakes section

to be governed by a three fourths voting rule In this connection it

should be noted that ifthe three fourths vote is later found to beunduly

restrictive of ordinary conference business the Commission may take

steps based upon actual experience rather than speculation to change

the voting rule

We consider now the provision of Agreement No 62008 par 2

which provides that in no case shall a rate on a given commodi y

from a Great Lakes port of the United States he less than the corr

sponding rate from other corife ence areas eiK pt with consent of

two thirds ofthe confe encemembers

10 F U O
246 FEDERAL MARITIME COMMI SSION

The Examiner approved the provision Considering the fact o

substantially higher cost of service from theLakes theExaminer coul

find no reasonable excuse for a rate froni the Lakes ever to be lowe

than the corresponding rate from the Atlantic and Gulf Ifit becam

necessary to meet competition in the Lakes the Examiner found n

reason to assume that the non Lakes members ofthe conference would

take a purely dog in the manger attitude to prevent a Lakes carrie

from meeting the competition In addition the Examiner reasone

if the Lakes rate were cut to meet foreign competition propriet

would suggest that the Atlantic and Gulf rate be cut to at least a

Iowa point in order to avoid putting a

shipper from the Lakes in 

preferred position with respect to its seaboard competition Finally

the Examiner found that any general sustained reduction of Lake

rates below Atlantic and Gulf levels would not only require subsidiza

tion ofLakes service by Atlantic and Gulf cargo but might well lea

to general instability ofrates

Thus the Examiner concluded that proper provision for over a

conference consent to Great Lakes rates fixed by the Great Lakes sec

tion at a point below Atlantic and Gulf rates is not unreasonable i

the circumstances and would not unjustly affect shippers ports o

carriers It does not substantially detract from the salutary effect o

the Great Lakes section provision and it would tend to maintain 

fair relation between Lakes rates and Atlantic and Gulf rates

The Commission in its earlier report recognized that certain admin

istrative economies can be effected by permitting separate trade area

to be brought under a

single conference administration and therefore

authorized the conference to extend its administration to the Grea

Lakes area lIowever the Commission disapproved the proposed con

ference amendment requiring the approval of two thirds of all con

ference members to set a rate for the Lakes section lower than tha

applicabletoAtlantic Gulfshipments

The Court of Appeals remanded this issue to the Commission fo

reconsideration because the Commission erroneously interpreted th

independent action language in section 15 to dictate automati

disapproval

Upon reconsideration we are convinced that the result reached i

our earlier decision was correct In reaffirming our previous holding

we find that the arrangement would be detrimental tothe commerce o

the Uilited States and contrary to the public interest and must there

fore be disapproved under section 15

As found above carriers in the Lakes compete for the sametypes o

cargoes as carriers serving seaboard ports shippers at inland point

10 F M C
AGREEMENTS U S ATLANTIC GULF 247

have an option during the navigation season of using either range

depending upon a balance ofmyriad transportation factors including

the level of rates Cargo is diverted from one range to the other in

response to the competitive factors

Witnesses for the conference recognized the existence ofcompetition

between thetwo trading areas One witness was opposed to the creation

of a

separate Great Lakes conference because this would create further

competition for us which we wish to avoid Another witness stated

that some shippers shipped both from Atlantic Gulf as well as from

Lakes ports which is further indication that competition between the

two areas exists

While a lower rate from the Lakes would seldom be established be

cause ofthe additional expenses in carrying cargo out ofthe Lakes the

Great Lakes carriers should non theless be free to set such rates The

free exercise of rate making initiative by Lakes carriers will as it has

in the past continue to promote and strengthen commerce moving

through the Lakes On the other hand the situation proposed by the

conference would be harmful to shippers who use or may wish to use

the Great Lakes by depriving them of freedom to negotiate rates with

carriers serving the Lakes and by ameliorating a carrier s incentive

to serve the Lakes Likewise the arrangement by its tendency to

encourage cargo to move overland to seaboard ports frustrates the

full utilization ofGreat Lakes ports

Therefore the provision which allows the existence of a veto power

in carriers serving only Atlantic and Gulf ports poses a threat to the

commerce of the United States and to public interest far greater

than any rate competition that may ensuebetween the twotrades Great

Lakes ports are developing into the fourth coast of this country and

have already obtained an important position in our commerce Any

rate control over common carrier operations in the Lakes by Atlantic

and Gulf carriers who are principally if not exclusively motivated

by the best interests of their own trades would handicap the growth

and development of the Lakes trade by encouraging cargo to move

overland to seaboard ports and by tending to discourage the establish

ment of better and more frequent service from the Great Lakes We

therefore find on this record that the agreement in this respect is detri

mental to the commerce of the United States and eontrary to the

public interest It therefore must be disapproved under section 15

The conference may submit a revised agreement not inconsistent

with the terms of this report for our consideration

By the Commission

Signed THOMAS LISI

Secretary

10 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 1187

REDUCED RATES ON MACHINERY AND TRACTORS FROM UNITED STATES

ATLANTIC PORTS TO PORTS IN PUERTO RICO

DOCKET No 1187 SUB 1

FURTHER REDUCTION IN RATES ON MACHINERY AND TRACTORS FROM

UNITED STATES PORTS TO PORTS IN PUERTO RICO

Decided January 1 1967

Authority reaffirmed to require that 1 in the absence of valid transportation

ratemaking factors militating against such result cargo move through

naturally tributary areas and 2 where it becomes necessary in the public

interest high value commodities move at rates high enough to enable the

carriage of essential low value commodities at rates lower than those at

which said essential commodities would be carried in consideration of the

usualtransportation factors alone

No need demonstrated to assert such authority on present state of record in

this proceeding

Carrier s present rates found to be lawful as just and reasonable

HOlfIter S Oarpenter and Edward T Oornell for respondent T IT

Trailer Ferry Inc C Gordon Anderson Trustee

John Mason and Edward M Shea for respondent South Atlantic

Caribbean Line Inc

J S Provan and Warren Price Jr for respondent Sea Land

Service Inc

Amy Scupi for respondent Amerioan Union Transport Inc

Joseph Hodgson Jr for respondent Seatrain Lines Inc

William L Marbury Donald MacLeay and HaroldE Mesirow for

intervener Maryland Port Authority

John T Rigby for intervener Commonwealth of Puerto Rico

Sidney Goldstein General Counsel F A Mulhern Attorney Arthur

L Winn Jr SamJUel L MOe111Uln J Raymond Olark and James M

Henderson for intervener Port of New York Authority

Donald J Brunner and Thomas Ohristensen Hearing Counsel

248 10 FY C
REDUCED RATES ON MA HJ N1E RY FROM UJS TO PUEtRfI ORICO 249

REPORT ON REMAND

By THE COMMISSION John Harllee Olwirman Ashton C Barrett

Vice Ohairman James V Day Oommissioner

PROCERDINGS

On May 10 1966 the Commission entered its Report and Order in

the captioned proceedings setting the minimum rates of 50 cents per

cubic foot on heavy machinery moving from United States North

Atlantic ports to Puerto Rico and 48 cents per cubic foot on the same

commodity moving from Uni ed States South Atlantic Florida

ports to Puerto Rico Italso approved but did not fix a 28 cents per

cubic foot rate on road scrapers a

very large form of roadbuilding

machinery for the two carriers from Florida ports South Atlantic

and Caribbean Lines Inc SACL and T 1T Trailer Ferry TMT

The basis for this decision was that the proposed rates of SACL and

TMT 37 cents per cubic foot or for that matter any rates lower than

48 cents per cubic foot on the subject commodity would be unjust and

unreasonable withinthe meaning of section 4 of the Intercoastal Ship

ping Act 1933 the 1933 Act because such rates would unreasonably

prejudice North Atlantic ports by drawing away in the absence of

transportation conditions justifying such diversion cargo nat

urally tributary to such ports in violation of section 16 First of the

Shipping Act 1916 Such determination wasmade irrespective of the

fact that the 37 cent rates had been shown to be fully compensatory

An additional ground for the fixing of a 48 cent minimum rate for the

South Atlantic carriers was that such a rate would enable the North

Atlantic carriers to move at lower rates commodities essential to the

welfare of the Commonwealth of Puerto Rico The minimum rates

of the North Atlantic carriers had been set at 50 cents per cubic foot

because rates below that level would not have been compensatory

On May 25 1966 TMT filed a Petition to Review the Commission s

decision with the Court of Appeals for the District of Columbia Cir

cuit The Commission moved the court to remand the proceeding to it

to reconsider the issues after the taking of further evidence and op

portunity to the parties to re3lrgue the legal issues involved The mo

tion requested the court to remand to enable the Commission to forth

with vacate the order under review and to reopen the proceeding tor

the taking of further evidence and for such further action as may be

appropriate in the circumstances On November 14 1966 the Court

otAppeals granted the Inotion conditioned upon the filing with it of

See voL 9 FMO Reports 465

10 F M C
250 FElDE RAL MARITLME COMMISSION

our report on the proceedings on remand within 60 days from the date

ofthe court s order

On November 23 1966 the Commission vacated its order and re

opened these proceedings and requested eviaence and argument on

the issues stated below Hearings were held before Examiner Herbert

K Greer on December 13 15 1966 after which with the concurrence

of all parties and pursuant to order ofthe Commission the record was

certified to the Commission for decision Briefs have been received

from all parties oral argument washeld

IssuEs FOR RESOLUTION

Tl1e Commission sought to resolve the following issues

1 Prejudice to New York resulting from diversion of traffic due

toTMT s rates

2 The Commission s authority to set rates which will enable New

York and Florida ports to each get the traffic olfiginating in territory

from which inland freight costs are lower to the respective ports

3 Whether highvalue commodities should take a high rate in order

to enable New York carriers to secure some of the high value com

modity traffic and thus to be able to carry goods essentials to the

needs of the Commonwealth ofPuerto Rico at a low rate and

4 Arethe lesser distances from Florida ports to Puerto Rican ports

than from North Atlantic ports to Puerto Rican ports a factor which

alone or in conjunction with the other matters ili thisproceeding w

rant a differential in rates between the aforementioned contmenta

ranges ofports to Puerto Rican ports on the commodities under inves

tigation and if so in whatamounts

DISCUSSION AND CONCLUSIONS

A The Legal 188Ue8

The above issues upon which evidence was received and argumen

made in thi remanded proceeding are primarily matters involving

the authority ofthis Commission to utilize certain principles in deter

mining thereasonableness ofrates and ifnecessary in fixing minimum

reasonable rates Basically t e Commission in its prior report in this

proceeding asserted its authority to insure that in the absence o

valid transportation ratemaking factors militating against such resu

including cost of transportation to carrier value to shipper and dis

tance between transit points as further discussed under issue 4

below cargo move thr ugh naturally tributary areas issue 2

supra Italso asserted its authority to insure that where it beGome

necessary in the publi interest high value commodities move at rate

lOFMC
REnUCIDD RATES ON MAOHINiERY FROM U S TO PUERTO RICO 251

high enough to enable the carriage of essential low value commodities

at rates lower than those at which the low value commodities would

be carried solely in consideration of the usual transportation factors

alone issue 3

The Commission is still of the opinion that it possesses such

authority The cases cited in ourprior report amply indicate the legal

bases for these positions 1TMT contests our power to increase rates

which are compensatory and the validity of our determination that it

unreasonably prejudices North Atlantic ports when it does not serve

such ports The New York and Ayrshire cases supra both indicate that

TMT is incorrect Ne j York does not depend uponthe 1940 amendment

to the Interstate Commerce Act as TMT asserts insofar as its appli

cation to the instant proceeding is concerned Perhaps prior to 1940

the Interstate Commerce Commission could not correct unlawful dis

criminations against regions but mere regions are not involved in

thisproceeding ports and POlt areas are As TMTconceded in its

petition to the court to review ourprior report

The purpose of Section 16 First was to prevent discrimdnation by the water

carriers between ports and port districts since those are the only points served

py suchwater lines

Furthermore theAyrshire case not dealt with at all by T 1T does not

evenmention the 1940 amendment

Hearing Counsel maintain that any reliance upon equalization

cases like Portland supra is wrongly placed as the instant proceeding

is not an equalization case and that TMT s minimum rate should be

fixed at 48 cents merely because a lower rate would be wasteful of

revenue Firstly we never contended that this proceeding was an

equalization case It does not involve as Hearing Counsel correctly

indicate varying rates for an identical service Nevertheless the policy

of promoting the movement of cargo through ports through which it

should normally move applies equally to equalization cases and the

instant case Moreover section 16 First of the Shipping Act 1916

doesn t

say only unreasonable prejudice which comes about as the

result of an equalization system is unlawful it says all unreasonable

prejudice is unlawful Insofar as a carrier utilizes rates to enable it

unreasonably to prejudice aport locality the carrier s conduct is

unlawful whether it is the result of an unlawful equalization or a

single unjustifiably low ocean rate which has the same effect

1

Issue 2 Oity oj Portland v Pacific Westbound 00nference 4 F M B 664 1955

United States v Illinois Oent RR 263 U S 515 1924 New York v United States

331 U S 284 1947 Ayrshire OOrp v United States 335 U S 573 1949

Issue 3 Reduced Rates On Autos N Atl Ooast to Puerto Rico 8 FM C 404 1965

B cE OR 00 v United States 345 U S 146 1953 Government of Guam v FederaZ Mari

time Oommission 329 F 2d 251 oD C Cir 1964

10 F M C
252 FEDERAL MARITIME COMMISSION

Secondly insofar as the wastefulness of revenue argument is

concerned we must disagree that such wastefulness alone is unlaw

fulWastefulness illthe context of thisproceeding and stripped of its

evil connotations merely means the failure to charge what the traffic

will bear We know of no principle which would require a carrier to

charge rates higher than he chose to charge unless 1 the carrier s

level of rates was so low that it or other carriers were 3Jbout to be

driven from a trade which would be left with inadequate service

Intercoastal Rate St1 UCure 2 U S MC 285 301 303 1940 o

2 the carrier s rates had an unlawful impact upon someone or thing

e g

another carrier shipper or port TMTs 37 cent rate was as

Hearing Counsel admit fully compensatory and as we noted in our

initialreport in this proceeding the 37 cent rate would not drive any

of the respondents out of the business Puerto Rican trade partic

ularly in light ofthe fact that the North Atlantic carriers had carried

only about 5 5 of the heavy machinery traffic Hence in order fo

a 48 cent minimum rate to be fixed for TMT it became necessary to

discover an unlawf l

impact that the 37 cent rate had The rate had

an unlawful impact upon the North Atlanticport locality The 37 cen

rate wasfound to be unlawful by the Commission in part because of a

effect the wastefulness of revenue achieved It was found unlawfu

not simply because TMT could have earned as much revenue at 48

cents as at 37 cents butbecause ithad earned this revenue at the 37 cen

rate by attracting cargo which should have moved through the por

ofNew York area

Vith regard to issue 4 what use may be made of distance in deter

mining rates is indicated in many cases including United States v

Illinois Cent R R supra Particularly distance has an importan

bearing where because of a shorter distance between transit points 

carrier incurslesser costs 2

B The FM ual Issues

The factual issues involved in this proceeding are prejudice to

the port of New York issue 1 and the necessity to invoke th

uthority which is the subject matter of the remaining three issues

audwhich authority we have affirmed above

The North Atlantic carriers have since our order of May 10 1966

maintained rates of50 cents per cubic foot on heavy machilleryand th

II SACVs Exhibit 22 excluded by the Examiner and not made the subject of an offe

of proof was utilized in portions of sAeLs brief and a motion to strike those pages 

the brief dealing with it was made at oral argument Exhibit 22 purported to show that th

lesser distance between the South Atla lltic and Puerto Rico visa vis the North Atlant

and Puerto Rico was responsible forlower costs of the South Atlantic carriers Because 

our disp06ition of the issues in this proceeding it becomes unnecessary for us to rule on th

motion to strike

10 F MC
RE DUCE RATES ON CHINIERY FROM U IS TO PUERff O RICO 253

South Atlantic carriers have maintained rates at 48 cents per cubic

foot Since our order was vacated on November 23 1966 they have

voluntarily maintained such rates

The result of the carryings for the first three quarters of 1966 indi

cates a movement of naturally tributary cargo back through the port

of New York a d there is no indication thrut the port is being unlaw

fully prejudiced at the present time

There additionally appears to be no need to act with respect to the

public interest at it rclates Ito the needs of the Puerto Rican economy

in this proceeding as the ComJ110nwealdl itself has pointed out As

the Commonwea lth highlights in this proceeding there is no justifica

tion for adjusting the machinery rates to insure the movement of low

value essential comlnodities inasmuch as the reopened record here

does not indicate the need of the North Atlanticcarriers for a revenue

cushion from the movement of heavy maCihinery or even thak such

cushion would increase their carriage of commodities essential to

Puerto Rico 3

TMT in its hrief to the Commission on remand states that

We feel sure that the lessons of the litigation have not been lost on the

carriers and that restraints will be exercised in the future

Itis to be hoped that T 1T is correct and that all parties in this pro

ceeding have learned the lessons to bc gaincd from lld the dangers

inherent in unreasonably low rates

There appearing no necessity on the currcnt record j n thisproceeding

to set minimum r3ltes and no evidence having been presented on te

mand which would indicate a contrary conclusion the rates currently

in effeot are found lawful as just and reasonable and the proceeding

i discontinued

SEPARATE OPINION OFCOMMISSIONER GEORGEH HEARN

Now that my colleagues have had another opportunity to review the

issues in this proceeding Iamdelighted to see that they agree with vhe

conclusion expressed in my original dissent 4

concerning the important

issue in this r3lte case to wit not setting a minimum rate or floor

Another look at the case indicates that this is the prime issue

To deny the shipping public the benefit of lower raJtes which the

carriers are willing and able to offer in my opinion is appalling

The reopening of this record does not Teflect any evidence w

hich

will allow me to make a determination on the other questions raised

It thus becomes unnecessary to deal further with Sea Land s Exhibit 3 excluded by

the Examiner which purported to indicate the extent to which Sea Land carried certain

low rated commodities

4 Commissioner Hearn s dissent vol 9 FMC Reports p 498

10 F M C
254 FEDERAL MARITIME COMMISSION

by the parties and the Commission consequently Ireiterate the reason

ing and position outlined in the dissent supra

SEAL Signed THOMAS LISI

Seoretary

10 F MC
FEDERAL MARITIME COMMISSION

No 6548

NORTH ATLANTIC PORTUGAL FREIGHT CONFERENCE

EXCLUSIVE PATRONAGE TRIPLE RATE SYSTEM AND CONTRACT

Proposed exclusive patronage triple rate system and contract found unjustly

discriminatory between shippers and exporters detrimental to the commerce

of the United States and contrary to the public interest the contract also

found unlawful because providing for more than one spread between ordinary

rates and rates charged contract shippers Application disapproved

Richard W Kurrus and James N Jacobifor respondents

Frarwis P Desmond and Don A Boyd for intervener E 1 du Pont

de Nemours and Company and Jerome Ii Heckman and Robert R

Tiernan for intervener The Dow Chemical Company and Dow Chemi

cal International S A

HowardA Levy E Duncan Ha lnner Jr andDonald J Brunner as

Hearing Counsel

INITIAL DECISION OF CHARLES E rfORGAN PRESIDING EXAMINER 1

This proceeding was instituted by the Commission pursuant to

seotions 14hand 22 of the Shipping Act 1916 as amended theAct

to determine whether

1 the proposed system and form of exclusive patronage triple rate

contract of the member lines of theNorth Atlantic Portugal Freight Conference

meet the requirements of Section 14b or will be detrimental to the commerce

of the United States contrary to the publiC interest or unjustly discriminatory

or unfair as between shippers exporters importers or ports or between

exporters from the United States and their foreign competitors and 2 the

application of the Conference for permission to institute the proposed system

should be granted pursuant to said Section 141 and if so 3 the proposed

form of exclusive patronage triple rate contract should be approved disap

proved or modified in accordance with the requirements of Section 14b and the

Commission s decision in The DuaZ Rate Oases

1

This decision became the decision of the Commission on January 17 1967 Rule 13 g

Rules of Practice and Procedure 46 CFR 502 227

255

10 F M C
256 FEDE RAL MARITIME COMMISSION

The respondents are the North Atlantic Portugal Freight Confer

ence and its six Inember lines namely American Export Isbrandtsen

Lines Inc Companhia de Navegacao Carregadores Acoreanos

Portuguese Line Fabre Lines Fresco Line and Italian Line

Service is provided from United Stakes North Atlantic Ports in the

Hampton Roads Maine range to ports in Portugal Italian Line

serves Portugal for the carriage of cargo only with its passenge

vessels The otherfive conference lines operate regularly in the trade

Collectively the conference lines offer about 9 sailings a month

E I du Pont de Nemours and Company du Pont and Dow

Chemical Company and Dow Chemical International S A Dow

interveners oppose the proposed exclusive patronage triple rate

system Hearing Counsel also oppose the proposed system The op

position of these parties is to the triple rate feature of the proposed

article 6 of the merchant s rate agreement The other clauses of the

proposed agreement conform generally with the clauses approved in

The Dual Rate Oases 8

F

M C 16 1964

Under the proposed article 6 freight rates would be set at three

levels The ordinary r3Jte that is the maxinlum or tariff rake would

be charged where neither the shipper northe consignee of a

shipmen

is a signer of the proposed agreement A rate based on a 7 5 percen

discount would he charged where either the shipper or the consignee

but not both is a

signer ofthe agreement A r3Jte based on a 15 percen

discount would be charged where both the shipper and the consignee

of a shipment are signers

There wasa steamship conference in thistrade prior to 1955 From

1955 to September 1964 there was no conference and the trade wa

beset by instability The present North Atlantic Portugal Freigh

Conference was approved by the Commission on July 22 1964 and

began functioning on or about September 15 1964 Priorto the forma

tion ofthe present conference in 1964 the rates were at low depressed

and unprofitable levels Many rates were noncompensatory The new

conference has been successful in sta blizing the trade The low rate

no longer exist and the rates as a Thole are back to the 1955 level o

higher The 1955 rates are considered to have been at a

reasonably

profitable level In Novemoer lOG5 there Va a general increase in

conference rates of 10 percent The conference presently has no open

rates other than on bulk commodities

The cargo in thistrade to Portugal amounts to wbout 30 000 long

tons yearly including manufactured items steel produots agricultura

products oils wax auto parts cosmetics cigarettes tobacco food

stuffs airplane parts and others Portugal has a population about the

same as thatof New YorkCity

10 F M C
NORTH A DLAN fliC PORrlUGAL l REl GH l CONFERENOE 257 

11here is nO regular nan canference competition in this trade vVithin

the past yearthere were said to be nan canference sa ilings to Partugal

an faur 01 five accasians The recard instances only three sailings but

with few details One lat af 550 tans af tabacca was shipped via

Jugolinja the Yugaslav Line at a rate abaut 10 percent belaw the

canference rlvte Butter of unspecified tonnage was shipped via Con

cordia 01 Casta lines There vas alsO a shipment of steel tannage not

specified which may have been a pal

taf the I

agus River praject This

project involved tihe movement of parts of a

prefabricated bridge

The respandents believe that there are about 35 steamship lines opelat

ing fram United States Atlantic parts to J1ecliterranean Sea ports

ar aperating thraughthe Mediterranean eastward which lines might

arrange to serve Partugal if the cargoes were attractive The respand

ents also believe that there is patential campetition fram cargO shipped

fram United States Narth Atlantic parts to the Eurapean gateway

parts af Antwerp Alnsterdam and Ratterdam 01 to the French

Atlantic parts afthe Bardeaux Dunkirk range with subsequent trans

shipment either averland 01 by water to Partugai but the recard

disclases nO specific instances of such canlpetitian Transshipment is

nat a unique feature af the Partuga trade

One fact abaut thistrade stands aut The trade has been stable since

the canference was refarmed in 1964 And this trade has been stable

natwithstanding the fact that the canference has had nO exclusive

patranage system that is the canference has nO dual rate system 01

comparable exclusive patranage system Althaugh the canference naw

seeks a triple rate system it has not tried a dual rate system

There are between 200 and 300 cansignees in Partugal receiving

cargO shipped in thistrade an a relatively regular basis The canference

lines have considered the adoptian af an exclusive patronage dual rate

system but believe that it would be extremely difficult to sign any

cansiderable number af consignees under a dual rate system

Althaugh most af the cargO maving in this trade is saId under FOB

01FAS terms with the cansignees having cantral af the rauting the

respandents believe that an exclusive patranage systelll which wauld

cantract anly with cansignees wauld nat be feasible Respandents

reasan is their view that a significant partian af the cargO is rauted by

shippers 01 thatthe routing cauld be contralled by the shippers citing

as examples theshipments of duPan tandDow

On the ather hand the respandents seemingly refute their awn can

tention af significant rauting by shippers by cantending alsO that

the expressed farebodings af Dow and du Pant relate nat to the use

af the praposed exclusivepatranage triplerate cantract in this trade

hut to its passible use in other trades Respandents refer to the facts

l

F M C
258 FEDEIRAL MARtIT fME COMMISSION

that Dow shipped 191 139 tons of cargo on conference vessels through

out the world in the year 1965 but with only 10 tons shipped in this

U S Atlantic Portugal trade and that du Pont annually exports

25 000 shipments which generate ocean freight revenues in excess o

10 000 000 but with only 700 tons weight or 770 tons freight

shipped in the U S Atlantic Portugal trade

Under the proposed triple rate contract the respondents expect to

sign about 75 percent of the regular consignees in Portugal Respond

ents believe that the shippers would have neither obligationnorreason

to solicit contract signers in Portugal inasmuch as such solicitation

would be done by the sales representatives of conference lines It is

intended that the conference office in New York City maintain a com

plete and current record of all contract signatories and that this

record would be available to interested inquirers The proposed exclu

sive patronage system and contract however contain no requirement

that the conference office maintain such a record and make it available

The proposed triple rate system is new and different from any such

system now in effect in our foreign commerce The suggestion of a

triple rate exclusive patronage system was not raised throughout the

legislative history of the Dual Rate Act section 14b Public Law

87 346 75 Stat 762 October 3 1961

The record contains no evidence that any specific shipper in the

United States supports the proposed triple rate exclusive patronage

system

The proposed triplerate system is designed by the conference to

curb or to eliminate nonconference competition By tradition in

Portugal and in many other European countries discounts to con

signees are consistent with usual business methods Respondents have

not tried to sign the consignees in Portugal to a dual rate contract so

they cannot be certain that the consignees would not sign this type of

contract

One ofthe underlying reasons assigned by the respondents for their

proposal and probably a principal reason is that the triple rate sys

tem is expected to eliminate legal questions that have arisen under

dual rate contract systems concerning the question of who has the

legal right to route the cargo particularly in connection with the

so called FOBjFAS loophole For example if a consignee were not

a signatory to a dual rate contract but had the right to route the cargo

he might route an FOB or FAS shipment by a nonconference carrier

even though theshipper was a contractsigner

Du Pont sells much of its cargo shipped to Portugal on elF terms

to its Portugal affiliate The remainder ofits cargo toPortugal is pur

chased by non affiliates on an FOBjFAS basis but carrier selection

10 F M C
NORTH ATlLANTIC PORTUGAL li REOClHT CONFERENCE 259

by these consignees occurs infrequently Dow s export sales wherever

possible are made on elF terms

The ability of du Pont and Dow to quote firm delivered prices will

be greatly impeded under the proposed triple rate system because of

the need of first ascertaining whether the Portuguese customer has

signed the conference contract In other words a signatory shipper in

the United States shipping cargo to an unsigned consignee will be

charged under the triple rate system the tariff rate less 7 5 percent

whereas another signatory shipper in the United States making a com

petitive shipment to a

signatory consignee will benefit by a 15 percent

discount from the tariff rate

In contrast a

signatory shipper under a dual rate system will know

exactly what his freight costs will be and more importantly he will

know what his shipper competitor s

freight costs will be One of the

principal purposes of a tariff is to make freight costs definite and

certain thereby avoiding unjust discrimination as between shippers

Adoption ofthe proposed triple rate contract system would produce

the result that a

shipper would have to know whetherthe consignee is

a contract signatory or the signatory shipper would have to quote three

prices on hisgoods namely 1 an FOB price 2 a elF price allow

ing 7 5 percent discoun on the ocean freight if the consignee is not a

signatory and 3 a elF price allowing 15 percent discount on the

ocean freight if the consignee is a

signatory

Doing business abroad is a difficult undertaking for United States

exporters and the quotation of three prices on the exported goods cer

tainly would not simplify the job and more likely would be an undue

burden on the exporter trying to develop the foreign commerce of the

United States

Under the circumstances particularly in view of the present sta

bility ofthe trade no need has been shown for an exclusive patronage

contract as proposed in this trade and in particular it is clearly evi

dent that the proposed triple rate contract will lead to uncertainty as

to the ocean freight charges which the contract shippers from the

United States will pay Therefore it is concluded and found that the

proposed exclusive patronage triple rate system will be unjustly dis

criminatory and unfair as between shippers and exporters from the

United States and that the proposed system because it will inhibit

export shipments will be detrimental to the commerce of the United

States and contrary to the public interest of encouraging exports and

fostering a favorable balance of trade Accordingly article 6 of the

proposed system the clause relating to triple rates is disapproved

and the application of the North Atlantic Portugal Freight Confer

10 F M C
260 FEIDElRAL MARITIME COMMISSION

ence for permission to institute an exclusive patronage triple rate sys

tem and contract is denied

Disapproval of the proposed triple rate system regardless of the

merits of the proposal as discussed above also appears to be required

as amatter of law under section 14b 7 ot theAct

The statute requires that the Commission shall approve any exclu

sive patronage contract and provided the contract 7

provides

for a spread between ordinary rates and rates charged contract shippers which

the Commission finds to be reasona1ble in all the circumstances butwhich sp1 eJd

shall in no event be more than 15 per centum of the ordinary rates

Emphasis supplied

The respondents proposal provides not for a spread but for two

lipreads Therefore the proposal is barred by section 14b 7 and it is

so concluded and found

Signed CHARLES E MORGAN

Presiding Ewaminer

10 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 66 52

IN THE ATTER OF Tln MODIFICATION OFAGREEMENT 5700 4

Decided January 30 1967

The Federal Maritime Commission is not required under the Administrative

Procedure Act or the Shipping Act to hold an evidentiary hearing where

no genuine or material issue of fact is presented

Under the 1961 amendment to section 15 of the Shipping Act and General Orders

7 and 9 promulgated thereunder conference agreements must contain ade

quate provisions for self policing and the admission withdrawal and ex

pUlsion of members

Agreement No 5700 4found to be in violation of section 15 and General Orders

7 and 9 and contrary to the public interest for failure to contain adequate

provisions for self policing and the admission withdrawal and expulsion of

members

The Oommission may intheexercise of its broad regulatory discretion modify a

conference agreement wbich after notice and bearing is found to be in

violation of theAct or contrary to thepublic interest by ordering theaddition

of provisions which will bring such agreement into compliance with the re

quirements of the Act

Oharle8 F Warren and John P Meade for New York Freight Bu

reau Hong I

ong

George F Galktnd and Amy 8cupi for States arine Lines

Donald J Brwnner andSamuel B N mirow Hearing Counsel

REPORT

By THE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairman George H Hearn 001nmissioner

This proceeding was instituted by our Notice of Intent to Modify

Agreement No 5700 4and Order to Show Cause Why Such Modifica

tions Should Not Be Incorporated IntoSaid Agreement This notice

advised the parties that the Commission intended either to modify

Agreement No 5700 4by adding provisions for self policing and ad

See decision of Oct 3 19G6 at p

165

10 F M C 261
262 FEDERAL MARITIME COMMISSION

mission withdrawal and expulsion of members or to withdraw ap

proval of the agreement for failure to contain such provisions

BACKGROUND FACTS

In order to understand this proceeding and the conclusions we hav

reached it is neccessary to relate in some detail the evellts which hav

gone before The New York Freight Bureau Hong n

ong hereafte

referred to as the Bureau is a

ratemaking conference serving th

inbound trade from Hong Kong to U S Atlantic and Gulf ports I

has been in existence since 1924 and since 1937 has operated under ap

proved Agreement 5700 Until 1964 this agreement remained substan

tially unchanged Such changes as were made dealt with the rotation

ofthe Chairmanship and minor changes in the geographic scope ofthe

agreement etc The modification approved on July 29 1960 wa

designated Agreement No 5700 4

The 1961 amendment to section 15 oftheShipping Act act ofOcto

ber 3 1961 Public Law 87 346 section 2 75 Stat 763 requires th

Commission after notlce and hearipg to disapprove cancel or mod

ify any agreement

which fails to provide reasonable and equal terms and conditions for ad

mission and readmission to conference membership of other qualified carrier

inthe trade or failsto provide that any member may withdraw from membership

upon reasonablenotice withoutpenalty forsuch withdrawal

and provides further that

The CommisS ion shalldisapprove any such agreement atiter notice and hearing

on a

finding of inadequate pollcing of the obligations under it or of failure o

refusal to adopt and maintain reasonable procedures fop promptly and fairl

hearing and considering shippers requests and complaints

Pursuant to this amendment and our general rulemaking authorit

under the Act we promulgated General Order 7 on August 22 196

28 F R 9257 and General Order 9 on May 1 1964 29 F R 5797

which deal respectively with self policingsystems and conference mem

bershi p requirements

General Order 7 states in pertinent part 46 C F R 528 2

Conference agree plents

III shall contain a provision describing the method o

system used by the parties in policing the obligations under the a reement includ

ing the procedure for handling complaints and the functions andautho ity o

every person having resPonsibility foradministering thesystein

Similarly General Order 9 46 CF R 523 specifieS that conference

agreenlents must contain certain provisions insuring reasonable stand

ards for the admission withdrawal and expulsion of members

In compliance with the amendment to section 15 and the General O

10 F M C
MiOD lFU CAT I OF AlGR EEMElNTl 5700 4 263

dels r ferred to above the Bureau filed two modifications to its basic

agreement for our approval under sootion 15 Agreeplent No 5700 6

1

filedop February 10 1964 provided for a system ofselfpolicing whiGh

gener Uy complied with the requirements of section 15 and General

Order 7 Agreement No 5700 7 filed on June 17 1964 contained

am epdments designed to bring their agreelnent within the require

mel1ts ofGeneral Order 9

These agreements were withdrawn before approval because after

analysis of them the staff suggested to counsel for the Bureau that cer

tain chtrifying and conforming changes be made and that the two

agreements be consolidated into one In response to this suggestion

counsel for the Bureau withdrew Agreements 5700 6 and 5700 7 and

filed a third agreement designated 5700 8 which contained the changes

suggested by the staff but sub tantially repeated the provisions of

5700 6 and q7QO 7

Ve issued an order ofconditional approval of Agreement 5700 8 in

whi h the Bureau members were given60 days within which to accept

the modificati ns Additional time for acceptan e was sought by the

Bureau and granted by us The Order of Conditional ApprovaJ as ex

tended was due to expire on May 2 1966 However on March 1 1966

States Marine Lines oneof the member lines of the conference sent

a t

legram to the Commission which sta d in pertinent part

States Marine opposes the agreelnent and hereby withdraws

same from Cmmission s consideration as far as States Marine is

eoncerned On 1ay 2 1966 the Order of Conditional Approval

expired py its own terms since no notification had been received by the

Commission ofacceptance by the Bureau nlembership

On May 13 1966 at the Bureau request ve approved Agreement

5700 8 in part ie as to those portions which were deemed nOn COI1 rO

versial because they had not been objected to by States Marine and

issued an order of investigation Docket 66 32 with respect to the

co ntro versia porti0ns

The original 9rder ofinvestigation set down three issues for determi

nation 1 The expansion of the conference trade area to include

the Great Lakes 2 the votIng prOrisions and 3 lnodification of

the self policing provisions to include provision for reference of cer

tain arbitration matters to the Federal Nlaritime Commission

On June 13 1966 States Marine filed a

petition to reconsider our

order of May 13 supra and after considering this petition and the

1

Agreement 5700 5 was a tonnage ceiling agreement of Ii temporary nature approved

on September 21 1962 It expired by its own terms on January 6 1966 See Our report in

Docket 6 29 Agreement No 9 Sl Hong Kong Tonnage Oe4ling Agreement served Sep

te llber 19 1966 10 F lLC 134 966

10 F M C
264 FEDERAL MARITIME COMMISSION

Bureau s

reply dated June 20 1966 we issued an amended order i

Docket 0632 in which the issues raised in States Marine s petition fo

reconsideration were also set down for investigation These amend

ments broadened the original order of investigation to include th

followingissues 1 Whether Agreement 57008 was properly befor

the Corrunission for its approval under section 15 2 if Agreemen

5700 8 was properly before the COITInlission for approval should th

approval granted in our order of May 13 1966 be continued 3 

Agreement 5700 8 was not properly before the Commission for ap

proval and the approval thereto was without force and effect wer

Agreements 5700 6 and 5700 7 properly withdrawn and if not wha

is their present status as representing true and complete agreemen

of the parties and 4 whether there is in existence a

presently ap

proved agreement to which all the parties signatory thereto now agre

and should approval thereto be continued or should the agreement b

nlodified disapproved orcanceled

Shortly before the time for hearings in Docket 66 32 the Bureau

feeling that several of the issues specified in the amended order of in

vestigation were pure questions of law involving no genuine issues o

material fact filed its petition for a

declaratory order for the sum

mary resolution of legal issues on September 9 1966 States Marin

Lines joined the Bureau in requesting declaratory relief in its repl

received on September 26 1966

Oral argument was waived and in our report issued on October 4

1966 we decided that

1 States Marine Lines telegram protest ofMarch 1 1966 filed prio

to approval of Agreement 5700 8 operated to withdraw Agreemen

No 5700 8 from the Corrunission s consideration

2 Our order of May 13 1966 which approved Agreement 5700

in partwas void ab initio since said agreement wasnot properly befor

the Commission for approval

3 Agreements 5700 6 and 5700 7 had been withdrawn prior t

approval

4 That Agreement 5700 4as approved on July 29 1960 is presentl

in fullforce and effect andconstitutes thebasic agreement under whic

the New YorJ c Freight Bureau Hong Kong is permitted to operate

5 Agreement 5700 4does not satisfy the requirements of section 1

and General Orders 7 and 9 promulgated thereunder in that it does no

contain a satisfactory system of self policing and does not meet th

required criteria for admission withdrawal andexpulsion ofmembers

6 Proceedings in Docket No 66 32 shouldbe discontinued

7 That the members of the New York Freight Bureau Hon

10 F M C
MODlF1ICAT10iN OF A1G REEME NTl 5700 4 265

Kong should be required to show cause why Agreement 5700

should not be modified by us or in the alternative why continued ap

proval of said agreement should not be withdrawn

On the same date we issued our Notice of Intent to Modify and

Order to Show Cause This notice and order repeated conclusions set

forth in our report or October 4 1966 supra and stated further

that

The members of the New York Freight Bureau liong Kong were able to agree

upon amendments to this conference agreement which would satisfy therequire

ments of General Orders 7 and 9 Agreements 5700 6apd 57007 received the

unanimous support of all the Bureau members

Ve pointed out that there are only two courses of action available

to the Commission The first is to withdraw approval of Agreement

5700 4and unless satisfactory selfpolicing and membership provi

sions are added to the agreement this course is clearly necessary un

der section 15

The second is for us tomodify Agreement 5700 4by adding amend

ments which would give the conference an adequ te system of self

policing and proper provisions for admission withdrawal and

expulsion

Accordingly the menlbers of the Bureau were notified

pursuant to ourauthority under secti n 15 of the Shipping Act 1916 that

we intend to modify Agreement 5700 4by deleting subparagraphs 10 b 10 c

lO d and 10 e and by adding new paragraphs 12 through 16 as set forth in

theAppendix A hereto

1Ve expressed the view thatthere was

no need for the taking of evidence in this proceeding since no

genuine issues of material fact are presented The modifications to

Agreement 5700 4which the Commission proposes to make as specified

in this notice have twice been considered and approved 2

by th

Commission as satisfying the requirements of section 15 and General

Orders 7 and 9

POSITIONS OF THE PARTIES

New York Freight Bureau Hong Kong

The Bureau supports generally theCommission s proposal to nlodify

Agreement 5700 4by adding selfpolicing and membership provi

sions It points out however that the proposed modifications depart

from the text ofAgreement 57008 in three particulars 1 By adding

the requirements of General Order 18 in proposed Article 12 2 by

I Agreements 57007 and 5700 8received informal staff approval and Agreement 5700 8

which was substantially similar in all material respects has twice been approved by the

Commission as to form

10 F M C
266 FEDERAL MARITIME COMMISSION

adding a 20 day notice provision in proposed Article 14 g

and 3

by revising the language of proposed Article 14 h

relating to mat

ters which may be referred to the Commission

The Bureau does not object to the 20 day notice provision Itargue

that General Order 18 exempts existing agreements ITom the reqllire

ment that a provision be incorporated for the filing of minutes I

contends that the language of Article 14 h should conform to tha

which was approved in the Commission s order of May 13 1966

Ina letter to theSecretary dated November 23 1966 followingora

argument counsel for the Bureau suggests that the term Secretary

be deleted whenever the term Chairman Secretary is used in th

proposed modifications He notes States Marine s objection to th

language Itis hereby agreed and declared by and between the partie

hereto that and advises that the Bureau has no objection to th

deletion of this or similar phrases formed in the text of the

modjfications

States Marine Lines

StatesMarine Lines contends

1 That the Commission may not disapprove cancel or modify

an agreement except after notice and hearing and upon findings made

on the basis of such hearing in accordance with the Administrative

Procedure Act

2 That even where aH procedural directions are followed the Com

mission s power to modify an agreement is merely the power to

disapprove it where the parties refuse to modify it in required

particulars

3 That the proclamation of passiv ty in Docket 6629 is contrary

to the present assertion of authority to rewrite carrier agreements to

which theparties refuse concurrence

4 That the use or such language as It is hereby agreed in

the proposed modifications is an anomaly and a contradiction in tenns

where one ofthe parties does not in fact agree

5 That the law does not require a self policing clause in the confer

ence agreement

6 That the law permits only disapproval of an agreement afte

notice and hearing ona finding or inadequate policing of the obliga

tions under it

7 That if a self policing formula is required in all conference

agreements by the self policingprovision of section 15 then a

shippers

requests and complaints formula is also required

8 That the selfpolicing system proposed by the Commission does

not meet the procedural requirements ofGeneral Order 7 orthe funda

mental requirements offajrness

10 F M C
MODIFlCATIQN QiF AGREEME rrr 570O 4 267

9 That this proceeding should be suspended pending the outcome of

the appeal from Docket 1095 now pending in th Court Qf Appeals

States Marine LineS indic tes its willingness to negotiate with the

other members of the Bureau or in the altern3tive suggests that th

Commission inaugurate arulemaking proceeding with a view to work

out a self policing Iormula applicable to all conferences

Hearing 0ounsel

Hea ring Counsel support the Commission s proposal to modify

Agreement 5700 4They contend that

1 A section 15 agreement is not a mere private agreement but a

public contract impressed with the public interest and permitted to

exist only so long as it serves that interest

2 The plain language ofsection 15 allows the Commission to modify

an agreement without further reference to the parties in an appro

priate case provided that notice and opportunity for a hearing is

afforded the parties

3 The provision in amended section 15 calling for the disapproval

of any agreement upon a finding of inadequate policingofthe obliga

tions under it presupposes that some system for self policing is in

existence

4 In order to qualify for continued section 15 approval a confer

ence agreement must contain a formula by which self policing of the

obligations arising under the agreement will be accomplished

5 The power to modify an agreement is not inconsistent with the

so called proclamation of passivity Docket 66 29 3

since the deci

sion in that case was that there was no agreement before the Commis

sion for approval whereas in the instant case there is an approved

agreement in existence albeita patently defective one

6 Hearing Counsel distinguish the requirements for aself policing

system from provisions for entertaining shippers requests and com

plaints by pointing out that the New York Freight Bureau Hong

Kong is meeting this requirement by setting forth such procedures

as partofits tariff as filedwith the Commission

7 Hearing Counsel oppose States Marlne s contention that the Com

mission is attempting to modify Agreement 5700 4 without a hear

ing They note that States Marine refused to avail itself ofthe oppor

tunity afforded to file affidavits of fact which might esta rblish some

basis for such a

request

8 Hearing Counsel join with the Bureau in suggesting that Article

12 requiring the filing of minutes be deleted from the proposed

amendments

8

Hong Kong Tonnage Oeiling Agreement No 94S1 served April 28 1966

10 FM O
268 FEDERAL MARITIME COMMISSION

DISCUSSION

There are only three fundamental questions presented in this case

1 Whether the Commission has the legal authority after notice an

hearing to modify a section 15 agreement by adding provisions with

out further reference to the parties to the agreement to obtain the

assent

2 Whether the procedural requirements of notice anq hearing

have been met

3 Whether the modifications to the agreement ordered herein ar

within thesound discretion ofthe Commission

The Oommissions Legal Autlwrity to Afodify

States Marine Lines is correct when itpointed out that the Commis

sion has never previously used its statutory authority to modify a

agreement directly The usual practice has been and is to issue a

order of conditional approval i e the changes are referred back to th

conference membership for acceptance and upon the filing of evidenc

of such acceptance the modifications proposed by the Commissio

stand approved

Nevertheless the la nguage of section 15 which provides in pertinen

part

The Commission shall by order after notice and hearing disapprove canc

or modify any agreement or any modification or cancellation thereof that it find

to be contrary to the public interest or to be in violation of thisAct I

Emphasis added

is in our view clear and unequivocal There is nothing to construe A

the Court said in Oaminetti v U S 242 U S 470 485 1916

Where the language is plain and admits of no more than one meaning the dut

of interpretation does notarise and the rules which are to aid doubtful meanin

need no discussion

States Marine Lines suggests that because the Commission has neve

before modified an agreement directly it is somehow foreclosed from

doing so at this time Ve know of no rule of statutory construotion

which would operate to repeal a

portion of a

statute simply becaus

of nonuse and States 1arine has citednone

Moreover as early as 1933 the Commission s predecessor expresse

the view that it could under the authority of section 15 order amodi

fication 4of a conference agreement

Upon a

showing I

that I modification of any section 15 agreement wi

remove a detriment to the commerce of the United States the Commis

sion will of course take proper correctiveaction

In Re Rates in Oanadian OU1 rency 1 U S S B 264 281 1933

10 F M C
MlODI FJCAT ON OF AGREEM ElNIT 5700 4 269

Similarly in our report in Docket 1095 5

we repeated the view that

Our authority under section 15 of theAct is not simply thesterile power

to accept or reject that which theparties to agreements file with us Section 15

expressly grants us the power to modify agreements filed withus

States Marine Lines argues that we cannot modify sua sponte an

agreement without further reference to the parties for approval viz a

conditional approval because such a modification does not comport

with the definition of the word agreement This argument verges on

frivolous Of course such an instrument is no longer the agreement

ofall ofthe members

We do not pretend that the agreement 5700 as modified by us is

acceptable to all ofthe parties to the agreement On the contrary our

earlier report in this case makes it clear that we understand States

Marine s position completely

States Marine Lines is quite correct when it contends that when the

Federal Maritime Commission modifies a section 15 agreement by

direct action it ceases to be an agreement of the parties Itbecomes

a modified agreement In our opinion Congress vested in the Commis

sion this authority to modify in order to meet the kind of situation

which is here presented

As we stated in InRe Pacific OoastEwnopean Oonf e

Respondents conference agreement is not some sacrosanct private arrangement

but a public contract impressed with a public interest and permitted to exist

only so long as it serves that interest

The District ofColumbia Court ofAppeals reinforced thisposition

in Swift and 00 v F M0

7

saying that a section 15 agreement

t

is not simply a private contract between private parties the intent

oftheparties is only one relevant factor and the Ccmmission

not only can but must weigh such considerations as the effect of the

interpretation on commerce and the public Moreover the agreement

existed legally only because approved by the Commission

The Commission must be givenreasonable leeway in delineat

ing the scope of the agreement and therefore the extent of its prior

approval

Respondent States Marine Lines reliance upon our report in Docket

No 6629 and the so called doctrine of passivity is misplaced In

that case we decided that when one of the original parties to a new

agreement filed for approval under section 15 withdraws from the

SAgr No 160 21 T P F OJ aft dAgr No 3103 17 JjataA 1 and Gul Fri Oo

Dkt 1095 9 F M C 355

07 F M C 27 87 1961 See also S atea Marine LIne v Tf fMIIIPaclfto Freight Oonl

7 F M C 257 1962 andl Mediterranean POOZ8 InvesUgation Docket 1212 9 F M C 264

7306 F 2d 277 281 1962

10 F M C
270 iEDERAL MARITIME COMMISSION

agreement prior to approval that act destroys the subject matter o

the Commission s jurisdiction In other words we cannot create o

impose an agreement where none existed before

However where as here there is in existence an approved confe

ence agreement the Commission s role is not and cannot be passive fo

we have an affirmative obligation under the Shipping Act to maintai

a

continuing surveillance over every approved agreement and th

111anner in which such agreements are implemented

Several important distinctions must be made between Docket No

66 29 and the instantcase

In Docket No 66 29 we held that the so called agreement unde

consideration was a new agreement separate and distinct from th

basic conference agreement It vas neither an amendment to nor 

modification of Agreement No 5700 vVe decided therefore that befor

we could even consider that instrument as an agreement within th

meaning of section 15 of the Act there would have to be a showing tha

there wasa continuing assent of all of the purported parties signator

to the agreement Moreover the scheme involved in the ceiling tonnag

agreeme twas a voluntary undertaking and was not required hy th

Act or any of the Commission s General Orders

Before it receives section 15 approval a conference agreement is n

more than a

contingent agreement depending for its vitality upon th

happening of a condition subsequent i e Commission approval

However once a conference agreement is approved the conference

assumes a quasi public character Itis more than a mere private asso

ciation A conference is accorded a

privileged status under the law

It is permitted to do things in concert which absent approval lon

regulation by the Federal Maritime Commission would be in violatio

of theShipping Act and in most instances the antitrust laws as wel

It is true that where a conference with a unanimous voting rule

flIes an amendment to its basic agreement with us for approval an

one of the members withdraws from the amendment prior to approva

the a rnendment no longer may be considered by us as a conference

yenerated 17wdification This is precisely the position we took in ou

earlier report in this case In many cases this would end the matter

IIowever the instant case presents a different problem The modif

cations originally proposed by the conference membership and late

rescinded by the unilateral fiatof one ofits members were not optiona

kinds of changes which a conference could adopt orignore at will bu

r lther Tete ili compliance with the clear mandate ofCongress and ou

General Order s 1 and 9

Vhere a conference is a going concern est 1blish ng rates for it

members operating under dual rate contract privileges and oth rwis

10 F M C
MODI F1ICATION OF A1GREEMIDN l 5700 4 271

regulating the terms and conditions for the movement of ocean freight

in a particular trade we have a clear duty under the Shipping Act to

exercise our regulatory authority to the full extent indicated by the

Jlct

The Show 0C1IU8e Procedwres

In our notice and order to show cause we apprised the parties of

ourtentative view thatAgreement No 5700 4 was in violation of sec

tion 15 and General Orders 7 and 9 and notified them of our intent

either to modify the agreement by adding certain provisions which

were appended to the notice or to 1oithdra1o approval of the agree

ment altogether

We expressed the opinion that there were no genuine issues of

material fact and therefore no need for an evidentiary hearing How

ever the door wasleftopen when we said

Should any of the Parties to this lproceeding consider that there are disputed

issues of fact which are relevant to this proceeding such facts shall be specified

with particularity by means of affidavits setting

forth such facts together with

a statement of theirrelevance to theissues in question Should any other parties

dispute these facts by a similar affidavit thedisputed issues of fact if relevant

willbe set down foran evidentiary hearing

Since the parties filed only memoranda of law hut no affidavits ofl

fact as allowed by the language in the order to show cause we hold

that there is no reason for an evidentiary hearing For example there

is no question of fact as to the deficiency of Agreement 57004 with

respect to provisions for self policing and membership The agreement

as it stands simply contains no such provisions

States Marine Lines argues that the Commission is attempting to

modify Agreement 5700 4 without a hearing They demand an

evidentiary hearing whileat the same time refusingto avail themselves

of the opportunity afforded them to file affidavits of fact which might

establish some basis for such a request

States Marine was afforded a hearing as required by the Shipping

Act and the Administrative Procedure Act through this show cause

proceeding Itis well established that

the Supreme Court has defined full hearings as one in which ample

opportunity is afforded to all parties to make by evidence and argument a

showing fairly adequate to establish the propriety or impropriety from the

standpoint of justice and law of the step asked to be taken Vhere no

genuine or material issue of fact is presented the court or administrative body

ay pass upon the issues of law after affording the parties the right of

argument 8

8

Producers Livestock Mqrkefing Assoc v US 241 F 2d 192 10th err 1957 affd

346 U S 282 1958 See also American Airlines Inc v OA B 359 F 2d 624 D C Cir

1966 at

pp 632 633

10 F M C
272 FEDERAL MARITIME OOM MIS SION

Respondents have been given ample opportunity to present an

genuine or material issue of fact and were granted oral argumen

The parties procedural rights to notice and hearing have be

scrupulously observed

Self Policing Procedures

In promulgating General Order 7 on August 22 1963 28 F R 9257

we said in part

Some comments also challenged the Commission s authority to require t

inclusion of self policing as acondition precedent to approval or continu

approval of an agreement under section 15 As amended by section 2 of Pub

Law 87346 75 Stat 763 4 section 15 provides The Commission shall d

approve any such agreement after notice and hearing on a finding of inadequa

policing of the obligations under it This provision in demanding t

adequate policing of the obligations under the agreement clearly presupposes t

establishment of some precedure for that purpose And the establishment of t

self policing procedure is necessarily predicated upon an agreement between t

parties Ithas been the consistent position of theCommission that such an agre

ment is a modification which is within the purview of section 15 and this is no

expressly fortified by the statute itself Under section 15 a true and comple

copy orif oral a true and complete memorandum of all agreements within th

purview of the section must be filed with and approved by the Commission A

agreement which does not contain the procedure for self policing which ha

been adopted by the parties is an incomplete agreement within the meaning 

section 15 Conversely it would seem to be obvious that if the parties make n

provision for self policing they are ignoring the statute In either case the

section 15 agreement would have to be disapproved unless the situation we

corrected

Earlier we held in States Marine Lines v Trans Pacific Freig

Oonference 7 F MC 257 1962 affirmed Trans Pacific Freight Oo

ference of Japan v F MO et al 314 F 2d 928 9th Cir 1963 that 

system of self policing is anecessary part of a basic conference agre

ment since it vitally affects the interrelationships of the parties

Thus States Marine s position that the law does not require 

formula for self policing to be included in the basic agreement 

without merit

The self policing requirements of section 15 consists of two parts

1 adequate procedures must be set forth in the basic conferenc

agreement whereby the machinery for self policingis established an

2 there must be an implementation of that machinery in practic

By modifying respondents agreement as proposed in theorder to sho

cause we are furnishing only the first element ofthis requirement i

providing of the necessary machinery The implementation of th

machinery will be up to the conference and if it is not accomplishe

in good faith then the requirements of the 1961 amendment to sectio

10 F MC
MlODlFJCATIQN OF AlGREEMEtNT 7e04 273

15 clearly dictate withdrawal of approval of the conference agreement

The approval ofthe agreement as modified will not preclude a subse

quent finding of inadequate policing of the obligations under it

However unless the agreement is amended so as to include a system

of self policing there is no possibility that the conference can legally

police itself

States 1arine further argues that requiring of self policing pro

visions in all section 15 agreements vithout requiring such agree

ments to have provisions for the consideration of shippers requests

and complaints is inconsistent under the language of amended

section 15

The requirement that conferences adopt reasonable procedures for

promptly and fairly hearing and considering shippers requests and

complaints is procedural only and unlike a self policing system does

not effect a substantive change in the scope of the conference agree

ment Sueh procedures neither ereate nor destroy rights They merely

prescribe how such rights as already exist may be exercised Aceord

ingly such provisions are normally contained in the conference tariff

sehedules Put another way a conference can adopt and implement

ldequate procedures for dealing with shippers complaints and re

quests without obtaining prior approval under section 15 Self policing

ploeedures however require our specific approval

The lI odified Agreement

A eonference agreement must contain satisfactory self policing and

membership provisions and since Agreement 5700 4does not meet

those requirements we were faced with making a ehoiee between can

cellation or direct modification Inthe circumstances ofthis ease either

course could be justified However on balance we believe that the

public interestwill be better served by modifying the conference agree

ment as ordered herein thereby making its continued approval pos

sible subject of eourse to eontinue surveillanee as to the manner in

which the self policing and other provisions are carried out

If we were to withdraw our approval we would be penalizing 16

out of 17 member lines which have indicated their willingness to com

ply with General Orders 7 and 9 and in fact have so agreed In the in

stant case it became abundantly clear that the conference was being

thwarted at every turn by the recalcitrance of a

single member States

ifarine Lines Governed as the conferenee is by a unanimous voting

procedure it is powerless to accept modifications proposed by the Com

mission in an order of conditional approval because this single member

refuses to give its assent even though earlier voting for the changes

proposed

10 F l1C

299 843 0 68 19
274 FIDDERAL MARITIME ooMMiSroN

As to the actual modifications which are being ordered it appear

that there is no dispute among the parties as to the membership pro

visions Articles 14 and 15 in the Appendix hereto States Marin

Lines has indIcated its willingness to agree to such provisions

There is no single self policing system which we consider best an

we have purposely left this to the individual conferences in Genera

Order 7 to allow them to work out the formula which will best su

their purposes We have indicated only in general terms what suc

systems shall include as aminimum

We have selected the particular self policing system we did simply

because all of the members of the New York Freight Bureau Hon

Kong at one time agreed substantially to it Agreement No 5700 7

and all but States Marine Lines agree to it at the present time

More importantly we have examined the self policing system care

fully and found as a matter of law that it satisfies the requirements

ofGeneral Order 7

States Marine Lines objects to the system and calls for an evidenti

ary 4earing to determine such questions of fact as conditions of the

Hong Kong trade the number of carriers in and out of the confer

ence the volume of cargo offering the space available to carry it and

intensity ofcompetition States Marine would also have this evidenti

ary hearing go into such issues as the competence and character of the

Chairman In the first place our order to show cause clearly specified

thatif an evidentiary hearing was desired affidavits and supporting

memoranda of relevance would have to be submitted States Marine

ignored thisdirective and has no standing now to complain Secondly

the economic conditions in the Honk Kong trade are irrelevant to the

question of the legal sufficiency of a selfpolicing system The remain

ing reasons advanced by States liarine for an evidenitary hearing are

premised on the assumption that the self policing formula will not be

applied justly and in good faith This is mere speculation on the par

ofStates Marine

In short States Marine s objections to the self policing system con

sist mainly of conjectures as to how the self policing system might be

used as an instrument of oppression We are duly concerned about the

rights of an individual member of a conference and the doors of the

Commission are always open to anyone with a legitimate complaint

Ifa conference does not administer its approved system ofself policing

in a fair manner this would surely support a finding of inade

quate policing ofthe obligations under it for which the man

datory penalty is disapproval of the entire con erence agreement

10 F M C
MODI FICATION OF AJGREE MEINT 5700 4 275

We have wide discretion in fashioning remedies As the Supreme

Court has said 9

Finding a wrong which it is duty bound to remedy the Maritime Commission as

the expert body established by Congress for safeguarding this specialized aspect

of the national interest may within the general framework of the Shipping Act

fashion the tools for so doing

Inour opinionthe circumstances of this case call for the modification

of respondents basic conference agreement in the manner set forth

in the order andAppendix 10 hereto

CONCLUSION

Insummary we conclude

1 That this case presents no genuine issues of material fact and

therefore there is no necessity for an evidentiary hearing

2 The respondents have been furnished with a proper notice ofour

intent to modify or in the alternative withdraw approval of Agree

ment No 5700 4and a hearing thereon as required by section 15 ofthe

ShippingAct

3 That Agreement No 5700 4is in violation of section 15 of the

Shipping Act in that it fails to provide reasonable and equal terms

and conditions for admission and readmission to conference member

ship of other qUtlified carriers in the trade or fails to provide that

any member may withdraw from membership upon reasonable nqtice

without penalty for such withdrawal

4 That Agreement No 5700 4 is in violation of General Order 9

in that it fails to contain standard provisions required thereby

5 That Agreement No 5700 4is contrary to the public interest in

that it fails to provide for a

system of self policing of its members

obligations under it

6 That Agreement No 5700 4 is in violation of General Order 7

in that it fails to provide for a system ofself policing of its members

obligations under it

I Cali orll4t at 01 v U S et al 320 U S 577 583 584 1944 F P C v Mandel Bro8

Inc 1359 US 385 393 1959

10 The Bureau requested that the following changes be made in the modification as pro

posed in the order to show cause

1 Deletion of Article 12

2 Substitution of the term Chairman wherever the term Chairman Secretary

appears

3 Deletion of a portion of the arbitration provision relating to Federal Maritime

Commission jurisdiction and

4 Deletion of tbe expression It is hereby agreed etc found in the be

ginning of Article 13 and other words of like effect

No objectioDs have been interposed Accordingly these changes have been made in the

amended text of the modifications See Appendix hereto

10 F 1C
276 FIDDERAL MARITIME OOMMI88ION

7 That Agreement No 5700 4should be modified by deleting para

graphs 10 b 10 c 10 d and 10 e and by adding new paragraphs

12 through 15 as set forth in the Appendix A hereto

Anappropriate order will be entered

OOm missWner James V Day Ooncurring

Iconcur in the majority opinion except that Iwould defer the

effective date of the order for 30 days Iwould thus give the parties

an opportunity if they should now prefer upon review of the order

herein to reach an independent accord among themselves andto submit

the same for Commission approval

ApPENDIX A

1 FAITHFUL PERFORMANCE BOND

As a guarantee of faithful performance hereunder and of prompt paymen

of any liquidated damages which may accrue against them or of any award

of judgment which may be rendered against them hereunder the parties hereto

shall deposit withthe New York Freight Bureau Chairman the sum of U8 30 000

thirty thousand or its equivalent in Hong Kong currency or a confirmed ir

revocable letter of credit in such form as may be approved by the New York

Freight Bureau in the aforesaid sum of US 30 000 thirty thousand or its

equivalent in Hong Kong currency established by a bank being a member o

the Hong Kong Exchange Banks Association and which is acceptable to the

New York Freight Bureau providing that itmay be drawn upon by draft signed

in the name of the New York Freight Bureau by the Chairman and by the

authorized representatives of any two Member Lines and payable to the New

York Freight Bureau to which there shall be attached a certiticatesigned by

the Chairman to the effect that there has been assessed or adjudged agains

the party who shall have deposited the said letter of credit a penalty or penalties

in the amount of the said draft Such depositing party shall in the event o

the payment of the said draft cause a new letter of credit inthe sumof U8 30 000

thirty thousand or its equivalent inHong Kong currency similar inits terms

to be issued immediately in replacenlent for that upon which thedraft has been

made Among other such provisions as the New Yorl Freight Bureau may re

quire the New York Freight Bureau may insist upon provisions in such lette

of credit which will render it most certain that payment must be made by th

banI immediately upon the compliance by the Chairman with the aforesaid

conditions

13 SELF POLICING SYSTEM

a A report shall immediately be made inwriting to the Chairman in respec

of any information vhich appears to such party hereto to be reasonably reliable

of thecommission by any other party hereto of a violation of thisAgreement

b A report shall immediately be made in writing to the Chairman in respec

of any information whIch such party hereto shall have received from any shippe

or from any other source considered to be reliable that any party hereto ha

committed a

violation of thisAgreement

10 F M C
MODIF1I CATION OF AGREEMEINTr 5700 4 277

c It shaH be the duty of the Chairman to investigate immediately all such

reports submitted by parties hereto in addition to any such reports in writing

he may receive direct from shippers or from any other source considered to be

reliable for which purpose the Chairman shall hereby be authorized to engage

the services of such qualified persons as he may consider necessary for a

thorough and complete investigation to be made

d It shall also be the duty of the Ohairman to ascertain on his own

initiative whether or not the parties hereto have strictlJ complied with the

terms of this Agreement the provisions incorporated in the New York Freight

Bureau tariff and all other decisions regularly and properly made by tbe par

ties hereto and in the event that there is any reason to believe that there

has been a

violation of any of the aforesaid obligations he shall file a com

plaint with respect thereto as above provided

e The Chairman shall be furnished such pertinent records of the parties

hereto thejr agents sub agents affiliates subsidiaries freight brokers compra

dores and or Chinese Freight Agents wherever located as may be required

in the enforcement of this Agreement and the decisions of the New York Freight

Bureau and the failure of any party hereto either on their own behalf or the

aforementioned additional parties shall constitute a violation of this Agreement

f Upon the completion of such investigations the Chairman shall lay

before the membership his written report thereon and such report shall include

all relevant particulars thereto other than the identity of the party hereto or

other person from whom the reportoriginated

g Su1P written reports shall constitute alld are hereafter referred to as

complaints A copy thereof shall be furnished to the nccused party notless than

20 days prior to the time that the matter is submitted to a vote of the parties

as provided in subparagraph h of this paragraph

h All such complaints shall be submitted to a vote of the parties hereto

other than the party charged with the violation after giving the party charged

in the respective complaint an opportunity to adduce evidence in its defense If

the parties hereto other than the party so charged shall by a three fourths

affirmative vote of all parties entitleo to vote determine that the violation or

violations alleged in the complaint have been provided the party charged with

the violation or violations shall be subject to liquidated damages as hereinafter

provided inrespect of each and every violation so proved butif the party accused

is dissatisfied with the decision reached as aforesaid such party shall have the

right to appeal it being incumbent upon the accused party to make any such

appeal within ten days following the aforementioned determination In which

event the question of iolation shall be left to the determination of a majority

of three arbitrators one arbitrator to be nominated by the accused the second

by a three fourth affirmative vote of the remaining parties and the third ar

bitrator to be nominated by the arqitrators so chosen it being incumbent upon

the parties concerned to nominate the first and second arbitrators within thirty

days of the appeal being made by the accused party In the event the accused

party does not appoint an arbitrator within the said thirty days the accused

party will thereby forfeit its right to appeal Such arbitrations shali take place

in Hong Kong and any decision so arrived at shall be binding and final and

such decision shall be equivalent to a

legal judgment given by the highest court

of law and the parties to this Agreement thereby waive and abandon every

right to take any legal action to obtain a review or reversal of the decision so

made

10 F M C
278 FEDE RAL M4RITIl 1E CO MlSSliON

However it shall notbe a breach of this agreement for any line to refer an

matter arbitrated to the Federal Maritime Commission for a decision as t

whether ornotthe matter arbitrated constitutes a modification of thisagreemen

i Inasmuch as it will be impossible to ascertain or measure the amount o

damages which the parties hereto will suffer by re son of the breach of th

Agreement the damages suffered thereby by each party hereto shall be assesse

on the basis of a three fourths majority vote as above provided but that in an

event such damages shall be subject to the undernoteq maxima exclusive of an

arbitration costs which may accrue to the accused party

1 First offence up to a maximum of U8 10 000 00 or its equiva

lent inHong Kong currency

ii 8econd offence up to a maximum of U8 15 000 00or its equiva

lent in Hong Kong currency

Hi Third offence upto a maximum of U8 20 000 00or its equiva

lent in Hong Kong currency

iv Fourth and any sub up to a maximum of U8 30 OOO 00 or its equiva

sequent offences lent in Hong Kong currency

j The Chairman shall notify inwriting the party against whom a violation

shan have been found of the decision against it and the amount of liquidate

damages which shall have been assessed against it In the absence of any appea

by such notified party inaccordance withthe provisions of Article13 h hereof

the party thus notified shall pay the amount of such liquidated damages within

a period of ten 10 days In the event that it shall fail or refuse to make such

payment withinsaid period the other parties may have resort to the p@rformance

bond which such party shall have deposited in accordance with the provisions

contained inArtiale 12 of this Agreement and the Chairman is hereby author

ized in case that a decision shall be made against it to the effect that it has

violated this Agreement and in case liquidated damages are assessed against i

and it shall fail to pay said damages within the period of ten 10 days afte

such notice has been given to it by the Chairman to pay the amount of said

liquidated damages to the other parties hereto from the cash which it sha

have deposited or ifits performance bond shall be by way of a confirmed irrevo

cable letter of credit to draw upon the letter of credit and pay the amount o

such liquidated damages to the other parties from the proceeds thereof such

payments to the other parties being on a pro rata basis The costs incurred in

arbitration proceedings shall be dealt withinthe award

k Each party hereto shall be fully responSible forthe acts and omission o

its parent companies agents sub agents affiliates subsidiaries freight brokers

compradores and or Chinese Freight Agents and an act done or omitted to be

done by an a ent sub age ilt affiliate subsidiary freight breker compradore

and or Chinese Freight Agent which would constitute a violation of this Agree

ment if done or omitted to be done by the party itself shall for all purposes

hereof constitute a violation of this Agreement by such party for which such

party shall be liable for damages inthe same amount as ifithad done or omitted

thesaid act

1 in the event of the termination of this Agreement or the expulsion o

yoluntary withdrawal of any of the parties hereto the performance bond de

posited by the parties concerned shall be returned to them together withaccrued

interest but only after any complaints which may be pending against the parties

concerned at the time of its expUlSion orwithdrawalor iltthe time of the termina

tion of this Agreement as the case may be have been satisfied

10 F M C
9

14 ADMISSION TO MEMBERSHIP

a Any common carrier by water which has been regularly engaged as a

common carrier in the trade covered by this Agreement or who furnishes evi

dence of ability and intention in good faith to institute and maintain such a

common carrier service between ports within the scope of this Agreement and

who evidences an ability and intention in good faith to abide by all the terms

and conditions of thisAgreement may her fter become a party to the New York

Freight Bureau promptly following written application to the New York

JrEight Bureau for membership such application to set forth evidence demon

strating compliance with the foregoing requirements by affixing its signature

hereto or to a counterpart hereof and by payment to theNew York Freight Bu

reau of any outstanding financial obligation arising from prior membership of

the ew York Freight Bureau and by posting withtheNew York Freight Bureau

security for faithful performance of its obligations as provided in Article 13

hereof

b Every application for membership shall be acted upon promptly

c No carrier which has complied with the conditions set forth in paragraph

a of this Article shall be denied admission or readmission to membership

d Prompt notice of admission to membership shall be furnished tq the Fed

eral Maritime Commission and no admission shall be effective prior to the post

mark date of such notice

e Advice of any denial of admission to membership together with a state

ment of the reasons therefor shall be furnished promptly to theFederal Maritime

Commission

15 WrrHDRAWAL AND EXPULSION OF MEMBERSHIP

a Any party inay withdraw from the Conference without penalty by giving

at least sixty 60 days written notice of intention to withdraw to the Confer

ence Provided however That action taken by the Conference to compel the

payment of outstanding financial obligations by the resigning Member shall

notbe construed as a penalty forwithdrawal

b Notice of withdrawal of any party shall be furnished promptly to the

Federal Maritime Commission

c No party may be expelled against its will from this Conference except

for failure to maintain a common carrier service between the ports within the

scope of this Agreement or for failure to abide by all the terms and ccmditions

of this Agreement

d No expulsion shall become effective until a detailed statement setting

forth thereason or reasons therefor has been furnished to the expelled Member

and a copy of such notification submitted to the Federal Maritime Commission

10 F M C

FEDERAL MARITIME COMMISSION

DOCKET No 6 17

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE APPLICATION No

552 lIESKEL SALEH DOING BUSINESS As EASTERN FORWAR DING

SERVICE

lnitia Deoision Adpted FebruOlrY 14 1967

Applicant found technically competent and able to engage in the business of an

independent oceanfreight forwarder

Application by holder of grandfather rights for license as independent freight

forwarder denied However effective drate of denitl l

postponed to allow

applicant to establish his own freight forwarding office and cease we

of

office equipment of shipper

Applicant ordered to cease and desist from thecollection tf unearned commis

sions from cal Tiers

Applicant in person

Donald J Brunner and Sawuel Nemirow as Hearing Counsel

REPORT

By THE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairmatn James V Day George H Hearn Oommi8sioners

This proceeding is before us upon Hearing Couqsels exceptions to

the supplemental initial decision ofExaminer Benjamin A Theeman 1

The Examiner in his initial decision found the following facts of

record 2

1 The Commission s files show that Respondent operated under

FMB Registration No 1715 since July 11 1958 on January 17 1962

Respondentfiled an application for a forwarder s license pUn3Uant to

section 44 b of the Act as amended the application was given the

number contained in the title of this proceeding s

1After the issuance of the initial decision we remanded the proceeding to the Examiner

for further findings and conclusions as to the technical competence and abiUty of the

applicant to engage in the business of an independent ocean freight forwarder

2 No exceptions were taken to these findings Quotation markshave been omitted forthe

sake of convenience

S Official notice Is taken of tbe facts contained in this paragraph

10 F M C 281
282 FEDERAL MARITIME COMMISSION

2 Respondent testified that he has read and is familiar with the

amendment to the Shipping Act 1916 Public Law 87 254 dealing

with independent ocean freight forwarders enacted on September 19

1961 containing the above cited sections

3 Respo Qdent hasbeen carrying on twobusinesses at 152 08 Jamaica

Avenue New York One business under the name of Jamaica Nylon

Center is the operation of a ladies specialty store The other business

under the name of EasternForwarding Service is the subject of tJlis

proceeding

4 Respond nt has performed freight forwar ing services for only

one client P S Saleh Inc hereinafter Saleh Inc Saleh Inc

engaged in thebusiness ofexporting cars and trucks to the MiddleEast

is wholly owned by Respondent s brother Philip

5 Respondent has heen performing the limited type of freight

forwarding services set forth herein for about 15 years At an unspeci

fled period and for about 6 months he was an exporter

6 Eastern operates from a hack room of the specialty store The

equipment consists of a desk atypewrIter 3 case not afiling cabinet

for account books freight forwarding forms Jet rheads and othe

necessary papers The telephone is also located there There is one

telephone number for both businesses but each business is separately

listed in the telephonebook

7 The front of the huilding occupied by Eastern has no indication

of any kind that Eastern is an occupant or that freight forwarding

services werebeing offered there Respondent did no public advertising

nor in any other way offered his freight forwarding services to the

public

8 Respondent haS no employees Because Respondent has no copy

ing machine hisdaughter does the necessary work on customs declara

tions Bills of Lading and the required copies of each 4This work is

done at the office of

Saleh

Inc and not at the office of Eastern Up to

aJbout 7 months ago Respondent employed a messenger who was not

fully employed but was used most of the time

9 Respondent very rarely communicates with or receives a com

munication from thecarrier

10 The usual procedure by which a shipment of Saleh Inc is put

aboard a common carrier and the organizations that take part in the

move ent are as follows

a Saleh Inc books the cargo with the common carrier

b Independent packers prepare the s

ipment fortransportation prepare the

dock receipt move thecargo either to thepier orthe vessel and bring the dock

receipt to Saleh Inc

The record contains no information as to the daughtersemployment

10 FM O
OCEAN FREIGHT FORWARDER LICENSE APPLICATION NO 552 283

e The particulars of the shipment are transmitted to Respondent usually at

the office of Saleh Inc

d On behalf of Respondent Respondent s daughter prepares customs dec

larations and Bills of Lading at the place of business of Saleh Inc Respondent

does notprepare consular documents ifany are needed

e Customarily the Line Copy 5

of the Bill of Lading is signed or initialled

at the place of business of Saleh Inc Respondent did not Know who signed or

ihitlalled the Line Copy for Eastern 6

f The packers deliver the cargo to the common carrier

g Respondent procures the carrier s signature n the Bill of Lading No

detailis given as to the means by which this step is accomplished

h Respondent has insufficient funds to coverfreight costs Saleh Inc sends

to Respondent a check made out to Respondent in the amo nt of the freight

Respondent deposits the check in its account and issues a

check in the same

amount to the commol carrier inpay ent forthefreight

i Respondent retains one copy of the B ill of Ladirig and gives two copies

to Saleh Inc

11 Respondent has a Line Copy stamp in his office and anqther in

the office of Saleh Inc Customarily the stamp in the office of Saleh

Inc is used Respondent has no recQllection when th stamp in his office

had last been used

12 Respondent charges and collects from the common carrier a

commssion at the rate of 21h percent for the shipments booked hy

Saleh Inc At 6 month intervals Respondent charges and collects

from Saleh Inc his freight forwardingfee at the rate of 5 per ship

ment There is no evidence to show that the rate of 5 00 per ship

ment is in any way unreasonable

13 During 1965 Respondent handled between 80 and 100 shipments

The combined income from carrier commissions and forwarding fees

totalled 1 800 This amount r

epresented about 40 percent ofRespond

ent s gross income the other 60 percent came from his specialty shop

Respondent s income from the shop has always heen greater than from

the forwarding activities and for several years before had been greater

than 60 percent

14 Respondent devotes about 20 percent or less of his time to for

warding activities Until recently he solicited no business from any

shipper other than Saleh Inc Within the last few months he has so

licited business from three otherexporters friendly to him Two ofthem

indicated that they might give him some forwarding business later in

lJ The Line Copy of the Bill of Lading contains the certification by the freight forwarder

of services rendered to the carrier in connection with the shipment as required by section

510 24 e of General Order No 4 as amended and section 44 e of the Act

a

There may have been occasions when Respondent was present at the preparation of the

Line Copy Then he would personally sign or initial it In Respondent s

opinion the

signing of the Hne copy was not important the main thing Is preparl g these two

Items those that are checked Respondent Is referrIng to 8ubItems 1 through 5

of the line copy certification

10 F M C
284 FEDERAL MARITIME COMMISSION

1966 and requested that he get in touch with them again They advised

Respondent that if he were in aregular office in New York city

that would help a lot particularly if he gave up the ladies specialty

business

15 There is no evidence that Eastern at any time shared directly

with Saleh Inc any part ofthe commission paidby the common ca r

riers or indirectly by reduced rates for the forwarding services

rendered

DISCUSSION AND CONCLUSIONS

On the basis or the foregoing the Examiner concluded that ap

plicant should he granteda license subject to the followingconditions

a Respondent immediately cease from billing carriers for freight forward

ing services not rendered to carriers by Respondent and cease accepting pay

ment from them forsuch unperformed services

b Respondent shall 1 forthwith certify to the Commission that he is

attempting to and will establish his own freight forwarding office and per

form his freight forwarder s services independently of tbe use of the office

facilities or employees of Saleh Inc orany other shipper and 2 establish

said independent office notlaterthan September 1 1966

Hearing Counsel excepted to the initial decision on two grounds

a The Initial Decision errs in granting a freight forwarder license subject

to certain Examiner imposed conditions

b The Initial Decision errs in granting a freight forwarder license to an

unqualified applicant in terms of sections 1 and 44 of the Shipping Act 1916

as amended

As to the second exception Hearing Counsel urged that The

record is pregnant with facts which demonstrate that this applicant

has performed little if any actual work concerning shipments o

P S Saleh Inc and further that

The bOoking of cargo is essential to the operation of a freight forwarder

service There is doubt whether this respondent has ever engaged in this ac

tivity or in fact he has the8Jbility to book cargo Therefore there is consider

able doubt if called upon today to do so he would be capable of handling this

basic matter

The order instituting this proceeding alleged but two grounds fo

denying applicant a license They were

that Beskel Saleh doing business as Eastern Forwarding Service doe

nothold himself out to theshipping public to perform ocean freight forward

ing services and that his close association with P S Saleh Inc his only

shipper client destroys his independence and thereby precludes him from

licensing

8

The Initial Decision was served June 22 1966 thus the September 1 date would hav

provided sufficient time for Rppl1cant to comply with the conditions

8 Concerning the failure of applicant to hold its services out to the publil the Exam

iner noted that No source for this requirement was given nor was any statute regula

10 F M C
OCEiAN FREIGHT FORWARDEn LICENSE APPLICATION NO 55 2 285

Since it seemed to us that Hearing Counsel were for the first time

raising the question of applicant s technioal competence or ability

to perform fundamental forwarding services we remanded the pro

ceeding to the Examiner in order that applicant may have an oppor

tunity to demonstrate on the record that he possesses sufficient

teclmical competence and ability to qualify as a licensed freight

forwarder under sections 1 and 44 of the Act

Subsequent to the remand on October 7 1966 Hearing Counsel

submitted amemorandum to the Examiner signed by Robert G Drew

Chief Division of Freight Forwarders Federal Maritime Commis

sion This memorandum set forth facts brought out by Mr Drew s

interview with the applicant concerning the latter s technical com

petence No hearings were had but the Drew memorandum was re

ceived in evidence with opportunity afforded applicant to comment

or request further hearing Applicant made no response The Exam

iner issued his supplemental iniHal decision concluding that applicant

possessed sufficient technical competence and should be licensed sub

ject however to the conditions set forth in his initial decision of

June 22 1966

Hearing Counsel excepted to the Examiner s supplemental decision

again on the same two grounds previously urged i e 1 the granting

of a license subject to certain Examiner imposed oonditions and

2 the granting of a license to an unqualified applicant in terms of

sections 1 and 44 of the Act

As we read these lates exceptions of Hearing Counsel they do not

go to the Examiner s conclusion that applicant is technically compe

tent and able Rather they restate Hearing Counsels position that the

record herein demands a denial ofthe instant application and if the

applicant can subsequently estaJblish that he is qualified for a license

then and only then shouldhe be granted alicense

We think the Examiner s discussion of the issues well founded and

dispositive and we adopt it as our own except as may be otherwise

indicated 9

Itis clear from the foregoing that Respondent for the past 15 years

has been carrying on the business of freight forwarding in a cir

cumscribed mannerlimited to a fewof the services usually performed

tton or case either cited or referenced to him The Examiner then concluded that even

though such a holding out was not required the applicant was in fact attempting to

solicit other clients and thus could be considered as trying to comply with the demand

Hearing Counsel took no exception to the Examiner s conclusions In view of the applicant s

attempted solicitation we see no reason to adopt orreject the Examiner s conclusion on this

question

II Here again for the sake of convenience quotation marks have been omitted and of

course all footnotes have been renumbered

10 F M C
286 FEDERAL MARITIME COMMISSION

by freight forwarders tO There appears to be no question that Re

spondent is fit willing and able properly to carryon the business o

forwarding as required by the statute Hearing Counsel does not

intend to the contrary However there are certain circumstance under

which Respondent has carried on his forwarding business that must

be rectified in order that hisappUcation for a license may be properly

granted

Respondent as to the shipments of Saleh Inc has not and does no

perform with respect to such shipment s the solicitation and secur

ing ofthe cargo for the ship or the booking of orotherwise arranging

for space for such cargo as required by section 44 e Despite this

nonperformance Respondent has been billing the carrier for commis

sion and receiving payment from thecarrier Itis this type ofunearned

payment the legislative history calls it unearned brokerage o

automatic unearned brokerage fees that section 44 e was enacted

specifically to eliminate ll The receipt of such unearned payments is

improper under section 44 e Respondent will be required to refrain

from requesting or receiving such payments from carriers unless h

actually performs those services set forth in and otherwise complies

with section 44 e as prerequisite to such payment 12

The record shows that Respondent has been dependent upon Saleh

Inc for certain office equipment and accommodations in order to com

plete the limited freight forwarding services that he performs The

record does not show that Saleh Inc has exerted any control overRe

spondent or is there sufficient evidence in the record to support a find

ing that Respondent is shipper connected Nevertheless this type o

operation is not consistent with the concept of an independent ocean

freight forwarder as contemplated by the statute Such arrangements

may easily lead to control ofthe forwarder by the shipper Respondent

has stated that heintends to openan office in downtown Manhattan and

10 For a listing of the divers services performed by freight forwarders see General Orde

4 46 CFR Sec 510 c l United States v American Union Transport 00 327 437 U S

1945 NY Foreign Freight Bureau Assn v

FM O 837 F 2d 289 292 1965 Docket

No 765 831 Freight Forwarder Investigation etc 6 FMB 327 334 5

U See particularly House Report No 2939 84th Cong 2d sess July 26 1956 page 54

paragraph 2 Unearned brokerage page 55 paragraph 8 Is remediaZ action required

in connection with the Shipping Act

13Secti on 44 e refers to a Ucensed forwarder It is applicable to forwarders holding

grandfather rights by the following serles of steps Section 44 b sets forth that the

grandfather rights may be continued under such regulations as the Commission shal

prescribe The Commission issued a regulation on May 1 1963 as Am Ddment No 1 to

General Order 4 Section 510 21 a of Title 46 CFR contains the following definition

510 21 Definitions

a The term Ucensee means any person licensed by the Commission as an indepen

dent ocean freight forwarder or any independent ocean freight forwarder who on Sep

tember 19 1961 was carrying on the business of freight forwarding under a valid

registration number issued by the Commission or its predecessors who filed an applica

tion for such a license Form FMC 18 on or before January 17 1962 and whose

application has not been denied

10 F M C
OCEA i

FREIGHT FORWARDER LICENSE APPLICATION NO 552 287

to devote full time to his forwarding business Itis assumed that Re

spondent will cease using the office and office equipment ofSaleh Inc

In any event as hereinafter stated a condition to the granting of Re

spondent s application is the complete severance from and discontinu

ance of the use of the office and office equipment of Saleh Inc or any

other shipper 13

Respondent is not a dummy forwarder in the sense that that term

is used in connection with freight fOlwarders Under Commission de

cisions 14 and the legislative history 15 rebating has been inextricably

connected with a dummy forwarder The Commission has defined a

dummy forwarder as one organized for the sole purpose ofcollect

ing compensation from carriers which would find its way back in whole

or in part to the shipper 16 The record is bare ofany evidence to show

that the payments made by the carriers to Eastern redounded in any

way to the benefit of Saleh Inc or in any way offended the rebating

provisions ofthe existinglawY

The Congress has listed 10 instances of facts and circumstances

whose existence Congress states raise at least an inference of the ex

istence of rebating arrangements As pointed out by Hearing Coun

sel five ofthem exist in this case

1S Despite theexistence ofthese items

Hearing Counsel do not contend that any of the carrier s payments

made to Eastern have found their way back to Saleh Inc Nor does

the existence ofthese five items when considered in the light ofthe en

tire record constitute sufficient evidenGe to support a conclusion to the

effect thatrebating has occurred

As already noted the Examiner concluded that applicant should be

granted a license provided he 1 immediately ceased collecting un

earned brokerage and 2 forthwith certify that he is attempting and

will establish his own freight forwarder office and perform his freight

forwarder services independently of the use of the office facilities or

13 See App Ucation etc Morse Shipping 00 etc 8 FMC 472 1965 Application etc

Del MarShipping Oorporation etc 8FMC 493 1965

16 Docket No 1192 Application etc Wm V Oady etc 8 FMC 352 358 Docket No

1201 Application eto Morse Shipping 00 eto 8 FMC 472 Docket No 1196 Application

etc Del Mar Shipping Oorporation 8 FMC 493 496

15 Testimony of Thomas E Stakem page 836 Hearings before the Special Subcommittee

on Freight Forwarders and Brokers 84th Cong 1st and 2d sess HR No 2939 supra at

page 54 H R No 2333 85th Cong 2d sess July 31 1958 H R No 798 86th Cong 1st

sess August 6 1959 S R No 1682 86th Cong 2d sess June 24 1960 and H R No

1096 87th Cong 1st sess August 31 1961

16 Docket No 1192 supra at page 358

17 HRNo 2939 supra page 54 2 Dummy forwarders

18 They are specifically a the members of the family orclose relatives of officials of

the shipper corporation are appointed to act as forwarders orbrokers c

The shipper

and its forwarder share the same offices without reimbursement and f the

forwarder is a oneman concern h The forwarder is designated to collect brokerage

on a

single account j

The forwarder is engaged in another business for his primary

occupation which appears to be unrelated to the business of forwarding

10 F M C
288 FEDERAL MARITIME COMMISSION

employees of Saleh Inc or any other shipper 19 We agree with these

conditions and impose them as our own However in application etc

Del Mar Shipping Oorporation etc 8 F MC 493 we found that an

incorporated for arder which has 50 percent of its stock owned by a

shipper in the foreign commerce of the United States was not an in

dependent ocean freight forwarder notwithstanding the intention of

the shipper not to exercise any control over the forwarder We thus

denied applicant Del Mar a license However we postponed the effec

tive date of the denial to allow time for divestiture by the shipper of

control of the forwarder Since the applicant do not now qualify for

a license we think this the better procedure Accordingly the applica

tion here under consideration is denied however the effective date

ofthe denial is postponed until August 1 1967 to enable the applicant

to comply with the above conditions in which event the denial order

would not be entered

INITIAL DECISION OF BENJAMIN A THEEMAN

PRESIDING EXAMINER 1

llhe order in thisproceeding served on March 29 1966 by the Fed

eral Maritime Commission Commission on Heskel Saleh doing busi

ness as Eastern Forwarding Service Respondent or Eastern stated

as follows

By letter dated February 2 1966 Heskel Saleh doing business as Eastern

Forwarding Service was notified of the Federal Maritime Commission s intent

to deny his application for an independent ocean freight forwarder license

The grounds for denial are that H kel Saleh doing business as Eastern For

warding Service does not hold himself out to the shipping pUblic to perfrom

ocean freight forwarding services and that his close association with P S

Saleh Inc bis only shipper client destroys his independence and thereby pre

cludes him from licensing Applicant has now requested the opportunity to

show at a hearing that denial of the application would be unwarranted

The hearing washeld in New York City pursuant to Sections 22 and

44 of the Shipping Act of 1916 as amended the Act to determine

whether Eastern qualified for a license pursuant to Sections 1 and 44

of the Act 2

Respondent appeared and participated in person Testi

mony of Respondent was placed in the record mainly through ques

tions by Hearing Counsel Respondent offered no substantial addi

tional data though given the opportunity to do so

19 The Examiner would have given the applicant until September 1 1966 see footnote 7

4upra

1This decision became the decision of the Commission on February 14 1967

1I These sections are contained In Public Law 87 254 enacted September 19 1961 provid

Ing for the licensing of independent ocean freight forwarders See portion of this decision

cinfra headed Pertinent Provisions of the Act

10 F M C
OCEAN FREIGHT FORWARDER APPLICATION NO 552 289

From the record as a whole it is found

1 The Commission s files show that Respondent operated under

Fl1B Registration No 1715 since July 11 1958 on January 17 1962

Respondent filed an application for a forwarder s license pursuant to

Section 44 b of the Act as an1ended the application was given the

number contained in the titleof thisproceeding 3

2 Respondent testified that he has read and is familiar with the

amendment to the Shipping Act 1916 Public Law 87 254 dealing

with independent ocean freight forwarders enacted on September 19

1961 containing the above citedsections

3 Respondent has been carrying on two businesses at 15208 Ja

maica Avenue New York One business under the name of Jamaica

Nylon Center is the operation of a ladies specialty store The other

business under the name of Eastern Forwarding Service is the sub

ject ofthisproceeding

4 Respondent has perforn1ed freight forwarding services for only

one client P S Saleh Inc hereinafter Saleh Inc Saleh Inc

engaged in the business of exporting cars and trucks to the Middle

East is wholly owned by Respondent s brother Philip

5 Respondent has been performing the limited type of freight for

warding services set forth herein for about 15 years At an unspecified

period and for about 6 months he was an exporter

6 Eastern operates from a back roon1 of the specialty store The

equipn1ent consists of a desk atypewriter a case not afiling cabinet

for account books freight forwarding forms letterheads and other

necessary papers The telephone is also located there There is one

telephone number for both businesses but each business is separately

listed in thetelephone book

7 The front of the building occupied by Eastern has no indication

of any kind that Eastern is an occupant or that freight forwarding

services werebeing offered there Respondent did no public advertising

nor in any other way offered his freight forwarding services to the

public

8 Respondent has no employees Because Respondent has no copying

llachine his daughter does the necessary work on customs declarations

Bills ofLading and the required copies of each 4This work is done at

the office of Saleh Inc and not at the office of Eastern Up to about

seven months ago Respondent employed a messenger who was not

fully employed but was used most of the time

3 Official notice is taken of the facts contained in this paragraph

4

The record contains no information as to the daughter s employment

10 F M C

299 843 0 68 20
290 FEDERAL MARITIME COMMISSION

9 Respondent very rarely communicates with or receives 

communication from thecarrier

10 The usual procedure by which a shipment of Saleh Inc is pu

aboard a cominon carrier and the organizations that take part in th

movement is as follows

a Saleh Inc books the cargo with the common carrier

b Independent packers prepare the shipment for transportation prepar

the dock receipt move the cargo either to thepier or the vessel and bring th

dock receipt to Saleh Inc

c The particulars of the shipment are transmitted to Respondent usuall

at the office of Saleh Inc

d On behalf of Respondent Respondent s daughter prepares customs dec

larations and Bills of Lading at the place of business of Saleh Inc

Respondent does notprepare consular documents ifany areneeded

e Customarily the Line Copy 5of the Bill of Lading is signed or initialled

at the place of business of Saleh Inc Respondent did not know who signed o

initialled the Line Copy for Eastern 6

f The packers deliver thecargo to thecommon carrier

g Respondent procures the carrier s signature on the Bill of Lading N

detail is given as to the means by which this step is accomplished

h Respondent has insufficient funds to cover freight costs Saleh Inc send

to Respondent a check made out to Respondent in the amount of the freight

Respondent deposits the check in its account and isSues a check in the sam

amount to the common carrier in payment for the freight

i Respondent retains one copy of the Bill of Lading and gives two copies

to Saleh Inc

11 Respondent has a Line Copy stamp in his office and another in

the office of Saleh Inc Customarily the stamp in the office of Saleh

Inc is used Respondent had no recollection when the stamp in his office

had ast been used

12 Respondent charges andcollects from thecommon carrier aCOnl

mission at the rate of 2 percent for the shipments booked by Saleh

Inc At 6 months intervals Respondentcharges and collects from Saleh

Inc his freight forwarding fee at the rate of 5 00 per shipment There

is no evidence to show that the rate of 5 00 per shipment is in any

way unreasonable

13 During 1965 Respondent handled between 80 and 100 shipments

The combined income from carrier commissions and forwarding fees

totaled 1 800 This amount represented about 40 percent of Respond

ent s gross income the other 60 percent came from his specialty shop

5

The Line Copy of the Bill of Lading contains the certification by the freight forwarde

of services rendered to the carrier in connection with the shipment as required by Sectio

510 24 e of General Order No 4 as amended and Section 44 e of the Act

6

There may have been occasions when Respondent was present at the preparation of the

Line Copy Then he would personally sign or initial it In Respondent s opinion th

signing of the line copy was not important the main thing is preparing these two items

those that are checked Respondent is referring to subitems 1 through 5 of the

line copy certification

10 F lfC
OCEAN FREIGHT FORWARDER APPLICATION NO 552 291

Respondent s income from the shop has always been greater than from

the forwarding activities and for several years before had been

greater than 60 percent

14 Respondent devotes about 20 percent or less of his time to

forwarding activities Until recently he solicited no business from any

shipper other than Saleh Inc Within the last few months he has

solicited business from three other exporters friendly to him Two of

them indicated that they might give him some forwarding business

later in 1966 and requested that he get in touch with them again

They advised Respondentthat if he were in a

regular office in New

York city that would help a lot particularly ifhe gave up theladies

specialty business

15 There is no evidence that Eastern at any time shared directly

with Saleh Inc any part of the commission paidby the common car

riers or indirectly by reduced rates for the forwarding services

rendered

POSITIONS OF THE PARTIES

Respondent stated that he intends to devote more of his time to

freight forwarding and to approach other exporters if he gets some

more business he will dispose of his specialty store and open an office

in Manhattan New York Respondent requests until approximately

the end of 1966 to accomplish this plan Then if the freight forward

ing business does not prosper he offers to consent to the cancellation of

his license Hearing Counsel takes no position in regard to this request

Hearing Counsel contend that Hespondent maintains a dummy

forwarder operation such as Congress intended to eliminate when it

passed Public Law 87 254

PERTINENT PROVISIONS OF THE ACT

Sec 1 when used in this Act

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

betweensuch Territories and possessions and handling theformalities incident

to such shipments

An independent ocean freight forwarder is a person carrying on the busi

ness 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

10 F M C
292 FEDERAL MARITIME COMMISSION

Section 44 a

provides that a

person desiring to engage in the ca

rying on ofthe business of forwarding must first secure a license from

the Commission

Section 44 b requires the Commission to issue the license t

o

an

qualified applicant who is or will be fit willing and able properly t

carry on the business of forwarding and to conform to the provision

of this Act and the requirements rules and regulations of the Com

mission issued thereunder and that the proposed forwardingbusines

is or will be consistent with the national maritime policies declare

in the Merchant Marine Act 1936 otherwise such application sha

be denied Also by Section 44 b the Congress granted so calle

grandfather rights to those independent ocean freight forwarder

who on the effective date of the Act were carrying on the busines

of forwarding under a

registration number issued by the Commission

Such forwarders were allowed to continue in business for a period o

120 days after September 19 1961 without a license and if the for

warder applied for a license within the 120 days he could continue t

operate under such regulrutions as the Commission shall prescribe

until othervrise ordered by the Commission

Secti n 44 e provides in pertinent part

e A common carrier by water may compensate a person carrying on th

business of forwarding to the extent of the value rendered such carrier i

connection with any shipment dispatched on behalf of others when and only

when such person is licensed hereunder and has performed with respect t

such shipment the solicitation and secming of the cargo for the ship or th

booking of or otherwise arranging for space for such cargo and at least tw

of the following services

1 The coordination of the movement of the c rgo to shipside

2 The preparation and processing of the ocean bill of lading

3 The preparation and processing of dock receipts or delivery orders

4 The preparation and processing of consular documents or expo

declarations

5 The payment of the ocean freight charges on such shipments

Provided however Before any such compensation is paid to or receive

by any person carrying on the business of forwarding such person shall 

he is qualified under the provisions of this paragraph to receive such com

pensation certify in writing to the common carrier by water by which th

shipment was dispatched that he is licensed by the Federal laritime Commis

sion as an independent ocean freight forwarder and that he performed th

above specified services with respect to such shipment Such carrier shall b

entitled to rely on such certification unless it knows that the certification i

incorrect

DISCUSSION

Itis clear frOlll the foregoing that Respondent for the past 15 years

has been carrying on thebusiness offreight forwarding in a circum

10 F M C
OCEAN FREIGHT FORWARDER LICENSE APPLICATION NO 552 293

scribed manner limited to a few ofthe services usually performed by

freight forwarders 7

There appears to be no question that Respondent

is fit willing and able properly to carry on the business of forward

ing as required by the statute Hearing Counsel does not contend to

the contrary However there are certain circumstances under which

Respondent has carried on its forwarding business that must be rec

tified in order that his application for a license may be properly

granted

Respondent as to the shipments ofSaleh Inc has not and does not

perform with respect to such shipment s the solicitation and secur

ing of the cargo for the ship or the booking of or otherwise arrang

ing for space for such cargo as required by Section 44 e Despite

this non performance Respondent has been billing the carrier for

commission and receiving payment from the carrier Itis this type of

unearned payment the legislative history calls it unearned broker

age or automatic unearned brokerage fees that Section 44 e

was enacted specifically to eliminate 8The receipt of such unearned

payments is improper under Section 44 e Respondent will be re

quired to refrain from requesting or receiving such payments from

carriers unless he actually performs those services set forth in and

otherwise complies with Section 44 e as prerequisite to such

payment 9

The record shows that Respondent has been dependent upon Saleh

Inc for certain office equipment and accommodations in order to com

plete the limited freight forwarding services that it performs The

record does not show that Saleh Inc has exerted any control over

Respondent nor is there sufficient evidence in the record to support a

finding that Respondent is shipper connected Nevertheless this type

of operation is not consistent with the concept of an independent

1 For a listing of the divers services performed by freight forwarders see General Order

4 46 CFR Sec 510 2 c United States v American Union Transport 00 327 US 437

1946 N Y Foreign Freight Burea u is8n v FM O 337 F 2d289 292 1965 Docket

No 765 831 Freight Forwarder Investigation etc 6 FMB 327 3134 5

8

See particularly House Report No 2939 84th Congress 2d sess July 26 1956 page

54 paragraph 2 Unearned brokerage page 55 paragraph 8h Is remedial action required

in connection with the Shipping Actf

II Section 44 e refers to a licensed forwarder It is applicable to forwarders holding

grandfather rights by the fOllowing series of steps Section 44 b sets forth that the

grandfather rights may be continued under such regulations as the Commission shall

prescribe The Commission issued a regulation on May 1 1963 as Amendment No 1 to

General Order 4 Section 510 21 a of Title 46 CFR contains the following definition

i 510 21 Definitions

a ahe term licensee means any person licensed by the Commission as an independ

lent ocean freight forwarder or any independent ocean freight forwarder who on Sep

tember 19 1961 was carrying on the business of freight forwarding under avalid regis

tration number issued by the Commission orits predecessors who filed an application

for such a license Form FMC 18 on or before January 17 1962 and whose application

has not been denied

10 F M C
294 FEDERAL MARITIME COMMISSION

ocean freightforwarder as contemplated by thestatute Such arrange

ments may easily lead to control of the forwarder by the shipper R

spondent has stated that he intends to open an office in downtown Man

hattan and to devote ful time to his forwarding business Itis assume

that Respondent will cease using the office and office equipment o

Saleh Inc In any event as hereinafter stated a condition to th

granting of Respondent s application is the complete severance from

and discontinuance of the use of the office and office equipment o

Saleh Inc or any other shipper 1o

Respondentis not a dummy forwarder in the sense that that term

is used in connection with freight forwarders Under Commissio

decisions lland the legislative history 12 rebating has been inextricabl

conneoted with a dummy forwarder The COmmission has define

a dummy forwarder as one organized for thesole purpose ofcollec

ing compensationfrom carriers whichwould find its way back in whol

orin parttothe shipper 13 The record is bare of any evidence to show

that the payments made by the carriers to Eastern redounded in an

way to the benefit of Saleh Inc or in any way offended the rebatin

provisions oftheexistinglaw u

The Congress has listed 10 instances of facts and circumstance

whose existence Congress states raise at least an inference of th

existence of rebating arrangements As pointed out by Hearin

Counsel five of them exist in this case

15 Despitethe existence of thes

items Hearing Counsel does not contend that any ofthe carrier s pay

ments made to Eastern have found their way back to Saleh Inc No

doeS the existence of these five items when considered in the light o

the entire record constitute sufficient evidence to support a conch sio

to the effect that rebating has occurred

The Commission s Order herein and Hearing Counsel make a poin

ofthe fact that Respondent does not hold its services out to the pub

10 See Application etc Morse Shipping 00 etc 8 FMC 472 1965 AppHcaUon etc

DeZ MarShipping Corporation etc 8 FMC 493 1965

IIDocket No 11821 Application etc Wm V CadY etc 8 FMC 352 358 Docket N

1201 Application etc Morse Shipping Co etc 8 FMC 472 Docket No 1196 Applicatw

etc DeZ MarShipping Oorporation 8 FMC 493 496

12 Testimony of Thomas E Stakem page 836 Hearings before the Special Subcommitt

on Freight Forwarders and Brokers 84th Cong 1st and 2d sess H R No 2939 supr

at page 54 HR No 2333 85th Cong 2d sess July 31 1958 HR No 798 86th Cong

1st sess August 6 1959 S R No 1682 86th Cong 2d sess June 24 1960 and H

No 109i 87th Cong 1st sess August 31 1961

13 Docket No 1100 supra at page 358

l H R No 2939 supra page 54 2 Dummy forwarders

15 They are specifically a the memoors of the family or close relatives of officials 

the shipper corporation are appointed to act as forwarders orbrokers c The shipp

and its forwarder share the same offices without reimbursement and f th

forwarder is a one man concern h The forwarder is designated to collect brokerag

on aSingle account j The forwarder is engaged in another business for his prima

occupation which appears to be unrelated to the business of forwarding

10 F MO
OCKAN FREIGHT FORWARDER LICENSE APPLICATION NO 552 295

lic Itis indicated that this lack is a cause for denial of Respondent s

application No source for this requirement is given No statute regula

tion or case is either cited 16or referenced Absent such basis thisre

quirement is not considered sufficient cause to deny the application

In any event Respondent has stated that he intends to close his spe

cialty shop if the forwarding business warrants open an office for

freight forwarding in a building in downtown Manhattan and has

already solicited other clients than Saleh Inc These actions proposed

and past show that Respondent is attempting to perform services for

more than one client and may be considered an attempt to comply

with the demand even though not required that he hold himself out

to the public

CoNCLUSION

Seotion 44 of the Act is a licensing statute Like other licensing

statutes it should be approached with aliberal attitudeto the end that

licenses may be granted to qualified applicants Applicationfor Freight

FOlWarders License Dixie Forwarding 00 Inc 7 FMC 109 122 167

1965 Ifthe Respondent refrains from reoeiving payment from car

riers for unearned commissions and severs his office conneotions with

the establishment of Saleh Inc the Respondent would come within

the definition of an independent freight forwarder contained in Sec

tion 1 ofthe Act The application will therefore be granted subject 17

however to the f

llowing conditions 18

a Respondent immediately cease from billingcarriers forfreight forwarding

services not rendered to carriers by Respondent and cease accepting payment

from them forsuch unperformed services

b Respondent shall 1 forthwith certify to the Commission that he is

attempting to and will establish his own freight forwarding office and perform

his freight forwarder s services independently of the use of the office facilities

or employees of Saleh Inc orany other shipper and 2 establish said inde

pendent office notlaterthan September 1 1966 19

BENJAMIN A THEEMAN

Presiding Examiner

lVASHINGTON D C June 22 1966

10 It is noted that in Docket No 1201 Morse Shipping 00 supra the Bureau of Domestic

Regulation and the freight forwarder stipulated in an agreement e Morse expresses the

intention to hold herself out to the shipping public as an independent ocean freight for

warder and actively solicit shipper clients in addition to Freiberg and its affiliates No

moreis said

17 Subject also of course to the regulations of the Commission prescribed for freight

forwarders

18 See Dixie Forwarding 00 Inc Morse Shipping 00 and Del Mar Shipping Oorporation

8upra for similar action by the CommIssion

19 This time is considered adequate in view of the fact that the Public Law 87 254

became effective September 19 1961 and Respondent first considered the establishment of a

Manhattan office in early 1966

10 F MC
296 FEDERAL MARITIME COMMISSION

REMAND OF PROCEEDING TO EXAMINER

This proceeding is before us on exceptions of Hearing Counsel 

the Initial Decision of Benjamin A Theeman in which the Examin

grantedapplicant a license subjectto the followingconditions

a Respondent applicant immediately cease from billing carriers forfreig

forwarding services notrendered to carriers by Respondent and cease accepti

payment from them forsuchunperformed services

b Respondent shall 1 forthwith certify to the Commission that he 

attempting to and will establish his own freight forwarding office and perfor

his freight forwarder s services independently of theuse of the office facilitie

or employees Of Saleh Inc or any other shipper and 2 establish said ind

pendent office notlaterthanSeptember 1 1966

As we read their exceptions Hearing Counsel except to granting app

cant a license on the grounds that applicant is not qualified 

terms of sections 1 and 44of theShipping Act 1916 as amended Th

order instituting this proceeding alleged hut two grounds for denyin

applicant a license They were

that Reskel Saleh doing business as Eastern Forwarding Service do

nothold himself out to the shipping public to perform oceanfreight forwardin

services and that his close association with P S Saleh Inc his only shipp

client destroys his independence and thereby precludes him from licensing

Vhile the transcript of hearing in this proceeding demonstrate

that Hearing Counsels concern with applicant s teclmical competenc

and ability to engage in the business of forwarding is not unwa

ranted a deni al of applicant s license on this ground would in o

view deprive the applicant of the notice of the matters of fact an

law asserted to which he is entitled by section 5 a of the Admi

istrative Procedure Act Therefore in order that applicant may hav

an opportunity to demonstrate on the record that he possesses sufficie

technical competence and ability to qualify as a licensed freight fo

warder under sections 1 and 44 of the Act we will amend the orde

instituting this proceeding to include the issue of applicant s techn

cal competence and remand the proceeding to the Examiner for 

further hearing on this issue

Therefore it is ordered That this proceeding be and herehy 

remanded to the Examiner in order that he may determine wheth

applicant possesses sufficient technical competence and ability 

qualify as alicensed independent ocean freightforwarder

Itis further ordered That thefirst ordering paragraph ofthe Com

mission s order served March 29 1966 in Docket No 66 17 he deleted

and the following paragraph substituted therefor

Therefore itis ordered pursuant to Sections 22 and 44 of theShip

ping Act 1916 46 U S C 831 841b That a proceeding is hereb

instituted to determine whether applioant is orwill be an independe

10 F M C
OCEtAN FREIGHT FORWARDER LICENSE APPLICATION NO 55 2 297

ocean freight forwarder as defined in the Act and whether applicant

possesses sufficient technical competence and ability to qualify as a

licensed independent ocean freight forwarder or otherwise qualifies

for a license pursuant to Sections 1 and 44 of the Shipping Act 1916

46 U S C 801 841b

SUPPLEMENTAL INITIAL DECISION OF BENJAMIN A THEEMAN

PRESIDING EXAMINER

On August 26 1966 the Commission remanded this proceeding to

the Examiner to determine whetherapplicant possesses sufficient tech

nical competence and ability to qualify as a licensed independent ocean

freight forwarder This supplemental decision results

On June 22 1966 the Examiner in his Initial Decision granted ap

plicant a license subject to the regulations of the Commission pre

scribed for freightforwarders and thetwo followingconditions

a Respondent applicant immediately cease from billing carriers for

freight forwarding services not rendered to carriers by Respondent and cease

accepting payment from them forsuch unperformed s rvices

b Respondent shall 1 forthwith certify to the Commission that he is

attempting to and willestallish his own freight forwarding office and perform

his freight forwarder 8 service independently of the use of the office facilities

or employees of Saleh Inc or any other shipper and 2 establish said

independent office not later than September 1 1966

Hearing Counsel filed exceptions to the Initial Decision that gave

rise to this remand In the remand the Commission specified that the

exceptions brought into question applicant s technical competence

and ability pointed out that these grounds were not list d in the

order initiating this proceeding and stated that a denial of applica

tion on the ground of incompetence would deprive the applicant of

llotice to which he is entitled under Section 5 a oftheAdministrative

Procedure Act 1

The Examiner duly set a

hearing on remand for October 10 1966

in New YorkCity

On October 7 1966 Hearing Counsel submitted to the Examiner

by covering memorandum with copy to applicant a memorandum

dated October 6 1966 signed by Robert G Drew Chief Division of

Freight Forwarders Federal Maritime Commission The memoran

dum set forth facts brought out by Mr Drew s interview with the

applicant concerningthe latter s technical competence Based thereon

1r Drew stated in his memorandum that applicant possessed the

necessary technicalcompetence

learing Counsel in their covering memorandum requested that the

Drew memorandum be received in evidence as an exhibit in lieu ofthe

1Now Sec 554 b of Title 5 DS C

10 F M C
298 FEDERAL MARITIME COMMISSION

hearing and stated that this action wasnot meant to imply that Hea

ing Counsel had in any way receded from the positions aiready take

in respect to theotherissues in thisproceeding

In view of Hearing Counsels action the October 10 1966 hearin

wascancelled

By order dated October 11 1966 applicant wasgiven through Octo

ber 24 1966 to comment on the receipt in evidence of the Drew memo

randum or to request a further heading Applicant made no response

Accordingly the Drew memorandum is received in evidence a

Exhibit No 4

The parties were given an opportunity to file briefs with regard t

the issue raised by the remand None did so

The Drew memorandum details the examination made into appl

cant s technical competence and shows that he has been and is capabl

of carrying on the business of ocean freight forwarding for others 

Therefore on the record as a whole it is concluded that applican

pOsSesses sufficient teclmical competence and ability to qualify as 

licensed independent ocean foreight forwarder subject to complianc

with the various conditions of the Initial Decision set forth in th

second paragraph of this Supplemental Decision

Accordingly the granting of the application subject tQ the cond

tions set forth in the Initial Decision ofJune 22 1966 is confirmed

BENJAMIN A THEE AN

Presiding Examiner

WASHINGTON D C

Novembe11 1966

DENIAL OF APPLICATION

AND

DISCONTINUANCE OF PROCEEDING

In its Report served February 15 1967 the Commission postpone

the effective date of the denial of the application herein in order t

permit applicant to establish his own office and perform forwarde

services independently ofSaleh Inc or any othershipper

Applicant has informed the Commission that he has decided t

discontinue hisforwarding activities Accordingly

Itis ordered That the application is denied and this proceeding 

discontinued

By theCommission

THOMAS LISI

Secretary

2

See page 7 of the Initial Decision in this proceeding where the Examiner found th

the Respondent has been carrying on the business of freight forwarding in a circu

scribed manner limited to a few of the services usually performed by freight forwarders

10 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 6615

IN THE MAITER OF AGREEMENT 9448 J OINT AGREE IENT BETWEEN

FIVE CoNFERENCES IN THE NORTH ATLANTIC OUTBOUND EuROPEAN

TRADE

INITIAL DECISION ADOPTED

February 17 1967

Agreement No 9448 as modified herein creates a cooperative working arrange

ment under which five member steamship conferences share office space

and services and meet together to discuss mutual problems in specified

areas As modified said agreement is approved conditioned upon the filing

of evidence of acceptance by the member conferences

Burton H White and Elliott B Nixon for respondents

Donald J Brunner SalnuelB Nemirow and ROger A McShea

Ill

Hearing Counsel

REPORT

By THE COMMISSION John Harllee Ohairmanj Ashton C Bar

rett Vice OhairnULnj James V Day George H Hearn

oo711lm issWnerS

This is an investigation on our own motion to determine inte l alia

whether a cooperative working arrangement No 9448 filed for ap

proval under section 15 ofthe Shipping Act 1916 should be

approve

disapproved ormodified

In his initial decision Examiner E Robert Seaver concluded that

the subj ect agreement ven as amended in the course of the hear

ings could not be approved under the criteria of section 15 and the

cases thereunder because the agreement was too genera and the Com

mission could not know with sufficient particularity the activities

that might be engaged in under its terms Ve agree

The respondent conferences appealed from thisinitial decision and

Hearing Counsel generally supported the position ofthe Examiner in

his initialdecision 1

1 Hearing Counsel take the position that the agreement which was the subject matter

of the investigation may not be amended during the course of the bearings witbout our

amending the order of Investigation We reject this view Itis entirely proper for an

Examiner to encourage modifications which might reafiOnably lead to all a

greement s

long as such modifications are within the scope of the original Inqul17
300 FEDE RAL MARITIME COMMLSSION

vVe have considered the exceptions ofrespondents and find that the

are essentially a reargument of issues which were fully briefed an

treated by the Examiner in his initial decision Upon careful exam

nation of the record and the briefs and argument of counsel we con

clude that the Examiner s disposition of these issues was well founqe

andproper

Ve depart from the Examiner s ultimate conclusion only to the ex

tent that on the basis of the record in this case we have modifie

Agreement No 9448 and as modified given it our approval cond

tioned upon respondents acceptance within 60 days These modif

cations specify the particular areas in which the member conference

are authorized to meet and discuss mutual problems These correspon

to the types of matters which the Conference Chairman testified ar

likely to be the subject of discussion

Ve note that the agreement as modified does not authorize th

parties to agree on anyt Iiing except housekeeping arrangements

Moreover it limits discussions to four specified areas If the partie

desire to broaden the scope of the agreement we have incorporate

simple amendatory procedures which can initiate such action

Accordingly except as noted herein we adopt the Examiner s in

tial decision as our own and make it a part hereof

Anappropriate Orderwill be entered

Bythe Commission

INITIAL DECISION OF E ROBERT SEAVER PRESIDING EXAMINER 2

Five steamship conferences 3

covering outbound trades betwee

American North Atlantic ports on the one hand and various range

ofports in Western Europe on the other each ofwhich operates und

an individual agreement previously approved by the Commissio

under section 15 ofthe Shipping Act 1916 filed Agreement No 944

for approval under section 15 The names of the conferences set o

in the margin reflect the respective ranges of ports they serve Th

agreement would establish a cooperative working arrangement b

tween the five conferences As originally submitted the propose

agreement recited simply that the members would meet consult an

I See Commission report in Docket No 6615 served February 24 1967

8 North Atlantic Baltic Freight Conference 7670 North Atlantic Continental Freig

Conference 9214 North Atlantic French Atlantic Freight Conference 7770 Chairma

Barnett North Atlantic Mediterranea n Freight Conference 7980 Chairman MacNe

North Atlantic United Kingdom Freight Conference 7100 Chairman Gage

10 FM C
AGREEMENT 9448 N ATLANTIC OUTBOUND EUROPEAN TRADE 301

confer together regarding common problems and issue j oint reports

andcirculars relating to suchproblems

The proposed agreement contained no limits on the scope of the

matters that could be discussed nordid it designate with particularity

the matters that would be discussed It contained no requirement for

reporting activities under the agreement to theCommission The Com

mission was concerned with the absence of any specific statement in

the agreement of its objects and purposes so on March 24 1966 it

issued an order of investigation and hearing under the authority of

sections 15 and 22 of the Shipping Act to determine

1 whether the agreement should be approved disapproved or modified by

the Commission pursuant to section 15 2 whether there are any unfiled

agreements between the carriers which are being unlawfully implemented and

3 whether the agreement submitted for approval is true and complete

Section 15 requires every common carrier by water or other per

son Eluibject to the Act to file with the Commission a true copy or if

oral a true and complete memorandum of every agreement with an

other such carrier or person which covers certain named anticom

petitive activities or provides for an exclusive preferential or co

operative working arrangement The term agreement is defined

so as to include understandings conferences and other arrangements

The statute requires the Commission to disapprove cancel ormodify

any agreement that it finds to be unjustly discriminatory or unfair

as between the interests named in the statute to operate to the detri

ment of the commerce of the United States or to be contrary to the

public interest or in violation of the Act It requires the Commis

sion to approve all such agreements that do not offend these statutory

tests and exempts approved agreements from the antitrust laws

A prehearing conference and hearing were held before the under

signed and after an exchange of briefs oral statements of counsel

were heard by the Examiner pursuant to the agreement of the parties

No shippers carrierS or others who might have an interest in the

OTeement took part in the hearmg orparticipated in any other way

Only the Chairmen of the respondent Conferences testified at the

hearing The facts as disclosed by this testimony and the exhibits

which weremade partoftherecord are as follows

The five conferences share office space at No 17 Battery Place New

York City For some 60 years a single chairman served all of these

conferences and they were loosely connected together under F MC

Agreement No 12 entered into in 1904 between the steamship lines

that ade up the membership of the respective conferences That

agreement was approved by a predecessor agency of the Commission

10 1l M C
302 FEDE RAL MARITIME COMMISSION

many years ago and had as its purpose the con ideration and adj us

ment of all non competitive matters appertaining to their gener

interest which shall simplify the conduct of the business and th

relations with shippers and their representatives with connecting ca

riers and with others That agreement unlike the one at hand CO

templated that the member lines would reach agreement with respe

to tho esubjects not merely discuss them

In March 1964 the respondent cQnferences decided that each shou

have greater autonomy and that the job of chairman of all of the

was too burdensome for o e man Aseparate chairman was appointe

for the North Atlantic Mediterranean Freight Conference and one fo

the North Atlantic United Kingdom Freight C6nference A

sing

chairman continues to serve the other three At the request of th

members to Agreement No 12 that agreement was cancened by th

Commission in August 1965 Agreement No 9448 is sought as a parti

substitute fQr Agreement No 12

Each ofthe respondent conferences has always held its own separa

meetings and will continue to do so Each adopts rates and publishe

and files its own tariff Each files its own separate minutes of i

meetings with the Commission Each has its own staff of employee

with minor exceptions such as a telephone operator who serves all o

the respondents The five member conferences serve different ranges o

ports in Europe and the United Kingdom For this reason there 

no direct competition between the members of one conference and th

members of the other A degree of competition between the group

exists insofar as a particular area in the hinterlands ofEurope may b

served by more than one range of European ports and thus is serve

by more than ODe of the conferences Competition is also possib

through transshipment of course but the extent of such competitio

was not shown However the discussions and aetivities under th

agreement are not intended to have anythingto do wit this compe

tion nor with competition from carriers outside the conferences Th

matters to be discussed are those where the interests of the membe

coincide The specific anticompetitive activities enumerated in sectio

15 including the discussion of rates are explicitly excluded fro

the coverage of the agreement The members do not seek autharity 

agree on anything merely to confer The agreement is considere

by its proponents to be a

cooperativ e working arrangem nt and sin

that is one of the types of agreement covered by section 15 they fe

that some of the contemplated activities Jlly require Commissio

approval in accordance with the statute They seek exemption fro

the antitnlst laws through such approval even though they feel th

10 M C
AGREEMENT 9448 N ATLANTIC OUTBOUND EUROPEAN TRADE 303

there is some doubt as to the applicability of those laws to the con

templated activities

The Conference Chairmen testified that as far as they can visualize

at present the type of matters that will or may be brought up for

discussion are

1 Legal problems allecting all five conferences Since all five employ the

same law finn they prefer to confer with their lawyers with respect to such

common problems at one time rather than at five separate consultations 2

Problems arising from new or proposed legislation regulations court decisions

3 Provisions of due bills bills of lading tariff rules forwarder rules con

tainer rules shipping documents 4 Innovations and changing conditions in

ocean transpOrt such as containerization of cargo 5 Issuance of joint reports

and circulars and disseminating material such as speeches of Commission

Members to themembers of theproposed agreement

Itis conceded by the parties and found and con luded that the joint

discussion of some of these matters falls withinthe coverage of section

15 and therefore within the jurisdiction of the Commission because

the agreement constitutes a cooperative working arrangement within

the meaning of the statute Hearing Counsel objected to approval of

the agreement as initially submitted on the grounds that it was so

general that the Commission would not know with sufficient particu

larity the activities that would be engaged in under the terms of the

agreement The Examiner shared this view The difficulty of drafting

an agreement that would specify every type of matter that might be

discussed and every problem of mutual concern to the conferences

that might be cQRsidered wasrecognized The parties to the proceeding

negotiated together to see if language could be found that would be

agreeable to all concerned The Examiner made an effort to assist in

reaching this common ground because he believed then and con

tinues to believe that the problem is not so much that the proposed

activities must be prohibited but merely that they are not described

adequately The objections to the form of the agreement resulted in

revision in the agreement by the respondents so as to set forth those

matters that will not be the subject ofthe interconference discussions

These exceptions cover every type of activity described in section 15

except cooperative working agreements The revision also attempts

to describe a little more precisely the matters that will be discussed

However the agreement is still open ended because the members

feel that they cannot presently anticipate and set forth every subject

thatmay require discussion at some later date

The revised form as finally submitted for approval is attached

hereto as an appendix This form is identified as Exhibit 10 in the

record Hearing Counsel continue to object to approval of the agree

10 F M C
304 FEDERAL MAIUTlMECOMMISSION

ment in its revised form on the ground that the agreem nt still do

not define the conduct that will be permitted with as much particu

larity as is required by section 15

DISCUSSIONS AND CoNCLUSIONS

As originally submitted the agreement contained no requireme

for reporting activities undertaken thereunder to the Commissio

Respondents were of the view that such reporting was not require

since no decisions or agreements on the subjects to be taken up we

contemplated As finally submittoed however the agreement has be

revised so as to require the keeping of minutes and submission 

reports to the Commission of the meetings and the matters taken u

and discussed This provisio11 satisfies the requirements of Gene

Order 18 and would afford the necessary means for the Commissio

to maintain a

continuing inspection of the activities under th

agreement

Section 15 of the Act forbids the approval of agreements betwee

conferences unless each conference retains the right of independe

action This requirement is satisfied by the third paragraph of t

agreement involved here which provides such a rervation Secti

15 also requires that conferences adopt and maintain reasonable pr

cedures for promptly and fairly dealing with shipper requests a

complaints The individual agreements and procedures ofthe memb

conferences establish the machinery to handle such requests and co

plaints This will fulfill the statutory requiremen t

since the dealin

with shippers will be through individual conferences Similarly t

question of self policing required by section 15 was not raised Th

too can be left to the individual conferences Since the parties to t

agreement apparently will not make joint decisions at present the

is nothingto pol ice

It is seen then that the crux of the case involves the questi

whether the Commission can or should approve an agreement und

section 15 that states in essence what activities the parties w

not engage in but does not set out in detail the activities that will 

engaged in The question is probably not one of earthshal ing 

tance to respondents nor in the over all scheme of things Howev

no cases have been decided on this rther puzzling point so consid

able care has been taken not only to see that respondents propos

reooives full and fair consideration but also to see that the result 

this proceeding will not establish an unworkable precedent

Both Hearing Counsel and the Examiner held the tentative vie

after the evidence was in briefs were filed and oral argument w

10 FM O
AGREEMENT 944S N ATLANTIC OUTBOUND EUROPEAN TRADE 305

heard that the revised agreement was about as specific as you could

make it and still accomplish the desires of the respondents and that

the agreement was probably approvable However when Hearing

Counsel submitted their final position they urged that the agreement

cannot be approved Respondents are adamant in the view that a sim

ple agreement to discuss mutual problems has to be approved After

further deliberation and in the light of the Commission policy

reflected in the recent decision in Docket No 66 27 infra the Exam

iner shares the view of Hearing Counsel although not entirely for the

reason a dvanced by them

Respondents argue that in Docket No 883 Unappro l

ed Section

15 Agree1nents West Coast South Ameriean Trade 7 F MC 22

1961 the COlnmission found that there was not a violation of sec

tion 15 where two conferences got together with no approved section

15 agreement and discussed mutual problems even rates Respond

ents state that they submitted this extremely simple agreement for

approval out of an abUlldance Of caution They argue that agree

ments must be approved unless they are found to violate the specific

tandards of section 15 Aktiebolaget Svenslca Ame1 ika L v Federal

Jfa1 itime Omnmission 351 F 2d 756 1965 Alcoa 8S 00 v Oia

Anonima Venezolana 7 F MC 345 1962 Respondents also cite the

rule that agreements should not be disapproved on the bare possi

bility that they couldviolate the Act At the least there ought to be sub

stantial likelihood of such conduct Agreement 8192 Alaskan

Trade 7 F MC 511 1963 They allege that there has been no show

ing that the proposed activities under the agreement will be disc imi

natory detrimental to commerce or contrary to the public interest

and that it therefore must be approved They point out that the Com

mission can disapprove the agreement at any time in the future ifthe

activities under the agreement go beyond those that are authorized

citing the Agreernent 849 decision supra

Respondents urge further that the anticompetitive aspects ifany

of their proposed agreenlent do not approach the extent of those prac

ticed in trades where all of the carriers are members of one conference

serving all Of tl1e ranges of ports such as the conference that covers

the entire trade between the Pacific Coast and Europe They say in

effect that if the Commission s aim is to minimize the inroads on anti

trust principles it should permit this kind of discussion agreement

rather than riskdrivingthe conference carriers all into one super con

ference in the North Atlantic

Hearing Counsel argue that agreements approved uncler section 15

must be precise in the description of the authorized activities in order

10 F M C

299 843 0 68 21
306 FEDERAL MARITIME COMMISSION

that the Congressional policy underlying the statUfte may work Tha

policy contemplates continuous administrative supervision over those

shipping activities exempted from the ant trust laws They citeAnglo

Oanadiatn Shipping 00 v United States 264 F 2d 405 1959 They

also cite cases holding that the Commission lllust have the means o

obtainil1g information and data if it is to properly carry out this su

pervision e g Unapproved Section 15 Agreements S1tpra and Medi

terranean Pool8 nvestig ation 9 F M C 264 Docket No 1212 decided

tTanuary 19 1966 The latter point a

ppears to be of somewhat limited

relevance

The thrust of Hearing Counsels argument is that the standard fo

a pproval of section 15 agreelnents is based on the contenJts of the

agreement JointAgreement Between Far East Oonference and Pa

cifio lVestbownd Oonferenoe 8 F M C 553 561 1965 In that case the

Commission held that an agreement must be sufficiently precise to per

mit any interested party to ascertain how the agreement is to work by

reading it without resorting to inquiries of the parties In short

Hearing Counsel say that the proposed agreement here is so genera

in its terms that anything could be taken up and considered by the con

ferences except those things specifically exchtded of course The

testimony of the conference chairmen bear this onto

The arguments of respondents are at first blush Inost persuasive

Vpon closer scrutiny though it is seen that their a

rguments suppor

the legality under section 15 ofthe things their witnesses said respond

ents intended to do under the agreement This is not the question The

question is the legality of the Commission giving section 15 approva

and antitrust inununity to anything therespondents might decideto

do underthe broadwording Of the agreement The Conunission simply

does not know at this time the eXtent and identity ofthe areas of mu

tual concern these carriers might confer about Yet the Commission is

under a mandate under section 15 to know what it is approving a

the time it does so Itis not enough that the a

greelnent can be thrown

out later if the activities prove to be beyond the pale For example i

the members discuss vessel utilization free space and the like thi

could lead to the spacingof the sailingsof all the carriers either by de

sign or simply because the minds of the members were similarly in

fluenced by the discussions If circulars are issued jointly this in it

self would tend to indicate that there was some agreement as to thei

content In turn the content of such circulars could influence or affec

concerted action These are examples of many subjects presently un

known to the Commission that might be taken up by the members

Yith resultsthat are eitheJ anticompetitive orwhich would have othe

10 FM C
AGREEMENT 9448 N ATLANTIC OUTBOUND EUROPEAN TRADE 307

consequences in transportation Rnd commerce of direct concernto the

Commission and the public

In addition to the reasons given by Hearing Counsel approval of

the agTeement must be denied because it runs counter to the policy of

the Commission evidenced in Docket No 6627 The Pe1 sian Gulf

Outwa d Freight Oonference 10 F MC 61 decided since this in

stant proceeding was submitted for decision In that case the

Commission decided that a conference cannot establish joint freight

rates on cargoes transported on foreign flag vessels that are lower

than those applicable to cargoes carried on American flag ships

under the terms of an approved section 15 agreement authorizing its

members to establish joint rates charges and practices That decision

and other court and Commission eases cited therein evidence a grow

ing policy to restrict activities under approved section 15 agreements

closely to those specified in the agreement This policy excludes many

practices that are claimed to be interstitial or included in the cover

of authority of the underlying section 15 agreement

This line ofcases provides a strong analogy to the present situation

for if conferences are to be held strictly to the activities explicitly au

thorized in their agreements then grea t caremust betaken when the

agreements are approved to see that 1 the Commission knows pre

cise y what it is a pproving and 2 the agreements set forth clearly

and in snfficient detail to apprise the public just what activities will

be undertaken It is manifest that this requirement of clarity in the

agreement will inure to the benefit of the conference concerned

Finally the respondents correctly state that section 15 requires

approval of proposed agreements unless they offend the statutory

tests The agreement proposed by respondents fails to comply with

these standards however on several counts It would be contrary to

the public interest to approve an agreement whose coverage is so

vague that the public cannot ascertain the coverage by reading the

agreement The approval of such an agreement would deprive the

public of the protection afforded by statute of the Commission s

surveillance over conference activities The blank check that would

be afforded by the approval of this agreement would sunply fail to

proted the public interest and the flow of commerce in the manner

contemplated by Congress in the enactment of section 15

Furthermore the proposed agreement is not the true and complete

agreement of the parties thereto The conference witnesses admitted

that even they do not know what subjects they might get into as time

goes on It is patently incomplete because it does not adequately

describe the activities that will be pursued under its terms vVritten

10 F M C
308 FEDERAL MARITIME COMMISSION

as well as oral agreements must be complete as well as true a

evidenced by the Commission s Order of Investigation in this ver

proceeding For this reason and those previously discussed the agree

ment cannot be approved

If as a result or this decision the respondent conferences decid

that they will seek to join together in a

super conference the issue

incident to the application for approval or such a

proposal would b

decided at that time on their own merits Those issues are not presen

here

There is no contention that there are any unfiled agreement

between the respondents that are being unlawrully implemented an

the record herein would not support a finding that such agreement

exist

Other contentions or the parties are either irrelevant in view o

the decision herein or they are not supported by substantial reliable

orprobative evidence

ULTIMATE CONCLUSION

1 Agreement No 9448 is hereqy disapproved pursuant to sectio

15 Shipping Act 1916 for the reasons set forth in this decision

2 Agreement No 9448 is not the true and complete agreemen

among respondents

3 There are no unfiled agreements between the carriers which ar

being unlawfully implemented

An appropriate order will beentered

Signed E ROBERT SEAVER

Presiding EXaniner

10 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 6615

IN THE MATTER OF AGREEMENT 9448 JOINT AGREEMENT BETWEEN

FIVE CONFERENCES IN THE NORTH ATLNTIC OUTBOUND EuROPEAN

TRADE

ORDER

The Federal 1aritime Commission instituted this proceeding to

determine whether Agreement No 9448 should be approved pursuant

to section 15 of the Shipping Act 1916 and the Commission having

this date made and entered its R portadopting the Examiner s Initial

Decision except as to disapproval of the subject agreement which

Report and Initial Decision are made a

part hereof by reference

Therefore it is ordered That Agreement No 9448 be and the same

hereby is approved pursuant to section 15 of the Shipping Act 1916

on the condition that it be modified by substituting the language con

tained in Appendix Bhereto

Itis further ordered That the approval herein ordered with respect

to Agreement No 9448 shall become effective at such time as the

Federal Maritime Commission receives written notice that the parties

have agreed to the foregoing modification except that such approval

shall become null and void unless the agreement so modified is filed

ith the Commission not later than sixty 60 days from the date of

service ofthisorder

By the Commission

Signed THO IAS LISI

Secretary

10 F M C 309
APPENDIX A

F M C DocKET No 6615

APPENDIX TO

INITIAL DECISION

AGREEMENT No F M C 9448

The undersigned Conf rences by their respective Clairmen thereunto duly

authorized hereby enter into a

cooperative working agreement in considera

tion of the mutual benefits resulting therefrom Itis the intention of the parties

through their respective Chairmen or other representatives to confer an

meet with one another in respect of common problems where their interest

coincide and issue joint reports and circulars relating to such problems Since i

is not possible to foresee in detail aU the subjects that will be discussed unde

the terms of this Agreement they cannot be enumerated here

Nothing herein shall authorize or permit the parties hereto to directly or in

directly consult meet or confer with one another with respect to fixing o

regUlating transportation rates or fares giving or receiving special rates

accommodations or other special privileges or advantages controlling regu

lating preventing or destroying competition pooling or apportioning earnings

losses or taffic allotting ports or restricting or otherwise regulating th

number and character of sailings between ports or limiting or regulating i

any way thevolume or character of freight or passenger traffic to be carried

Each Conference shall always retain theright of independent action and an

action taken by a member of this Agreement on matters discussed or conferred

upon shall be taken solely by the individual Conferences and reported upon b

them inaccordance with theterms of their approved agreements

The parties hereto shall within 30 days file with the Federal Maritime Com

mission a report of each meeting held pursuant to this Agreement describin

all matters that were discussed or taken up as to whiCh one of the Chairmen

shall certify as to its accuracy and completeness Copies of all reports o

circulars in whatever form issued under this Agreement shall be retained b

theparties forat least two years

This Agreement shall amend and supersede the Agreement between the unde

signed Conferences filed with the Federal Maritime Commission on or abou

April 15 1965 This Agreement shall not become effective until it is approved

by theFederal Maritime Commission in accordance with section 15 of the Shi

ping Act 1916

Dated NEWYORK N Y July18 1966

310 10 F M C
APPENDIX B

AGREEMENT No F M C 9448

AGREEMENT 9448 N ATLANTIC OUTBOUND EUROPEAN TRADE 311

The undersigned Conferences by their respective Chairmen thereunto duly

authorized hereby enter into a

cooperative working agreement in consideration

of the mutual benefits resulting therefrom and agree as follows

1 The member conferences are authorized to participate jointly in the

lease of office space and in connection therewith to utilize common telephone

mailroom receptionist duplicating photostat storage library and other

similar routine office services which can better be accomplished jointly and

shall apportion the expenses for the operation of such joint services and

facilitiesas may be mutually agreed upon

2 The member conferences through theirrespective Chairmen orother duly

designated representatives areauthorized to confer and meet with one another

with respect to the following common problems where their interests coincide

and issue joint reports and circulars relating to such problems

a Common legal problems

b Problems ariSing from proposed legislation and Court decisi On

c Standardization of terminology and provisions in bills of lading and

other documents commonly used in connection with ocean shipping

d Technological developments and changes affecting ocean transporta

tion such as containerization

3 This agreement may be amended upon a majority vote of its member

conferences provided however that no amendment shall become effective

unless and until it has been approved by the Federal Maritime Commission

pursuant to section 15 of the Shipping Act 1916

4 Nothing herein shall authorize or permit the parties hereto to directl y

or indirectly consult meet 01 confer with one another with respect to fixing

or regulating transportation rates or fares giving or receiving special rates

accommodations orother special privileges or advantages controlling regulat

ing preventing or destroying competition pooling or apportioning earnings

losses or traffi allotting ports or restricting or otherwise regUlating the number

and character of sailings between ports or limiting or regulating any way

the volume or character of freight or passenger traffic to be carried or in any

manner providing for an exclusive preferential or cooperative working

arrangement except as authorized in Paragraphs 1 and 2 of this Agreement

5 Each conference shall always retain theright of independent action and

any action taken by a member of this Agreement on latters discussed or con

ferred upon shall be taken solely by the individual conferences and reported

upon by them in accordance with the terms of their approved agreements

6 The parties hereto shall within 30 days after each meeting file with the

Federal Maritime Commission a report of such meeting held pursuant to this

Agreement describing all matters that were discussed or taken up as to which

one of the Chairmen shall certify as to its accuracy and completeness Copies

of all reports or circulars in whatever form issued under this Agreement

shall be retained by theparties for at least two yeara and copies thereof shall

be filed with the Commission in the same manner as reports required by this

paragraph

This Agreement shaH amend and supersede the Agreement between the

undersigned Conferences firled wtith the Federa l Maritime Commission on or

abiout April 5 1965

10 F M C
312 FEDERAL MARITIME COMMISSION

DOCKET No 6615 

ON PETITION FOR RECONSIDERATION

In our Report and Order in this docket served on February 24 19

we approved Agreement 9448 on the condition that itbe modified 

set forth in Appendix B to theReport

Respondents have filed an amended agreement which differs fro

thatspecified inOur Order in two respects

1 It does not contain paragraph 1 which relates to joint participation 

office services

2 Itdoes not contain the last two lines of paragraph 6 which relate to 

filing of reports and circulars withtheCommission

In an accompanying letter respondents aJttorney argued that agr

ments relating to joint office sharing arrangements and the pooling 

secretarial services have not in the past been considered as subject 

the requirements of section 15 even though they might literally 

deemed cooperative working arrangements See Volkswagenwe

A G v Marine Terminals Oorporation et al 9 F MC 77 82 1965

Counsel also contends that the requirement of filing circulars and 

ports goes beyond the terms of Gener al Order 18 We have treat

this letter and the amended agreement as a petition for reconsideratio

and so advised counsel for the respective parties Hearing Counsel 

their reply state that they have no objection to the proposed change

Dpon consideration ofrespondents petition for reconsideration 

Hearing Counselsreply thereto we conclude that the points rais

in saidpetition are well founded

Accordingly IT IS ORDERED

1 That respondents petition be and thesame hereby is granted a

2 That the amended Agreement No F MC 9448 a

copy of whi

is annexed hereto and made a part hereof by reference be and t

same hereby is approved pursuant to our authority under section 15 

theShippingAct 1916

By the Commission

Signed THOMAS LISI

Secretary

AGREEMENT No F M C 9448

The undersign d C nfe r

ences by their respective Chairmen the

unto duly authorized hereby ent 3r into a cooperative working agre

10 F M C
AGREEMENT 9448 N ATLANTIC OUTBOUND EUROPEAN TRADE 313

ment in consideration of the mutual benefits resulting therefrom and

agree as follows

1 The member Conferences through their respective Chairmen or other duly

designaJted representatives are authorized to conferland meet with one another

with respect to thefoHowing common Probl where their interests coincide

and issue joint reports and circulars relating to such problems

a Common legal problems

b Problems arising from proposed egislation and Court d ons

c StandardiZation of terminology and provisions in bills of lading and

other documents commonrly USed in connection with ocean shipping

d Technological developInentsand changes affecting ocean transporta

tion suchas containerization

2 This agreement may be amended upon a majority vote of its member

Conferences provided however thalt no amendment shall become effective

unless and uDJtil it has been SJpproved by the Federal Maritime Commission

pursuant to section 15 of the Shipping Act 1916

3 Nothing herein shall authorize or permit the parties hereto to directly

or indirectly consult m orconfer with one anotherwith l espect to fixing

or regwating transportation r8Jtes or fares g1V ing or receiving special rates

accommodations or other special privileges or advantages controlling regu

laJting preventing ordestroying competition pooling or apportioning earnings

losses or traffic allotting pom or restricting or otherwise regulating the

number and character of sailings between portJs or limiting or regulating in

any way the volume or character of freight or passenger traffic to be carried

or in any manner providing for an exclusive preferential or cooperative

working a rralJlgement except as authorized inParagraph 1 of this Agreement

4 Each Conference shaal always retain the right of independent action and

any action taken by a member of this Agreement on matters discussed or

conferred upon shall be ta ken solely by theindividual Conferences and reported

upon by them in accordmce with theerms of Ithei r

proved agreem ents

5 The parties hereto oShall within 30 daYlS after each meeting file wiJth the

Federal Maritime Commission a report of such meeting held pursuant to this

Agreement describing aU mattersthat were discussed ortaken up as to which

one of the Chairmen shall certifyas Ito its accuracy and completeness Copies

of aU repol lts or circulars in whatever form issued underthis Agreenient shan

he retainedby the pal ltles forat least2years

This Agreement shall amend and supersede theAgreemenJt between thermder

signed Conferences filed with the Federal Maritime Comm Sion on or 8Jbout

April 5 1965

10 F M C
FEDERAL MARITIME COM 1ISSION

DOCKET No 66 33

AGREEMENT No 8005 4 MODIFICATION OF NEW YORK TERMINAL

CONF NCE GREEMENT

ADOPTION OF INITIAL DECISION AND ORDER OF

APPROVAL

AdoptCll Fcbnw1Y 28 1967

By THE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohai1 man James V Day George H Hearn Oommis

sioners

This proceeding is before us for review OIl our own Illotion No excep

tions were filed to the Initial Decision and we decided to review that

decision because we disagree with the Examiner s ultimate conclusions

numbered 2 and 3

In his decision the Examiner quite correctly states that the rules

and regulations by which the authority to charge demurrage on export

cargo is to be implemented are not an issue in this proceeding There

fore we would substitute the following for said ultimate conclusions

2 The said Agreement will not make or give any undue or unreasonable

preference or advantage to any particular person locality or description of

traffic or subject any of these to any undue or unreasonable prejudice or disad

vantage inviolation of section 16First of theAct

3 Neither will the said Agreement constitute an unjust or unreasonable prac

tice as contemplated by section 17of theAct

In all other respeots we find the Examiner s decision which is at

tached hereto and made a

part hereof well founded and proper and

with the deletion of the words when implemented from ultimate

conclusions numbered 2 and 3 we hereby adopt it as our own

Therefore

Itis orderred That Agreement No 8005 4 as it appears in Appendix

A is hereby approved and this proceeding is hereby discontinued

By the Commission

SEAL Signed THOMAS LISI

Secretary

314

11 UK
AGREEMENT NO 800 5 4 MODIFI1CAsTION OF CONF AGREEMENT 315

DOCKET No 6633

AGREEMENT No 8005 4 MODIFICATION OF NEW YORK TERMINAL

CoNFERENCE AGREEMENT

Agreement No 8005 4which modifies the New York Terminal Conference

Agreement so as to permit the charging of demurrage and the establishment

of free time on export cargoes will not violate sections 15 16 or17 of the

Shipping Act 1916 and it is approved

Joseph A

Byrne for New York Terminal Conference respondent

James M Henderson and Douglas W Binns for Port of New York

Authority petitioner

Elkan Turk Jr for New York Committee of Far East Lines

petitioner

Philip G Kraenwr forMaryland PortAuthority

BlairP Wakefield for Virginia State PortAuthority

Roger A McShea Ill appeared as Hearing Counsel Donald J

Brunner Chief Office of Hearing Counsel F MC on the brief

INITIAL DECISION OF E ROBERT SEAVER PRESIDING EXAMINER 1

The purpose of this investigation is to determine whether Agree

ment No 8005 4between the members ofthe New York Terminal Con

ference which has been submitted to the Commission for approval

under section 15 of the Shipping Act 1916 the Act would violate

the provisions of sections 15 16 or 17 ofthe Act and whetherthe agree

ment should be approved under section 15 The Commission has juris

diction to conduct the investigation undersections 15 and 22 ofthe Act

The New York Terminal Conference operates pursuant to Agree

ment No 8005 as amended which authorizes its members to establish

and maintain joint rates rules and regulations applicable to truck

loading and unloading at piers in New Yorkharbor and vicinity and to

fix free time and demurrage rates and practices o import cargoes in

trades not otherwise covered by an approved section 15 can ier agree

ment 2The Conference consists of marine terminal operators contract

stevedores and common carriers by water who furnish marine terminal

facilities and services in the PortofNew Yorkand vicinity

As originally submitted for appr val Agreement No 8005 4 would

have modified the basic agreement by providing for the following

1 Clarification of the Conference s

ratemaking authority for

loading and unloading lighters

2 Ratemaking authority covering free time and demurrage on

export cargo

1

See Commission Order in Docket 6633 supra initial decision adopted Feb 28 1967

I The Conference has not yet established free time rules norfixed demurrage rates because

in New York this has been done by the carriers It is anticipated that as to the export

cargoes the terminals 10m take this action rather than the carriers

10 F MC
316 FEDERAL MARITIME COMMISSION

3 A change in language with respect to free time and demu

rage on import cargo

4 Ratemaking authority for sorting import cargo and

5 Preservation of the right of any member to charge rates d

ferent than those in the Conference tariffs except the tru

loadingand unloading tariff

Protests against approval of the proposed agreement were filed b

the Portof New York Authority and by the New York Committee 

Inward Far East Lines 3

The Authority and the Committee werename

as petitioners in the order of investigation in accordance with Ru

3 a of the Commission s Rules ofPractice and Procedure The Mar

land Port Authority and the Virgina State Port Authority inte

vened in the proceeding Their interest in the proceeding waslarge

based on a desire to be sure that the approval of the propose

agreement would not place the Port of New York in a

competitiv

advantage

The subject matter involved in the first modification mentione

above was considered by the Commission in Docket No 1153 Truc

and Lighter Loading and Unloading PrMtwes in Ne1 York Harbo

decision served ay 16 1966 The Conference therefore dropped tha

proposal from Agreement No 8005 4 in the course of this proceedin

In addition the Conference abandoned its request for approval of th

fourth and fifth modifications set out above because these modification

met with considerable objection from other parties in the proceedin

and apparently were not of as great importance to the Conference 

the remaining two items

This left as practically the sole issue in the proceeding the questio

whether the modification which would grant to the Conference rule

and rate m

aking authority over free time and demurrage on expo

cargo is lawful under the Act and whether it should be approved b 

the Commission under section 15 The remaining modification bein

the third one set out above is incidental to the requested authori

to establish joint tariff provisions covering free time and demurrag

on export cargo

So many of the issues having been eliminated by the

counsel for 

the petitioners and the interveners expressed the vie

at a prehooring conference that if the Conference could amend th

remaining two proposals to clarify certain provisions the protest

might be withdrawn Hearing Counsel also expressed the view that th

remaining issues might be disposed ofamicably but he desired to com

plete a canvass of shippers and associations of shippers in the Ne

8

The Committee is a group of carriers serVing various inbound trades from the Orie

naming free time and demurrage on inbound cargo at New York harbor operating under t

authority of FMC Agreement No 6015

10 F M C
AGR EIElMENT NO 8005 4 MODIFICA I

ION OF CONF AGREEMENT 317

York area to be sure that the ratemaking authority covering free time

and demurrage on exports would not raise protests among and prob

lems for the shippers Counsel for all ofthe parties felt that itwould be

possible and desirable to avoid an evidentiary hearing and the Ex

aminer agreed It was therefore decided that efforts to dispose of the

proceeding inthis way would be pursued and that a second prehearing

conference would be held

Atthe second prehearing conference Hearing Counsel reported that

the associations ofshippers and the individual shippers with whom he

had communicated had not raised protests to the proposed modifica

tion as amended in the course of the proceeding and that Hearing

Counsel did not object to approval of the proposed modifications In

the meantime counsel for the parties had agreed upon revisions ofthe

language of the proposed modifications and counsel for all of the

remaining parties withdrew their objection to approval of the agree

ment 4

It remained incumbent upon the Examiner to review the pro

posed modification as amended and make recommendations to the

Commission regarding its approvability Hearing Counsel suggested

that in view of the circumstances the most expeditious way of accom

plishingthis would be through the issuance of an initial decision after

briefs were filed by the parties expressing their position and their

views The other parties and the Examiners agreed to this course

DISCUSSION AND CONCLUSIONS

The facts incident to this initial decision are not extensive They

were brought out by counsel for the parties in the course of the pre

hearing conferences and in their memoranda submitted to the Exam

iner No issue has been raised as to these facts by any of the parties

The statutory requirements and prohibitions involved in thisproceed

ing are as follows

1 Section 15 of the Act requires that the Commission disapprove

cancel or modify the proposed modifications if they are found to be

unjustly discriminatory or unfair as between carriers shippers ex

porters importers or ports or between exporters from the United

States and their foreign competitors or to operate to the detriment of

the commerce of the United States or to be contrary to the public

jnterest or to be in violation of the Shipping Act Agreement No

8005 4will not violate these standards

2 Section 16 First of the Act makes it unlawful for any common

carrier by water orother person subject to theAct either alone or in

conjunction with any other person to make or give any undue or

unreasonable preference or advantage to any particular person local

The modifications in their final form are set out in Appendix A attached

10 F M C
318 FEDERAL MARITIME COMMISSION

ity ordescription oftraffic orto subject any particular person localit

or description oftraffic to any undue or unreasonable prejudice or di

advantage The Agreement will not bring about such a preferenc

advantage prejudice ordisadvantage

13 Section 17 requires that every such carrier and every other perso

subject to the Act shall establish observe and enforce just and reaso

able regulations and practices relating to or connected with the recei

ing handling storing or delivering of property and authorizes th

Commission to determine prescribe and order enforced a just an

reasonable regulation or practice whenever it finds that any such reg

lation or practice adopted by a carrier or other person subject to th

Act is unjust or unreasonable The modifications under consideratio

will not ipso facto constitute unreasonable regulations or practices

Ithas long been an approved practice for marine terminals or ocea

carriers to assess a

charge for demurrage against a shipper who leave

his cargo at the terminal for a period beyond the free time estab

lished by theterminal5In New York Harbor such charges are assesse

by the carriers in connection with the transportation of import carg

However no such charges are assessed in New York by anyone in co

nection with the storage at the terminal of export cargo Howeve

such cargoes are frequently allowed to remain on thepiers for extende

periods oftime for thebenefit of the shipper prior to export shipmen

This occurs for example when a shipper desires to assemble sever

parcels at the pier for shipment under a single bill of lading This 

referred to as the hold on dock practice

Itis apparent that these practices inevitably bring about a disparat

treatment as between import and export cargo and that it very like

couldlead to discriminatory treatment as to differentshippers ofexpo

cargo That is in the absence of an expressed period of free time in th

tariffs of the terminal conference or the carriers the cargo of on

shipper will remain in the terminal for a greater length of time with

out charge than the cargo of other shippers This is a valuable righ

to the shipper of course and results in an expense to the termin

operator

Piers and terminals are constructed for use as the transient repos

tory ofgoods rather than a

longtime storage shed The valuable work

ing space on the piers is restricted if the owners of cargo eithe

inbound or outbound are allowed to leave the cargo on the pie

indefinitely Inaddition to its paying the terminal operator for a valu

II See Storage of Import Property 1 U S M C 676 Docket No 2121 1937 Free Tim

and Demurrage Ohargea at New York 3 U S M C 89 Docket No 659 1948 Practicea 

San Franci8co TerminaZ8 2 U S M C 588 Docket No 555 1941 and General Order 

Part I 46 C FR 526 1

10 F M C
AGRiEEiMENT NO 8005 4 MODIFl1CAflION oF CONF AGREEMENT 319

able service demurrage is permitted indeed required by the Commis

sion in order to discourage the owners from leaving their cargoes on

the pier for excessive periods oftime Export cargo congests the piers

just as much as import and there is an equal need to discourage ship

pers leaving their export cargo on the piers for extended periods of

time

The Port ofNew York is unique in that the carrier rather than the

terminaloperator designates the free time and assesses the demurrage

charges on import cargo N ew York is also the only major port except

Philadelphia where there is no free time rule and no charge for de4

murrage or storage on export cargoes Official notice is taken of the

facts stated in thisparagraph which are based in part on a sampling

of the tariffs on file with the Commission

Itcannot be concluded that the proposed authority to charge demur4

rage on export cargo would result in any undue or unreasonable pref

erence advantage prejudice or disadvantage in violation of section

16 First On the contrary it is designed to eliminate such results and

can be expected to do so if properly administered Similarly the regu

lations and practices contemplated by the proposed modifications are

more just and reasonable within the meaning of section 17 than the

present system which allowsunlimited free time to certain export ship

pers The detailed method ofimplementing this authority is not il

issue

in this proceeding of course These methods including the extent of

free time and the evel of demurrage that will be set forth in

respondents tariffs on filewith the Commission will be subject to con

tinuing Commission surveillance under the provisions of the Act They

willhave to meet thestandards and will be subject continuously to the

requirements and prohibitions ofsections 15 16 and 17

Neitherthe petitioners the interveners nor Hearing Counsel suggest

that the proposed modifications would be unjustly discriminatory or

unfair as between the interests named in section 15 or that they would

operate to the detriment ofour foreign commerce or be contrary to the

public interest or in violation of the Act The Examiner knows of no

reason to suspect that the modifications would violate these standards

of section 15 oftheAct As stated earlier the practices contemplated in

the proposed modifications will be more likely to eliminate discrimina

tion

The Maryland Port Authority stated on the record that it had no

objection to approval oftheAgreement However in the memorandum

which it filed with the Examiner the Authority advanced certain

observations that deserve comment here even though as the Authority

states it can be argued that this goes far beyond the scope of

thisproceeding

10 F M C
320 FEDERAL MARITIME COMMISSION

The Authority states in effect that rules of general applicability ar

needed in this area ofdemurrage on export cargoes Itpoints out tha

unlike the importer the exporter does not always have control ove

the length oftime his cargo reposes on the pier before it isloaded on th

vessel and suggests that perhaps the ship should pay the bill if it cause

thedelay Clarification ofthe status ofterminaloperators generally i

relationto ship operators is needed the Authority suggests in orde

to prevent competitive advantages to particular carriers who allow o

require the shipperto bring his cargo to the pier far in advance of th

actual sailing Italso suggests that the fact that carriers operate man

of the terminals aggravates the competitive situation arising out o

free storage ofexport cargo The Authority suggests that this raises 

need for rules requiringseparate tariffs covering terminal charges

These are real problems that deserve careful attention An ev

dentiary rulemaking proceeding in this area might be advisable a

suggested when the Commission s schedule and its facilities permit 

In the meantime however these considerations do not require or eve

permitthe disapproval of Agreement No 8005 4Itmust be assume

that by ordering this investigation the Commission decided that a

least for thepresent the proposed agreement involved here is to be con

sidered ad hoc on its own merits rather than awaiting the adoptio

of rules of general applicability in this area As stated earlier ther

has been no showing nor even a suggestion that 8005 4will violate th

standards of section 15

Itis evident however that until general ruleS are established con

siderable caution will have to be exercised by respondent in adoptin

fair standards for assessing demurrage charges and establishing fre

time on export Cargo within the framework of the guidelines an

nounced in the cases cited in footnote 5 above and General Order 

Part IThe Commission staff willuse diligence of course in reviewin

the tariffs to see that the particular standards adopted by responden

are fair andthat they are clearly set forth in respondents tariffs The

review will also insure that the general guidelines heretofore adopte

by the Commission andits predecessors are complied with In thisway

the dangers feared by theMaryland PortAuthority will be minimized

Modification No 3 described above merely makes it clear that th

Conference s tariff filing authority will not conflict with such autho

ity possessed by the steamship conferences Itis incidental to the prin

cipal 1110dification which grants the authority to adopt tariff charge

and rules incident to demurrage and free time on export cargoes Itha

8 Docket No 965 Is a nonevldentlary rulemakIng proceedIng In this general area Whe

completed that proceeding may help settle some of the questions raIsed by the Marylan

Port Authority even though It Is concerned dIrectly with only the PacIfic coast ports

10 F M C
AGRE EiMEl IT NO 8005 4 MODIFlCAflION OF CONF AGREEiMEW 321

UVlIMATE CONCLUSION

not been questioned by the parties and no reason is perceived as to why

it should be disapproved The portion enclosed in brackets see Appen

dix A has been added by the Examiner in order that the provision

will accurately express the intention of the parties Also without the

change no demurrage could be charged by the terminals if a carrier

had on file a tariff of rates that did not include demurrage This would

result in unjust discrimination between shippers and was simply not

intended by the parties

1

Agreement No 8005 4 as set forth in Appendix A will not vio

late the standards of section 15 oftheAct

2 The said Agreement when implemented will not make or give

any undue or unreasonable preference or advantage to any particular

person locality or description oftraffic or subject any ofthese to any

undue or unreasonable prejudice or disadvantage in violation of sec

tion 16 First oftheAct

3 Neither will the said Agreement when implemented constitute

an unjust or unreasonable practice as contemplated by section 17 of

theAct

4 An appropriate order will be entered approving Agreement No

8005 4and discontinuing thisproceeding

E ROBERT SEAVER

Presiding Examiner

10 F M C
322 FEDERAL MARITIME COMMISSION

APPENDIX A

REVISED COpy OF FEDERAL MARrnME COMMISSION AGREEMENT No 8005 4

Agreement entered into at the City of New York New York on the 31st d

of January 1964 and modified on the 30th day of June 1966 by and betwee

the undersigned parties to Federal Maritime Commission Agreement No 8005

WITNESSETH

Whereas at meetings duly held on the 31st day of January 1964 and the 30

day of June 1966 at the office of the New York Terminal Conference in the Ci

of New York the parties hereto considered and voted in favor of certain amen

ments to said Agreement No 8005 as hereinafter setforth

Now THEREFORE the parties do hereby mutually agree as follows

First Clause One as amended ishereby further amended to read as follows

1 The parties shall establish publish and maintain a tariff and or tarif

containing just and reasonable rates charges classifications rules regulation

and practices withrespect to the services of

Loading and unloading of waterborne freight on to and from trucks ligh

ers and barges

Storage of waterborne import and export freight on pier faoilities includ

ing the fixing of free time and demurrage thereon provided howeve1 th

no tariff or tariffs so i8 ued shall include trades covered by tariffs now o

hereafter published and filed by or purS1tant to agreements among commo

carriers by water insofar as the latter tariffs cover free time an

demurrage

Second Except to the extent as amended hereby said Agreement No 80

shall remain in full force and effect as heretofore approved pursuant to Sectio

15 of the Shipping Act 1916

Third This Agreement shall become effective at such time as it shall be a

proved by the Federal Maritime Commission pursuant to Section 15 of the Shi

ping Act 1916

Filed on behalf of the following parties comprising the membership of th

New York Terminal Conference

American Export Isbrandtsen Lines Inc

American Stevedores Inc

Bay Ridge Operating Co Inc

Chilean Line Inc

Grace Line Inc

International Terminal Operating Co Inc

Maher Stevedoring Co Inc

Marra Bros Inc

Maude James Inc

John W McGrath Corporation

Nacirema Operating Co Inc

Northeast Marine Terminal Co Inc

Norwegian America Line

Pioneer Terminal Corporation

Pittston Stevedoring Corporation

Reliable Marine Service Co Inc

Universal Terminal Stevedoring Corporation

NOTIll UnderZined portions designate amended provisions of Agreement 8005

10 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 65 52

JAPAN ATLANTIC AND GULF FREIGHT CoNFERENCE AND TRANS PACIFIC

FREIGHT CONFERENCE OF JAPAN MoDIFICATION OF DUAL RATE

CONTRACT

Decided March 23 1967

Permission is granted Conferences to a modify the prompt release clause

b add a false declaration elause and c delete certain references to the

Federal Maritime Commission in their approved dual rate contract form

Petition to make further modifications deletions and additions denied

ElJcam Turk Jr for respondents

Donald J Brwnner Howard A Le1JY and E DuncaJn Ha mner Jr

Hearing Counsel

REPORT

By THE COIMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairman James V Day and George H Hearn

Oornmi8sWners

This proceeding arises out of a petition filed by the Japan Atlantic

and Gulf Freight Conference and the Trans Pacific Freight Con

ference of Japan Conferences pursuant to section 14b of the

ShippingAct 1916 requesting permission to modify certain provisions

of their Commission approved dual rate contracts We instituted this

investigation to determine 1 whether departures from the contract

language approved for use by respondent Conferences in EwcVusive

Patronage Oontracts 8 F MC 337 1964 are necessitated by condi

tions in the trade and if so 2 whether the changes proposed meet

the standards of section 14b of the act and can be permitted pursuant

to thatsection

Inhis Initial Decision Examiner HerbertK Greer approved certain

changes to respondents approved contract form namely 1 use of an

alI affiliates clause 2 modification of the present prompt release

10 F M C 323
324 FEDERAL MA RITIME COMMISSION 

clause and 3 addition of a false declaration clause All other r

quested changes modifications and deletions were denied by th

Examiner This proceeding is now before us on exceptions to the Initia

Decision

Respondent Conferences are engaged in the inbound trade to th

United States from theFar East principally fiom Japan

On October 30 1964 the Commission issued its Report and Orde

in Dockets No 1078 and 1080 Exclusive Patronage Oontract

supra granting permission rto the respondent Conferences to institut

a dual rate contract system in their respective trades and approvin

for use by them a form of dual rate contract Since the form of con

tract which was approved was different from thrut which had bee

submitted by them the Conferences submitted the approved form t

committees for study After several months of study these committee

concluded that the dual rate contract form approved by the Commis

sion would not be adaptable to conditions existing in the trade an

recommended that these contract forms not be utilized On the bas

of these findings and recommendations respondents approved con

traot form has never been put into effect The Conferences now see

permission allowing them to make the modifications to the approv e

form which they deem necessary to create contract systems which i

their view would be effective in their trades These proposed change

will now be considered

A The 0hartered Vessel Exclusion Olause

Respondents propose by their present application to delete tha

provision in their approved contract form which excludes from con

tract coverage

shipments on vessels owned by theMerchant or chartered solely by th

Merchant where the term of the charter is for six months or longer and th

chartered vessels are used exclusively for the carria e of the Merchant 

commodities

They contend that there is no need for a charter exclusion clause i

their dual rate contracts in view ofthe fact that there are no merchan

shippers in Japan who own vessels capable of use in trans Pacifi

voyages to the United States and no movement of bulk cargo in th

trades They take the position that the principal reason the Commis

sion initially adopted a charter exclusion clause in The Dual Rat

Oases 8 F MC 16 42 1964 was to protect the vested interests o

American shippers who had invested in the construction of vessels o

long term charters for the carriage of their products They maintain

that since there are no such vested iruterests in trades here involved

to be protected as there were in The Dual Rate Oases supra th

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 325

economic need for charters ofsix months or longer duration is absent

Respondents explain that although there is no evidece that any

merchants trading from Japan to the United States presently own

vessels or are chartering vessels they fear the inclusion of the charter

exclusion in their contracts will be to suggest to the signatory mer

chants ways to avoid their dual rate contracts They contend

There are asubstantial number of vessels arriving inJapan to complete char

tered voyages for bulk cargo and which seek employment from Japan to another

point where further tramp cargoes are available Atpresent a numlber of these

vessels obtain one way trip charters to the United States with iron and steel

items as their nucleus cargo There is no need now for merchants to commit

themselves any further than to a one way trip charter However the mclusion

in the JAGFC and TPl CJ contracts of an exception for cargoes moving on

vessels chartered for six months or more would be an invitation to merchants

to do what they are not now doing Although a merchant might lose some

flexibility he could always find other employment for the chartered vessel

when a voyage in these trades is notneeded

On the basis of the foregoing the Conferences conclude that the

putting into ffect of the contract system will create a motive for

large merchants whose volume of activities makes it economically

fea ible for them to indulge in chartering to seek to obtain an advan

tage over their less fortunate competitors Inthis regard respondents

also allege that Conference representatives have been advised by small

shippers that they consider the chartering privilege discriminatory

and object to its inclusion intheir contracts

In his Initial Decision the Examiner found that the respondents

had failed to justify the deletion of the charter exclusion clause pre

scribed by the Commission in The Dual Rate Oases supra Respond

el1ts except to the Examiner s

rulings and reargue the same contentions

made before theExaminer We agree with the Ex miner s disposition

of respondents contentions Indeed we find that the arguments ad

vanced by the Conferences are either grounded on completely erro

neous assumptions or totally unsupported on the hasis of the record

before us

Although the charter exclusion clause was not created by statute

but rather arose from an exercise ofour authority undersection 14b 9

of theShipping Act 1916 1

the legislative history of section 14b makes

it abundantly clear that a limited exemption for merchant owned or

chartered vessels was one of the matters which Congress intended that

the Commission should deal with in its approval of dual rate systems

In its report on the bill which ultimately became Public Law 87 346

the Senate Committee onCommerce stated

l Section 14b 9 gives us authority to require or permit such other provisions In dua J

ratecontracts as are notInconsistentwltb section 14b

10 F M C
326 FEDERAL MARITIME COMMISSION

A second matter which the Commission should resolve by rule or regulatio

involves the extent to which if at all dual rate contracts should exclude fu

cargoes which move in shippers private or cba rttered vessel s Obviously unle

this question is carefully considered it is quite possibl that one of two thing

might result First large shippers would be able to gain substantial competitiv

advantage over their smaller competitors or second contract shippers could n

make fair and legitimate use under certain circumstances of their own or cha

tered vessels S Rept No 860 87th Cong 1st Sess 1961 p 15

The charter exclusion clause as finally formulated by the Commi

sion strikes what we believe to be a fair balance between carrier an

merchant interests and to be in the best interest of the parties con

cerned the public and the commerce of the United States PMif

Westbound OOnfMe1We Amendment to Dual Rate Oontract 9F MC

403 409 1966

Although the present clause did permit shippers who already owne

or chartered vessels to continue doing so its principal justification

was not as respondents suggest to protect the vested interests of 

few American companies who had invested in the construction o

their own vessels or had committed themselves to long term charter

of vessels for the carriage of their products Rather it was the Com

mission s recognition of the overall philosophy of the Shipping Ac

1916 which prompted it to include into dual rate contracts a claus

which accords to merchants the right to engage in bona fide proprie

tary carriage under reasonable conditions The philosophy of perm

ting dual rate contracts under the statute wasnot to create a complet

monopoly for conferences but rather to assure them a nucleus o

cargo Or as we elaborated in The Dual Rate Oases supra at page43

An important purpose of the Shipping Act is to facilitate theflow of commerc

and while it recognizes that a proper conference sY8tem can contribute to th

end it does not undertake to give the conference prior claim on all cargoes n

afford the conferences protection from all possible competition 8 F M C 16l 4

1964

It was not then nor is now our intention to deny contract sign

tories the privilege of chartering vessels merely on the basis of th

fact that they are large merchants whose volume of activities make

it economically feasible for them to indulge in chartering 2

Th

Commission was quite well aware that exclusion from contract cove

age of a merchant s goods moving on the merchant s owned or cha

tered vessels would primarily benefit larger shippers We also realize

however that neither the economic philosophy of the United State

nor section 14b of the Shipping Act requires that merchants be d

2 We advise respondents as the Examiner did below to take note of the possib1l1ty th

certain shippers could be deterred in entering into dual rate contractSl if this privilege w

withdrawn

10 F M C
JAPAN ATLANTIC AND GULF FnEIGHT CONFERENCE 327

prived of all normal economies which go along with largeness The

Dual Rate OMes supra at page 42 Indeed the foreign commerce of

the United States benefits by virtue of the economies made available

to American merchants

Respondents alternate argument that the inclusion of a charter

exclusion clause in their contracts will create a motive for large

merchants to engage in either the ownership or the long term charter

ing of vessels to the detriment of the stability of the Conferences rate

structure is likewise without merit 3

Their claim is based exclusively

on the fact that vessels now arriving in Japan to complete chartered

voyages for bulk cargoes and seeking some employment from Japan

as an alternative to a

voyage in ballast are obtaining one way trip

charter to the United States with iron and steel as a nucleus To con

clude therefrom that conditions exist which would make it easy for

merchants to engage in chartering for six months or longer is non

sequitur Indeed it is quite improbable from an economic standpoint

that a shipper would in effect enter the shipping business Testimony

shows that Japanese shippers operate on a small margin of profit and

that it is extremely doubtful that they would want to assume the

additional risk of voyage operation In any event the Conferences

have not produced one iota of substantial evidence to demonstrate

that even if signatory shippers were to take advantage ofthe charter

exclusion privilege they would be adversely affected thereby See

Pacifie Westbound Oonte renee Amendment to Dual Rate Oontract

9 F M C 403 1966

In light of the foregoing we find that respondents have failed to

sustain their burden of proof They have failed to show that adevia

tion from the uniform charter exclusion clause is necessitated by

conditions particular to their trade

B The Affiliates Olause

By the present application respondents also propose to delete the

affiliates clause approved by the Commission in ExelJusive Patr01Wge

3

In this regard consider whwt we state in Pacific Westbound Conference Amendment to

Dual Rate Contract 9 F M C 403 410 1966where we had occasion to rule on a conten

tion quite similar to that advanced by respondents above There Conference representatives

had also voiced fears that although certain commodities had not yet moved on chartered

vessels it was very likely that they would unless the Conference was allowed to amend the

approveu charter exclusion clause In dismissing this contention we explained that

whether or not there will be further charter movements in the Conference

trade cannot be determined from the record and a finding one way or the other would

be the product of unalloyed speculation This Commission has said that the mere possi

billty that a conference agreement may result in a violation of the Act is insufficient

reason to disapprove the agreement citations omitted Likewise the mere possibUity

that large traders may utilize the chnrter exclusion clause would not ustify the

granting of thepresent petition

10 F M C
328 FEDERAL MARITIME COMMISSION

Contracts 

4

supra and substitute therefor an all affiliates provis o

which would bind all affiliates as well as agents regardless ofwheth

the contract signatory regularly exercises working control in relati

to shipper matters 5

Respondents position is that the present affiliates clause was a

proved by the Commission with United States business and tradi

conditions in mind and that there is justification for the propos

modification because substantially different economic and legal re

tionships are found among enterprises in Japan which sell for exp

to the United States These differences were explained in detail 

witnesses for respondents

The Japanese corporate structures were described as spherica

rather than pyramidal as we know them in the United Stat

Individual companies much like U S corporations are interrelat

into large industrial financial and commercial groups not only 

stock ownership but also by interlocking directors and by manag

ment councils The latter consists of the top management of all t

entities of a corporate complex who confer from time to time for t

purpose ofmaintaining overall control and establishing general gro

policy One large corporate complex might include various corpo

tions involved in the manufacture of automobiles chemicals a

electronic products as well as various real estate warehousing a

banking enterprises

As a result of these flexible and fluid interrelationships respon

ents maintain that in Japan it would be very difficult to prove t

The affiliate clause approved by us for use by the Conferences reads in pertinent pa

as follows

2 a The Merchant shall ship or cause to be shipped all of its ocean shipmen

moving in the Trade on vessels of the Carriers unless otherwise provided in t

agreement

b The term Merchant shall include the party signing this Agreement as ship

and any of his parent subsidiary or other related companies or entities who may 

gage in the shipment of commodities in the trade covered by this Agreement and o

whom he regularly exercises direction and working control as distinguished from 

possession of the powerto exercise such direction and control in relation to shipp

matters whether the shipments are made by orin the name of the Merchant a

such related company or entity oran agent or shipping repesentative acting on th

behalf The names of such related companies and entities all of whom shall have 

unrestricted benefits of this Agreement and be fullybound thereby are listed at the 

of this Agreement The party signing this Agreement as Merchant warrants a

represents that the list is true and complete that he will promptly notify the Carri

in writing of any future changes in the list and that he has authority to enter i

this Agreement on behalf of the said related companies and entities so list

Article 2 b optional

This is the same uniform affiliates clause adopted by us in The Dual Rate Gas

8 F M C 16 1964

Ii The provision proposed by respondents would provide that

2 a The Merchant shall ship or cause to be shipped exclusively by vessels 

the Carriers all goods shipped in the Trade directly orindirectly by the Merchant a

any of its agents parent subsidiary associated oraffiliated companies all of wh

are hereinafter included in the term Merchant

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 329 

regular exercise of working control by the contract signatory in rela

tion to shipping matters that this working control is not regularly

exercised by one related company over another but exercised only

when deemed necessary by the ma nagement counselors who determine

group policy

In his Initial Decision the Examiner concluded that the present

record disclosed cIrcumstances peculiar to respondents trades which

justified a departure from the standard form of affiliates clause

adopted by the Commission in The Dual Rate Oases supra Accord

ingly he granted respondents permission to use an all affiliates clause

Hearing Counsel except on the grounds that respondents have failed

to demonstrate a necessity for deviation from the standard affiliates

clause Ve agree

Respondents request for an all affiliates clause has previously been

considered by this Commission and denied in Exclusiroe Patronage

Oontracts supra In specifically rejecting the v

ry clause which the

Conferences again seek to institute we stated

It was abundantly clear that respondents desire theall inclusive Sffili

tes clause as an aid to their policing of the contrad As we pointed out in The

Dual Rate Oases no words in any agreement can assure that the parties will

not breach their contract and that the affiliates clause thereand hereap

proved includes a specific provision regarding various subterfuges In short

the easing of carrier sales effort and the aiding in stridt observance of the con

tract offered by an all inclusive clause is far outweighed by the legitimate busi

Dess interests of autonomous subsidiaries or affiliatei 8 F M C 340 1964

The Examiner while cognizant of all the above concluded that

findings of fact in such earlier prOceeding relating to the Japanese

corporate jungle and the unworkability of the presently approved affiliates

clause were not made in the detail permissible on the record inthis proceeding

Hearing Counsel maintain that it is not enough to merely say that

that record in the proceding is different or more detailed than the

record in Docket Nos 1078 and 1080 but that it is incumbent on re

spondents to demonstrate that conditions in the trades have changed

since the making of the record in Docket Nos 1078 and 1080 other

wise tIllS proceeding is in essence a

reopening ofthose dockets We find

considerable merit in Hearing Counsels objections

In Pacific Westbownd Oonference AlJUnd IJUnt to Dual Rate Oon

tract supra at page 409 we emphasized that

departures from the clauses prescribed in The Dual Rate Oases

will be allowed to suit the reasonable commercial needs of a particular trade

flpon a showing by 8ubstantia evidence that such a

change is needed or

warranted Emphasis added

10 F M C
330 FEDERAL MARITIM COMMISSION

And we pointed out there that it was incumbent upon the Conferen

to come forward with such facts and circumstances peculiar to its tra

as would warrant a departure from the uniform clause While t

instant record does admittedly provide more details concerning t

nature of corporate relationships in Japan than did the record in th

earlier proceeding in Docket Nos 1078 and 1080 nevertheless t

record in those dockets does sufficiently describe the conditions exis

ing In sum there has been no showing that conditions and oircum

stances in the trades have changed since the making of the record 

the earlier procoodings Any determin3Jtion that the approved form 

contract is unworkable and that the all affiliates clause would 

easier to enforce is at best a calculated guess

Hearing Counsel citing Pacific Ooast European Oonference E

clusive Patronage Oontract Order on Reconsideration Docket 10

served September 22 1966 would have us deny the proposed mod

fication for the additional reason that resporrdents have had no actu

operating experience upon which to base the requested relief Respon

ents however suggest that our decision in North Atlantic Westboun

Freight Association Dual RateOontrMt 8 F M C 387 makes it cle

that actual experience or operrution is not a

prerequisite to deviatio

from the approved form of contract 1Vhile our decision here is base

on other grounds actual operating experience or the lack of it llla

or may not be determinative of the disposition of a

particular clau

in a contract In the NAWFA case 12 years of operation without 

charter exclusion clause when coupled with substantial shipper su

port justified deviation from the standard contract In the instant ca

respondents have had no operating experience under any form of co

tract and aside from an unsupported allegation that unspecified sma

shippers consider the charter exclusion clause discriminatory there 

nothing in the record which would warrant the proposed deletion Ha

they shown by evidence ofrecordthat theproposed modification ofth

all affiliates clause was in fact warranted the absence of actual opera

ing experience would not preclude the granting ofthe requested relie

Accordingly we find that the respondents have failed to show th

a deviation from the standard affiliates clause in these trades is wa

ranted Consequently respondents request to delete the affiliates claus

of their presently approved form of dual rate contract is denied 

6

Respondents basic objection to the presently approved affiliates clause and th

justification for the clause they propose is their conviction that under the former 

would be difficult or impossible to prove that a

signatory merchant regularly exercise

working control over the related company It is clear on the record however th

respondents proposed clause would be far less than a

panacea to their enforcement pro

lems In fact the Conferences are quite obviously aware of the difficulties which would

encountered in determining under their proposed clause which affiliates are bound a

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 331

C The Suspension Provisions

Article lO b of the Conferences approved contraot presently

provides that

h Upon the failure of the Merchant to payor dispute his liability to pay

liquidated damages as herein specified for breach of the contract within thirty

30 days after receipt of notice by registered mail from the Conference that

they are due and payable the Carriers shall suspend the Merchant s

rights and

obligations under the contract until he pays such damages If within thirty 30

days after receipt of such notice the Merchant notifies the Oonfe1 ence by regis

tered mail that he disputes the claim the Oonfe1 ence shall within thirty 30

days thereafter proceed in accordance with Article 11 to adjudicate its cladm

for damages and if it does not do so said claim shall be f01 eVe1 barre lIf the

adjudication is in the Oonference s fav01 and the damages are not paid within

thirty 30 days after the adjud ication becomes final the Oonference shall

suspend the Merchant s

rights and obligations under the contract untU he pays

the damages No suspension shall abrogate any cause of action which shall have

arisen prior to the suspenSion Payment of damages shall automatically tenninate

suspension The Oonference shall notify the Fedeml Marit ime Oommission of

each s1tspension and of each te1 mination of s ltspension within ten 10 days

after the event

Respondents now proposed to delete the italicized portion of this

article Respondents objection to this part of the clause is the pro

vision forever barring dalnage claims where the Conference does not

proceed to adjudication within 30 days after receipt of notice frOlll

the merchant that he disputes the claim and the requirement of notifi

cation to the Comnlission of each suspension and tellnination of

suspenSIOn

The forever barred provision is deemed objectionable on two

counts First respondents complain that it leaves insufficient time to

resolve the dispute without recourse to adjudication The Conferences

make much of the fact that recourse to litigation is not as conmlon in

Japan as it is in the United States and that more time to settle disputes

would serve to avoid legal proceedings and the expense involved 7

the difficulties of enforcing the contmct Witnesses for espondents testified that the prac

tice of other conferences in Japan is to require a signatory merchant s affiliate to also

execute a contrad in order to obtain the contract rate They anticipate that respondent

Conferences would also follow this practice As Hearing Counsel have stated

One may logically ask why have Buch a clause at all if it is still necessary to

require each affiliate to execute the contract before he is allowed the contract rate

The Examiner also conceded that

There are inconsistencies in respondents position It is difficult to understand how

an y affiliates clause could be workable in an industrial system where it isvery difficult

for a Signatory to list all affiliates If a parent compan has no control over a sub

sidiary in relation to shipping matters it isquestionable whether they would be bound

by the parent s entering into a shipping contract The Commission has often com

mented on the fact that no contract language will prevent avoidance of a contract

obligation JD 9

7 Witnesses testified that in Japan the objective is to settle disputes without the neces

sity of direct confrontation between the parties for Japanese businessmen do not like to be

in the position of having been declared publicly to be wrong

10 F M C
332 FEDERAL MARITIME COMMISSION

Secondly respondents qUe6tion the Commission s

right to establis

periods of limitations other than those established by the Feder

Government or the legislatures ofthe severa states even with respe

to contracts which are entered into prirrcipally in the United State

They urge that in any event the Commission is without au1thority 

impose a period of limita tions with respect to contracts to be entere

into predominantly in a

friendly foreign nation

Moreover the Conferences take the position that notifications to th

COlnmission in cases of suspensions and terminrutions of suspension

serve no practical purpose since the likelihood that Japanese me

chants will be counting on the vigilance of the Commission fo

protection of their interests is rather small s

The Examiner concluded that no valid reason appeared on th

record for deletion of all but the first sentence of Article 10 b o

respondents approved contract form and accordingly denied th

request Respondents except to a majority of the Examiner s

finding

and conclusions and reargue many of the points advanced below The

request however that in the event their contentions be again rejecte

that the period of time in Article 10 b

line 10 allowed the Con

ference to proceed to arbitration once the merchant notifies the Con

ferences that he disputes the claim be enlarged from thirty 30 t

ninety 90 days vVe find that the Examiner s denial of respondent

request to delete all but the first sentence of their approved suspensio

clause was proper and well founded Respondents alternative reque

for an enlargement of time from 30 to 90 days in which to procee

to arbitration is granted

Respondents have offered no evidence of anything unusual abou

these trades which would necessitate a departure from the standar

suspension clause Their objection to the forever barred provisio

on the grounds that it leaves insufficient time to resolve the disput

without recourse to adjudication falls of its own weight since it 

the Conferences themselves which set things in motion and contro

the time periods They can negotiate for as much time as they wan

before they send the initial notice to the merchant that damages ar

due Thus as Hearing Counsel has pointed out they can be prepare

to expect a notice of dispute more orless at their convenience

Respondents second objection to the forever barred provision o

the grounds that we are without authority to set periods of lim

tations is equally untenable As Hearing Counsel have pointed ou

the Commission is not compelling anyone to abide by a period o

8 The Conferences believe that any disputes regarding the propriety of a suspension w

mostlikely arisein Japan between one of the Conferences and a

Japanese merchant

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 333

limitation other than that established by the law of the jurisdiction

Since the suspension provisions weremade optional by the Commission

in The Dual Rate Oases supra no conference is compelled to adopt

it Ifa conference does however choose to have its form of contract

contain an express provisiongiving it therightto suspend amerchant s

rights and obligations under the contract for failure to pay adjudged

damages that conference must use the provision prescribed by the

Commission unless it can show that circumstances particular to the

conference trade necessitate another clause or none at all

Section 14b of the Shipping Act 1916 permits the use of dual

rate contracts but only if the Commission finds that certain safe

guards have been met In adopting this course Congress in a sense

r affirmed the earlier philosophy of section 15 of the Shipping Act

which by authorizingsupervised competition restricting agreements

among carriers recognizes that there is some justification in the

waterborne commerce for making exception to our normal policies

The Dual Rate Oases 8 F MC 16 at 24 1964 Auniform suspension

provision was one of the safeguards which Congress advocated and

which the Commission adopted to insure against punitive suspensions

or terminations by the conferences ofmerchants contracts

In The Dual Rate Oases the Commission was mindful of the desire

of Congress that insofar as was possible dual rate contracts should

be standard or uniform Therefore we required thatthose conferences

desiring suspension provisions employ the clause prescribed by us

This it is felt would greatly simplify the problem of shippers regard

ing the meaning and application of contract provisions Public interest

also dictated that there be an end to adjudication Therefore in pre

scribing a period of time within which a conference must proceed to

arbitration the Commission insured that submission of the claim to

legal process would not be delayed an inordinate amount of time Re

spondent has failed to demonstrwte that our reasoning in The Dual

Rate Oases is inapplicable here

vVe also reject respondents contention that notification of suspen

sions to the Commission serves no useful purpose and should not be

required As we pointed out earlier section 14b like section 15 ofthe

Shipping Act is a limited legislative grant of an antitrust exemption

In granting carriers permission to engage in certain forms of activity

which would otherwise be tpllawful underthe antitrust laws Congress

however made it clear that these exemptions must be accompanied

by effective governmental supervision and control Thus this

Commission must

scrutinize the agreement to make sure that the conduct thus legalized

does notinvade the prohibitions of the antitrust laws any more than is necessary

10 F M C
334 FEDERAL MARITIME COMMISSION

to serve the purposes of the regulatory statute Isbrandtsen Co Inc v Unit

States 211 F 2d 51 at 57 D C Cir 1954

The requirement that notification of suspensions be given to th

Commission serves the very useful and necessary function of providin

us with information vital to our duty or administering the Shippin

Act effectively It enables us to determine whether conferences a

abiding by the terms of their contracts or whether they are engagin

in any activities that might be detrimental to the commerce of th

United States orcontrary rto the public interest

On the basis of all the foregoing we find that respondents hav

failed to support their claun that deletion of all but the first senten

of their presently approved suspension clause is necessitated by th

conditions in their trades Respondents however are free to enlarg

from 30 to 90 days the period of time within which they must procee

to arbitration The Uniform 1erchants Contract appended to o

General Order 19 31 F R 12523 12526 allows a conference to u

anywhere between a minimum period of 30 days and a maximu

period of 90 days without further permission from the Commission

Accordingly no further discussion is required

D ThA P110mpt Release Olause

Respondents propose to delete the prompt release clause of the

presently approved contract 9

and substitute therefore the followin

language

5 Tbe Mercbant has the option of sel ting any of tbe vessels operated 

the Carriers subj t to agreement witb the particular Carrier as to quanti

and agrees to make application for space as early as possiible before tbe select

vessel s advertised sailing date In tbe event that tbe Mercbant is unable 

secure space on tbe sel ted vessel he may request tbe a ssistance of the Conf

enee in securing space on tbe selected vesselor on a vessel sailing from Ule Chos

port at or about the same time as tbe seleted vessel Ifwitbin three 3 busine

days of such request tbe Conference fails to ure space on a vessel schedu

to sail witbin fifteen 15 days of the date of tbe request from tbe Mercbant 

9 Article 5 of the presently approved dual ratecontractprovides

5 The Merchant shall have the option of selecting any of the vessels operated 

any of the Carriers The Merchant agrees to request pace with the carrier he desi

as early as practicable and not less than five 5 days before the earliest date 

wishes to have the cargo loaded aboard the vessel The Merchant shall not be o

gated to select a Conference carrier or carriers forany shipment which the Carr

cannot suitably accommodate within a ten 10 calendar day period requested by 

Merchantforloading provided however that the Merchant shall first promptly no

the Conference of such unavailability of space and If within two 2 business da

after receipt of such notice the Conference shall not have advised the Merchant th

his entire shipment can be suitably accommodated by a vessel or vessels if 

merchant hy contract is obligated to make the shipment on a single vessel suita

space shall be provided on a single vessel of the Carriers within said ten 10 c

endar day period the Merchant shall be free with respect to such shipment to sec

space elsewhere within a reasonable time

10 F l1C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 335 

aforesaid the Merchant shall he at liberty to secure such space on any vessel

whatsoever

The Conferences position is that the 2 day period presently allowed

the Conferences to advise a shipper that a Conference vessel can

accorrttnodate the shipment when the one selected by him is una vail

able is unreasonably short because of time differences between Japan

and the cities in Europe and the United States Since the executives

of various member lines are located in the United States or Europe

respondents fear that it would experience difficulty particularly on

weekends in contacting the home office of the European and U S

member lines on such short notice Respondents also point out that

Japanese holidays are different than holidays elsewhere Saturday

is a working day in Japan hut not customarily in the United States

The Examiner pointed out the The Dual Rate Oases did not pre

scribe a definite form for the prompt release clause and that contract

forms approved by the Commission show prompt release clauses which

vary in many respects other than in statingtime periods and concluded

therefore that permission should be granted respondents to modify

the prompt release clause oftheir contract in accordance with their

request Inthis regard theExaminer found that

In this proceeding the evidence of time differences differences in holidays

and working days in the various countries wherein contact may he Tequired

to determine the availability of a

vessel warrants increasing the time in which

the conference may advise the merchant that his shipment can be accommodated

on a vessel other than the one ihe has selected With rega rd to thelincrease from

10 to 15 days in which the conference must furnish space no shipper has

appeared to objct to theincrease and in view of the wide range of ports served by

respondents thisperiod appears to be reasonable

While uniformity in contlact clauses is to be attained whenever possihle the

question of Uniformity is not present as to the prompt release clause Contract

forms approved by the Com1l1Lssion show Prompt release CIauses which vary in

many respects other than in stating time periods Thus it cannot be said that

the present clause is uniform 01 that the advantaoges of uniformity require

adhering to the language now found in that clause The proposed clause

meets the requirements of the first numbered paragraph of Section 14b of the

Act

No exceptions have been taken

Ve agree with the Examiner that respondents proposal be granted

In view of the fact that eommission General Order 19 published in

the Federal Register 31 F R 12525 on September 22 1966 21 days

after the initial decision in this proceeding was served adopts as

standard for all future applications for dual rate contracts a prompt

release clause identical to that proposed hy respondents no further

discussion is required

10 F M C
336 FEDERAL MARITIME COMMISSION

E The Nat iJral Routings Olause

The Conferences sought permission to delete the natural routin

clause prescribed by the Comnlission in The Dual Rate Oases a

substitute therefor the followingprovisions

6 The Merchant is not required to divert shipment from anatural route 

served by the Carriers where direct carriage is available provided howev

that where shipment is to be made via any port within the range of ports serv

by the Oarriers and more than one port is avai1ruble to theMerchant as a natu

route the Merchant shaH route his cargo to such of those ports as the Carri

may serve If for any particular shipments the Merchant shall contend th

the service provided by the Carriers is notthe natural route theMerchant sh

by written notice advise the Conference of the service Which the Merch

contends is the natural route and the name of the carrier or carriers nota pa

to thisAgreement who are providing or willprovide such service Ifwithin th

3 business days after receipt of such notice the Conference advises the M

chant that avessel operated by the Carriers will provide such service wit

fifteen 15 days after receipt by the Conference of such notice as aforesaid 

Merchant shall be obligated to select the Carrier s service Service so provid

shall not constitute a precedent or otherwise be construed as a

concession t

it is a natural route

Respondents major objection to the present clause before the E

aminer related to the definition of factors to be considered in det

nlining what is a natural route They stated that the Conference me

bers have the impression that the Commission s definition would 

interpreted as requiring consideration of economic criteria entire

from the 1erchant s point of view that under such an interpretatio

ports which are not considered natural might be so considered sol

because a non conference vessel might go there to try to get ca

which would be otherwise subject to the contract

The Examiner found that the Conferences had failed to supp

their position that the naJtural routings clause proposed in the pr

ent application is more suitable for adrninistration in the light of co

ditions in Japan than is the presently approved clause In denying t

proposed changes he further determined that the Conferences 

pression that the presently approved clause could be interpreted 

relating economic conditions solely to the merchants interest w

erroneous in view of the Commission s comments in The Dual Ra

Oases at page 35

There is no justifiable need served by relieving the merchant of his obligat

to use conference vessels merely because a nonconference carrier is callingat 

of the several ports through which a partiCUlar shipment could naturally mo

and the conference calls at another port of equal natural routing but notthep

served by the nonconference line

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 337 

As we have construed the natural routing provision of section 14b the

merchant will be free under his contract to use nonconterence vessels if in fact

the use of conference vessels would require him to divert his cargo to unnatural

routes The merchant will not be permitted to escape his contract obligations

however when the nonconference service is no more natural as it were than

that of theconference

The Examiner concluded

In Exclusive Patronage Oontracts supra the Commission found that thefacts

disclosed did not make inappropriate the conclusions and reasoning followed in

llhe Dual Rate Oases and denied permission to deviate from the standard

clause Nor can circumstances be found inthis record which would render former

reasoning inapplicable The definition of natural routing was included in the

approved clause to simplify shipper problems Respondents desire to eliminate

a definition and permit arbitrators to decide in case of dispute what the term

means Ifrespondentsoonsidertheir proposed clause would simvlify the natural

route determination in case of dispute they overlook the practical aspect of

the problem The guidelines provided by the approved clause eliminate at least

some of the indefiniteness rather than leave it entirely open to one interpretation

by thecarrier another by the shipper and possibly a third by arbitraltors Their

concern that interpretation of the clause would relate economic conditions solely

to the merchant s interests cannot be accepted as a proper inter prefation in view

of the Commission s comments inTheDual Rate Oases

Respondents reference to the similarity between their proposed clause and

the clause approved by the Commission for the North Atlantic Westbound

Freight Association Association has been considered Ifthere is a similarity in

circumstances in these trades and the trade in which the Association operates

it has notbeen disclosed

No exceptions were taken to this aspect ofthe Examiner s decision 10

Since no exceptions have been filed to the Examiner s

findings and

conclusions and since we fully agree withthese rulings it is not neces

sary to discuss them in any further detail vVe conclude therefore

that respondents request to substitute their own natural routings

clause for the one presently approved for use by the Conferences be

denied

F False Declarations

Respondents propose to modify Article 11 of their approved con

tract by adding the following clause

Itshall be a breach of this Agreement for the Merchant or any person firm

tlr company acting or purporting to act on behalf thereof to make a false

declaration or representation in respect of the kind quantity weight measure

ment or value of the cargo covered by this Agreement unless the Merchant

shows that such false declaration or representation was made accidentally and

withoutthe intent to avoidthe payment of the proper amount of freight on such

10 Respondents explaIned that they were motivated In not taking exception to the

E amIner 9dental of tbelrproposed clause by his ooservation regarding the proper inter

pretation of the natural routlngs clause approved inTM Dual Rate 0a8e8 and in Ezclus11J6

Patronage Oontract8

10 F M C

299 843 0 68 23
338 FEDERAL MARITIME COMMISSION 

cargo and that immediately 

upon learning of such false declaration or repr

sentation the Merchant tendered the balance if any of the amount of freig

properly due to the Carrier concerned

There is testimony in the record to the effect that the Conference

have experienced difficulty in dealing with shippers engaged in th

Japan United States trades due to false declarations Respondent

state that the additional wording proposed is not with the end purpos

of winning law suits but is intended as a supplement to the existin

program of policing false declarations and to act as a deterren

against forbidden conduct

The Examiner after considering all the evidence found as follows

The fact that the conferences experience unusual difficulty in their trades 

dealing with the problem of false declarations warrants a contract artic

specifically relating to the problem Hearing Counsels proposal that damage

in event of breach shall be determined by the principles of contract law is on

a repetition of language used in Article 10 a of the approved agreement The

concern that a false declaration might be considered grounds for suspension o

the shippers rights and obligations under the contract reIa tes to Article 10 b

under which the conferences may suspend if a shipper fails to pay adjudicate

damages Other suspension provisions areArticle 15 a

relating to war hosti

ties warlike operations embargoes or other interferences with commercia

intercourse and Articles 15 b and 15 c

relating to increased rates made unde

special circumstances The contract does not provide for suspension in event o

breach Inasmuch as damage in event of breach of contract is covered unde

existing clauses and there is no provision which would permit suspension becaus

of breach of contract it would appear unnecessary to add the language propose

by Hearing Counsel u

It is concluded that the record supports respondents request to add paragrap

l1 b

No exceptions to any of the Examiner s

rulings have been taken

Ve find that the Examiner s

findings and conclusions with regard

to the addition of a farse declaration clause are proper and well

founded and we adopt the same as ourown Accordingly permission

i granted respondents to add a false declaration provision to thei

presently approved form of contract

G Refe iences to the Federal Maritime Commis8ion

Respondents also seek to delete from Article 7 contract rates an

rate spread and Article 11 a contracts of carriage references to

the fact that tariffs are on filewith the Federal Maritime COIpmission

The Conferences recognize that the omission of these expressions

11 Hearing Counsel had proposed that the follOWing language be added at the end o

Article llb of the Conferences contract

In the event of such breach damages resulting therefrom shall be determined in

accordance with principles of contract law and nothing contained in this contrac

shall be construed to permit the suspension of the merchant s

rights and obligation

under this contract

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 339 

would in no way relieve them of the obligation to file the tariffs pur

suantto section 18 b oftheShipping Act

The Examiner concluded that the record did not support respond

ents request and denied the proposed deletions The Conferences have

excepted on the grounds that General Order 19 31 F R 12525 appears

to give them blanket permission to omit these references This excep

tion is well taken

General Order 19 referred to earlier in this Report provides that

certain specific references in the contractprovisions to Federal Mari

time Commission are optional and may be deleted without

further permission from the Commission

In view of the above respondents are free to omit the references

to the Federal Maritime Commission and no further discussion on

our part is needed

ULTIMATE CONCLUSIONS

On the basis of all the foregoing we find and conclude that

1 Respondents request to substitute an all affiliates clause for

the affiliates clause presently approved for use by the Conferences is

denied

2 Respondents request to delete the presently approved charter

exclusion clause is denied

3 Respondents request to modify the suspension provision of their

approved contract fornl is denied

4 Respondents request to modify the nrutural routings clause of

their contract is denied

5 Permission is granted respondents to a modify the prompt

release clause b add a false declaration clause and c delete cer

tain references to the Federal Maritime Commission in their approved

contract form

The Conferences dual rate contract form as modified will not be

contrary to the public interest unjustly discriminatory or unfair as

between shippers orexporters from the United States and their foreign

competitors and will comply with section 14b of the Shipping Act

1916

AIappropriate order will be entered

10 F LC
FEDERAL MARITIME COMMISSION

ORDER

This proceeding having been initiated by the Federal aritim

Commission and the Commission having fully considered the matte

and having this date made and entered of record a Report containin

its findings and conclusions thereon which Report is hereby referre

to and made a part hereof

It is ordered That the Conferences requests to 1 substitute a

all affiliates clause for the affiliates clause presently approved fo

use by the Conferences 2 delete the presently approved owne

chartered vessel exclusion clause 3 modify the suspension claus

oftheir approved contract form and 4 modify the natural routing

clause oftheir contract be and hereby are denied

It is further ordered however That permission be and hereby 

granted to the Conferences to 1 mollify the prompt release clause o

their approved contract form to read as follows

5 Tbe Merchant has the option of selecting any of the vessels operated b

the Carriers subject to agreement with the particular Carrier as to quantit

and agrees to make application for space as early as possible before the selecte

vessels advertised sailing date In the event that the Merchant is unable 

secure space on the selected vessel he may request the assistance of the Co

ference in securing space on the selected vessel or on a vessel sailing from th

chosen port at orabout thesame time as the selected vessel Ifwithinthree 3

business days af such request the Canference fails to secure space an a vess

scheduled to sail within fifteen 15 days of the date af the request from th

Merchant as aforesaid theMerchant shall be at liberty to secure such space o

any vessel whatsoever

2 add the following false declaration clause to their approved form

of contract

Itshall be a breach of this Agreement for the Merchant or any persan firm

or company acting ar purporting to act on behalf thereof to make a false declar

tion or representation in respect of the kind quantity weight measurement 

value of the cargo covered by this Agreement unless theMerchant shows th

such false declaratian arrepresentatian was made accidentally and without th

intent to avoid the payment af the praper amount of freight an such cargo an

that immediately upon learning f such false declaratian or representation th

340 10 F 1VI C
JAPAN ATLANTIC AND GV F FREIGHT CONFERENCE 341

Merchant tendered thebalance if any of the amount of freight properly due

to the Carrier concerned

and 3 delete the references tothe Federal Martime Commission

found in Articles 7 and 11 a of their approved contract form

Itis further ordered Tluut the terms and conditions of the form of

the dual rate contract attached hereto shall be used by the Japan At

lantic and Gulf Freight Conference and the Trans Pacific Freight

Conference of Japan to the exclusion of any other terms and provi

sions for the purpose of according merchants shippers and consignees

contract rates

By the Commission

Signed THOMAS LISI

Secretary

10 F M C
ApPENDIX

APPROVED AGREEMENT FROM DoCKET No 65 52

Agreement No

TRA NS PACIFIC FREIGHT CONFERENCE OF JAPAN AND THE JAPAN

ATLANTIC AND GULF FREIGHT CONFERENCE

1erchant s Agreement

Memorandum of Agreement entered into aL

thi day Of 19 by and between

having its his princip

place of business aL he

inafter called the Merchant and the carriers who are parties to the Unit

States Federal Maritime Commission Agreement No as amended p

viding forthe Name of Conference hereinafter called the Conferenc e or t

Oarriers and whichAgreement has been duly filed withtheMinrstry of Tran

portation of the Japanese Government

For their mutual benefit in the stabilization or rates services and practic

and for the development of international maritime commerce inthetrade defin

inArticle 1 of this Agreement the parties hereby agree as follows

1 The Conference undertakes throughout the period of this Agreement 

maintain common carrier serv ice which shall so far as concerns the frequen

of sailing and the carrying capacity of the vessels of the Oarriers Ibe adequa

to meet all the reasonable requirements of the Merchant for the movement 

goodS in the trade from Japan Korea and Okinawa to Pacific Coast ports 

California Oregon Vashington Canada and the ports of Hawaii and Alask

or United States Atlantic and Gulf Coast ports hereinafter called t

Trade and the Conference further agress that SUbject to the availabi

of suitable Space inthe vessels of the Carriers at the time when theMerchant 

piles therefor said vessels shall transport the gOOds of the Merchant in t

Trade upon the terms and conditions herein set forth Ports from and to wh

service is offered by the Carriers shall be set forth in the Conference tJariff

2 a The Merchant shall ship or cause to be shipped all of his ocean sh

ments mOTIng inthe Trade on vessels of the Carriers unless otherwise provid

inthis Agreement

b The term Merchant shall include the party signing this Agreement 

shipper and any of his parent subsidiary or other related companies orentit

who may engage in the shipment of commodities in the trade covered by t

Agreement and over whom he regularly exercises direction and working con

as distinguished from the posseSSion of the power to exercise such direction a

control in relation to shipping matters whether the shipments are made by 

in the name of the Merchant any such related company orenitity or an ag

or shipping representative acting on their behalf The names of such relat

342 10 F M C
JAPAN ATLANTIC AND GUlAFREIGHT CONFERENCE 343

companies and entities all of whom shall have the unrestricted benefits of this

Agreement and be fully bound thereby are listed at the end of this Agreement

The party signing this Agreement as Merchant warrants and represents that

theUst is true and complete that he will promptly notify theCarriers in writing

of any future changes in the list and that he has authority to enter into this

Agreement on behalf of the said related companies and entities so listed Article

2 b optional

c In agreeing to confine the carriage of its shipments to the va3Sels of the

Carriers the Merchant promises and declares that it is hi S intent to do so with

outevasion or SUbterfuge either directly orindirectly by any means including the

use of intermediaries or persons firms or entities affiliated with or related ro

theMerchant

d The Carriers agree that they will not provide contract rates to anyone

not bound by a Merchant s Rate Agreement with the Carriers The Merchant

agrees that he will not obtain contractrates for any person notentitled to Ithem

including related companies not bound by this Agreement by making shipments

under thisAgreement on behalfof any such person

3 a Ifthe Merchant has the legal right at the time of shipment to select

a carrier for the shipment of any goods subject to this Agreement whether by

the expressed or implied terms of an agreement fur thepurchase e Qr trans

fer of such goods shipment for his own account operation of law or otherwise

theMerchant shall select one or more of theCarriers

b IfMerchant s vendor or vendee has the legal right to select the carrier

and fails to exercise that right or otherwise permits Merchant to select the

carrier Merchant shall be deemed to have the legal right to select the carrier

c Itshall be deemed a breach of this Agreement if before the time of ship

ment theMerchant witb the intent of avoiding his obligation hereunder divests

himself or with the same intent permits himself to be divested of the legal right

to select the carrier and the shipment is carried by a carrier not a party hereto

d For the purposes of this Article the Merchant shall be deemed prima

facie to have the legal right at the time of shipment to select the carrier for

any shipment

1 with respect to which the Merchant arranged or participated in the

arrangements for ocean shipment or selected or participated in the

selection of the ocean carrier or

2 with respect to which the Merohant s name appears on theIbill of lading

orexport declaration as shipper or consignee

e Nothing contained in thisAgreement shall require the Merchant to refuse

to purchase sell or transfer any goods on terms which vest the legal right

to select the carrier inany other person

f In order that the conference may investigate the facts as to any shipment

of the Merchant that has moved or that the Merchant or the conference believes

has moved via a nonconference carrier and upon written request clearly so

speCifying the Merchant at his option 1 will furnish to the conference

chairman secretary or other duly authorized conference representative or attor

ney such information or copies of such documents which relate thereto and are

in his possession or reasonafbly availa ble to him or 2 allow the foregoing

persons to examine such documents on the premises of the Merchant where they

are regularly kept Pricing data and similar information may be deleted from

the documents at the option of the Merchant and there shall be no disclosure

of snch information without the consent of the merchant except that nothing

10 F MC
344 FEDERAL MARITIME COMMISSION

herein shall be construed to prevent thegiving of such information 1 in r

sponse to any legal process issued under the authority of any court or 2 to an

officer or agent of any government in the exercise of his powers or 3 to an

officer or other duly authorized person seeking such information forthe prosec

tion of persons charged wHh or suspected of crime or 4 to another carrier o

its duly authorized agent for the punpose of adjusting mutual traffic accoun

in the ordinary course of business of such carriers or 5 to arbitrator

appointed pursuant to this agreement

g Within ten 10 days after the event in any transaction in which th

Merchant is a

party and the legal right to select the carrier is vested in a perso

other than the Merchant and if he has knowledge that the shipment has bee

made via a nonconference carrier the Merchant shall notify the conference 

writing of this fact giving the names of the merchant and his customer th

commodity involved and the quantity thereof and the name of the nonconferen

carrier Provided however That where theactivities of Merchanttsare so exten

sive in area or the nature or volume of his sales makes it impracticable to giv

notice within ten 10 days the Merchant shall give notice as promptly a

possible after the event

4 This Agreement excludes 1 cargo of the Merchant which is loaded an

carried in bulk without mark or count except liquid bulk cargoes other tha

chemicals and petroleum products in less than full ship load lots 2 ship

ments on vessels owned by the Merchant or chartered solely by the Mercha

where the term of the charter is for six months or longer and the chartere

vessels areused exclUSively for the carriage of the merchant s commodties an

3

shipments of cargoes forwhich no contractrate is provided

5 The Merchant has the option of selecting any of the vessels operated by th

Carriers subject to agreement with the particular Oarrier as to quantity an

agrees to make aJpplication for space as early as pOSSible before the selected ve

sel s advertised sailing date In the event that the Merchant is unable to secur

space on the selected vessel he may request the assistance of the Conference i

securing space on the selected vessel or on a vessel sailing from the chosen po

at or about the same time as the selected vessel Ifwithin three 3 busines

days of such request the Conference fails to secure space on a vessel schedule

to sail within fifteen 15 days of the date of the request from the Merchant a

aforesaid the Merchant shall be at liberty to secure such space on any vesse

whatsoever

6 This agreement does notrequire the Merchant to divert shipments of good

from natural transportaition routes notserved by conference vessels where direc

carriage is available Provided however that where the Carriers provide servic

between any two ports withinthe scope of thiscontract which constitute a natura

transportation route between the origin and destination of such shipment th

Merchant shall be obligated to select theCarrier s service A natural transporta

tion route isa traffic path reasonably warranted by economic criteria such a

costs time available facilities the nature of the Shipment and any other eco

nomic criteria appropriate in the circumstances Whenever Merchant intend

to assert his rights under this article to use a carrier who is not a party hereto

and the port through which Merchant intends to ship or receive his goods is

withinthe scope of thisagreement Merchant shall first so notify the conferenc

inaccordance withtheprovisions of Article5 hereof

7 The rates applicable to shipments made under this Agreement shall be th

contract rates lawfully in effect at the time of shipment as set forth in the tarif

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 345 

or tariffs of the Conference Contract rates on every commodity or class of com

modities shall be lower than the ordinary rates set forth in the Carriers tariff

by a fixed percentage of fifteen 15 per centum of the noncontract or ordinary

rates The rates may be rounded out to the nearest multiple of five 5 cents

not including additional handling or accessorial charges which will notresult

in the difference between the rates exceeding fifteen 15 per centum of the

ordinary rates

8 a The rates of the freight under this agreement are subject to increase

from time to time and the Carriers insofar as such increases are under the

control of theCarriers will give notice thereof notless than ninety 90 calendar

days in advance in the

Cpnference tariff Should circumstances necessitate increasing the rates by notice

as aforesaid and should such increased rates be not acceptable to the Merchant

the Merchant may tender notice of termination of this Agreement to become

effective as of the effective date of the proposed increase by giving written notice

of such intention to the Conference wthin thirty 30 calendar days after the

date of notice as aforesaid of the proposed increase Further provided however

that the Carriers may within thirty 30 calendar days subsequent to the

xpiration of the aforesaid thirty 30 calendar day period notify theMerchant

inwriting that they elect to continue this Agreement under theexisting effective

rates and in the event the Carriers give such notice this Agreement shall

remain in full force and effect as if the proposed increase had never been made

and theMerchant s notice of termination had never been given

b The Conference shall offer to the Merchant a subscription to its tariffs

at a reasonably compensatory price however the Merchant shall be bound

by all notices accomplished as aforesaid withoutregard to whether he subscribes

to the Conference tariff Tariffs shall be open to the Merchant s inspection at

the Conference offices and at each of the offices of the Carriers during regular

businesshours

c The rates initiallyapplica ble under thts Agreement shall be deemed to

have become effective with their original effective date rather than to have

become effective with the signing of this Agreement and notices of proposed

rate increases which are outstanding at the time this contract becomes effective

shall run from the date of publication in the tariff rather than from the date

of thisAgreement

d The Merchant and theCarriers recognize that mutual benefits arederived

from freedom on the part of the Carriers to open rates where conditions in the

Trade require Buchaction without thereby terminating the dual rate system as

applicable to thecommodity involved therefore it is agreed that theConference

to meet thedemands of theMerchants and of the Trade may suspend the applica

tion of thecontract as to any commodity through theopen ng of therate Oon such

commodity including opening subject to maximum or mdnimum rates provided

that none of the Carriers during a period of ninety 90 days after the date

when the opening of such rate becomes effective shall quote a rate in excess

of the Conference contract rate applicable to such commodity on the effective

date of the opening of the f ate and provided further that the Tate shaH not

thereafter beclosed and the commodity returned to the application of the contract

system on less than ninety 90 days notice by the Carlliers through the filing

of contract noncontract rates intheirtariff

9 a The Merchant may terminate this Agreement at any time without

penalty upon the expiration of ninety 90 calendar days foHowJng written

10 F llC
346 FEDERAL MARITIME COMMISSION

notice to the Conference of intent to so terminate Provided however tha

theMerohant may terminate thisagreement upon less than sRid ninety 90 day

notice pursuant toArticle 8 a hereof

b The Conference may terminate thisAgreement at any time withoutpenal

upon the expiration of ninety 90 calendar days following written notice t

the Merchant Termination by the Conference may be in whole or with respe

to any commodity P1 ovided however that Agreements with similarly situate

Merchants arealso so terminated

c Termination as provided in this Article shall not abrogate any Obligatio

of any party or parties to any other party or parties hereto which shall hav

accrued prior to termination

10 a In theevent of breach of thisAgreement by either party the damage

recoverable shall be the actual damages determined after breach in accordanc

with the principles of contract law Provided however that where the Me

chant has made or has permitted a shipment on a vesseel of a carrier not 

party hereto in violation of this Agreement and whereas actual damage

resulting from such a violation would be uncertain in amO Unt and not readil

calculable the parties hereby agree that a fair measure of damages in suc

circumstances shall be an amount equal to the f

reight charges of such shipmen

computed at the Carriers contract rates in effect at the time of shipment les

theestimated cost of loading and unloading which would have lbeen incurred ha

theshipment been made on a vessel of a Carrier party hereto Such amount an

no more shall be recoverable as liquidated damages

b Upon the failure of the Merchant to payor dispute his liability to pa

liquidated damages as herein speCified for breach of the contract within thirt

30 days after receipt of notice by registered mail from the Conference tha

they are due and payable the Carriers shall suspend the Merchant s

right

and obligations under the contract until he pays such damages Ifwithin thirt

30 days after receipt of such notice the Merchant notifies the Conferenc

by registered mail that he diSIfutes the claim the Conference shall withi

thirty 30 days thereafter proceed inaccordance with Article 14 to adjudicat

its claim for damages and if it does not dO so said claim shall be foreverbarred

Ifthe adjudication is inthe Conference s fa VOl and the damages are not pai

within thirty 30 days after the adjudication becomes final the Conference sha

suspend the Merchant s rights and obligations under the contract until he pay

the damages No suspension shall abrogate any cause of action which sha

have arisen prior to the suspensi on Payment of damages shall automatically

terminate suspension The Conference shall notify the Federal Maritime Com

mission of each suspension and of each termination of suspension within

ten 10 daYS after the event

11 a This Agreement is not and shall not be construed to be a contrac

of carriage with the Carriers or anyone of them Shipments under this Agree

ment aresUbjeot to all the terms and conditions and exceptions of the then cu

rent Conference tariff and of the permits dock receipts bills of lading and othe

shipping documents regularly in use by the individual Carriers and to all law

and regulations of the appropriate authorities

b Itshall be a breach of thi agreement for the Merchant or any person

firm or company acting orpurporting to act on behalf thereof to make a fals

declaration or representation in respect of the kind quantity weight measur

ment or vlllueof the cargo covered by this Agreement unless the Merchan

shows that such false dedaration or representation was made accidentally an

10 F M C
JAPAN ATLANTIC AND GULF FREIGHT CONFERENCE 347 

withoutthe intent to avoidthe payment of the proper amount of freight on such

cargo and that immedialtely upon learning of such false declaration orrepresen

tation the Merchant tendered the balance if any of the amount of freight

properly due to theCarrier concerned

12 Receipt and carriiageof dangerous hazardous or obnoxious commodiIties

shall be subject to the special facilities and requirements of the individual

Carrier

13 The Conference shall promptly notify Merchant of changes in the Confer

ence membership and any additional carriers which become members of said

Conference shall thereupon become parties to this Agreement and theMerchant

sball thereupon have the right to avail himself of their services under the terms

of this Agreement Any Carrier party to this Agreement which for any reason

ceases to be a member of the Conference shall thereupon cease to be a party to

or participate in this Agreement and the Merchant shall not lbe entitled to

ship over said Carrier under this Agreement after such Carrier ceases to be a

member of the Oonference orafoter having fifteen 15 calendar days written

notice of the termination of such Oarrier s membership whichever is later

The Merchant may at any time after iIlOtice that a carrier has ceased to be a

member of the Conference cancel withoot penalty or liability for damages any

outstanding forwardbooking withsiuch withdrawing Carrier

14 All disputes arising in connection with this Agreement shall be submitted

to arbitration by any party and any dispute so submitted to arbitration shall

be finally settled under the Commercial Arbitration Rules of the Japan Com

mercial Arbitration Association At thetime a party makes a demand forarbitra

tion to the Japan Commercial Arbitration Association it shall also submit

thename of its arbitrator and the other party shall have fourteen 14 calendar

days thereafter to name its arbitrator and file samewith the Japan Commercial

Arbitration Association The Japan Commercial Arbitration Association shall

within fourteen 14 calendar days thereafter or within such other period as

the parties may agree name the third arbitrator who shall act as chairman

Any sum required to be paid by an award of thearbitrators shall be paid within

thirty 30 calendar days after a copy of the award has been mailed by the

arbitrators to the parties Judgment upon the arbitration award may be rendered

in any court having jurisdiction thereof or application may be made to such

court for a judicial acceptance of the award and an order of enforcement as

thecase may be In theevent an action for judgment of execution is brought in

a

court of competent jurisdiction on the arbitration award or on the judgment

rendered thereon the parties waive all rights to object th reto insofar as per

missible under the laws of the place where theenforcement action is instituted

The place of arbitration referred to in this paragraph shall be Tokyo Japan

unless otherwise mutually agreed upon by parties concerned The foregoing

provisions regarding arbitrations shall apply unless the parties mutually agree

to have any dispute settled pursuant to therules of any other arbitration society

and at any other place or inany other manner

Ifthe intention with which any party hereto did or omitted or caused or

permitted to be done or omitted any act orthing shall be an issue inany arbitra

tion proceedings hereunder and such party shall have failed refused or omitted

to furnish to any other party or to the arbitrators any information document

or data required to be furnished by it in accordance with this agreement the

arbitr8ltors may draw from such failure refusal or omission the inference

10 F M C
348 FEDERAL MARI IME COMMISSION 

that the information documents or data contain facts adverse to the positio

of theparty who so failed refused or omitted

15 a In the event of war hostilities warlike operations embargoes bloc

ades regulations of any governmental authority pertaining thereto orany oth

official interferences with commercial intercourse arising from the above co

itions which affect the operations of any of the Carriers in the trade cover

by this Agreement the Carriers may suspend the effectiveness of this Agre

ment with respect to the operations affected and shall notify the Mercha

of such suspension Upon cessation of any cause or causes of suspension set for

in this article and invoked by the Carriers said Carriers shall forthwith 

assume their rights and obligations hereunder and notify th Merchant o

fifteen 15 days written notice that the suspension isterminated

b In the event of any of the conditions enumerated in Article 15 a

the Carriers may increase any rate or rates affected thereby in order to me

such conditions in lieu of suspenSion Such increase or increases shall be o

not less than fifteen 15 days written notice to the Merchant Who may noti

the C rriers inwriting not less than ten 10 days before increases are to b

come effective of its intention to suspend this Agreement insofar as such i

creases is or areconcerned and in such event theAgreement shall be suspend

as of the effective date of such increase or increases unless the Carriers sh

give written notice that such increase or increases have been rescinded an

cancelled

c In the event of any extraordinary conditions not enumerated in Artic

15 a which conditions may unduly impede obstruct or delay the obligatio

of the Carriers the Carriers may increase any rate or rates affected

in order to meet such conditions provided however that nothing in this artic

shall be construed to limit theprovisions of Section 18 b of the Shipping 

1916 in regard to the notice provisions of rate changes The Merchant ma

not less than 10 days before increases are to beCome effective notify th

Carriers that this agreement shall be suspended insofar as the increases a

concerned as of theeffective date of the increases unless the Carriers shall giv

notice that such increase or increases have been rescinded and cancelled

For and on behalf of the Members of

the Conference

By

Chairman or Secretarypro tern

List of Carriers

Merchant

Full Corporate Company or

Individual Name

By

Title

Address of Merchant

10 F lLC
FEDERAL 1ARITIME COMMISSION

DOCKET No 6636

ADMISSION WITHDRAWAL AND EXPULSION SELF POLICING REPORTS

SHIPPERS REQUESTS AND COMPLAINTS OUTWARD CONTINENTAL

NORTH PACIFIC FREIGHT CONFERENCE

DecidedMarch 23 1967

Agreement No 93 found not to comply with requirements of section 15 of the

Shipping Act 1916 and General Orders 7 9 and 14

Outward Continental North Pacific Freight Conference ordered to amend Agree

ment No 93 to comply with General Orders 7 9 and 14 and section 15 of

the Shipping Act 1916 otherwise the Commission will withdraw approval

of its basicconference agreement

General Orders 7 9 and 14 are reasonable and valid promulgations of ru es

pursuant to sections 15 and 43 of the Shipping Act 1916 and theCommission

is authorized to disapprove Agreement No 93 for noncompliance therewith

Leonard G James for Outward Continental North Pacific Freight

Conference respondent

Donald J Brunner and Richard S Harsh Hearing Counsel

REPORT

By THE COMMISSION John Harllee 0hairman Ashton C Barrett

Vice Ohairman James V Day and George H iIearn

Oommissioners

PROCEEDINGS

By order served June 6 1966 we directed the Outward Continental

North Pacific Freight Conference Conference and the member lilies

thereof to show cause why Agreement No 93 as amended should not

bedisapproved pursuant to section 15 ofthe Shipping Act 1916 Act

because ofthe Conference s failure to comply with the requirements of

that section and our General Orders 7 9 and 14 The Conference filed

its opening memorandum and Hearing Counsel replied vVe heai doral

argument

10 F M C 349
350 FEDERAL MARITIME COMMISSION

FACTS

The Outward Continental North Pacific Freight Conference is a

association of common carriers by water serving the trade from

Scandinavian Baltic German Dutch Belgian and French Atlanti

ports to all Pacific Coast ports north of the United States 1exica

border and to the Hawaiian Islands with transshipment at Lo

Angeles Harbor and or San Francisco The Conference operates pur

suant to its basic agreement No 93 which was originally npprove

under section 15 of the Act in 1927 Subsequent to this approva

section 15 of the Act was amended by Public Law 87 346

1

to ployid

that continued approval shall not be permitted for any conferenc

agreement

which fails to provide reasonable and equal terms and conditions for dmissio

and readmission to conference membership of other qualified carriers in th

trade or failsto provide that any member may withdraw from membership upo

reasonable notice without penalty for such withdrawal

Public Law 87 346 further amended section 15 to provide that

The Commission shall disapprove any such agreement after notice and hearing

on a finding of inadequate policing of the obligations under it or of failure or re

fusal to adopt and maintain reasonable procedures for promptly and fairly hea

ing and considering shippers requests and complaints

The Commission s Genernl Orders 7 9 and 14 were subsequentl

adopted to implement the above mentioned requirements of section 15 

These General Orders contain rules and regulations which specifically

delineate minimum requirements imposed on a conference by theabove

quoted provisions of section 15 The rules were duly adopted by th

Commission pursuant to its rulemaking authority contained in sectio

43 of the Act 3

Each General Order allowed conferences subject to th

Commission s jurisdiction a fair amount oftime to fileany amendment

to their agreements orwhatever was required by Genera Orders 7 9

and 14

Respondent subsequently was advised by the Commission that its

agreement did not conform with the self policing and admission an

withdrawal requirements of General Orders 7 and 9

Respondent was advised by letter ofApril 29 1965 that its agree

ment was not in accord with the requirements of section 528 2 o

General Order 7 which provides that conference agreements betwee

1 87th Cong HR6775 Oct 3 HI 61

2 General OrfIcrs 7 9 and 14 pertain respecth ely to self policing admission and with

drawal reJuirements and shippers requests and complaint procedures

3

ection 43 was also enacted by Public Law 87 346 and reads as follows The Com

mission 8111111 make such rules and regulations as may be necessary to carry out th

provisions of the Act

10 F M C
OUTWARD CONTINENTAL NORTH PACIFIC FREIGHT CONF 351

common carriers by water in the foreign commerce of the United

States whether or not previously approved shall contain a provision

describing the method or system used by the parties in policing their

obligations under the agreement including the procedure for handling

complaints and the functions and authority of every person having

responsibility for administering the system Respondent did not reply

to this notice or take any action on this matter

Respondent was twice reminded by letter November 24 1964 and

February 16 1965 that it had not submitted the required self policing

reports the first ofwhich wasdue in July 1964 Sec 528 3 No reports

werefiled in response to these letters

UpOll notification ofthe requirements ofGeneralOrder 9 November

5 1964 respondent replied that it felt its agreement complied in all

respects Respondent was subsequently advised by letter ofApril 29

1965 of the specific areas in which it was believed its agreement did

not comply

a Just and reasonable cause is not adequate criteria for denial of

admission to membership Sec 523 2 c

b There is no provision for expulsion for failure to abide by all the terms

and conditions of the agreement Sec 523 2 h

c The agreement fails to provide that no expulsion shall become effective

until a detailed statement setting forth the reason or reasons therefor

has been furnished the expelled member and a copy of notification

submitted to theCommission Sec 523 2 i

No response was received to this notice and no action was taken

thereon by respondent

Respondent wasalso advised by letter ofJanuary 7 1966 that it had

not complied with the requirements of General Order 14 The require

ments with which respondent had not complied were specified

a The conference has notfiled a statement with the Commission outlining

in detail procedures for the disposition of shippers requests and com

plaints as provided inSec 527 3

b The conference has not filed a report on or before October 31 1965

covering all shippers requests and complaints and the information

requested with respect thereto which were received during the pre

ceding calendar quarter or pending at the beginning of such calendar

quarter as provided in Sec 527 4

c The conference has not advised us of the appointment of a resident

representative in the United States on or before September 9 1965 as

provided inSec 527 5

No response wasreceived to this letter

The Commission thereupon on June 6 1966 issued to respondeJit an

order to show cause why Agreement No 93 as amended should not be

disapproved by the Commission pursuant to section 15 of the Act

10 F M C
352 FEDERAL MARITIME COM MISSfON

because of respondent s failure to comply with section 15 and becaus

ofits failure to comply withGeneral Orders 7 9 and 14

DISCUSSION

Respondent in its memorandum of law states It may be as th

Commission alleges that they have not complied with Genera

Orders 7 9 and 14 Nevertheless respondent seeks to establish that w

Can not disapprove its conference agreement as a result of such failure

to comply Its argument onsists of the following five points whic

wewill discuss in order

1 Section 15 does not give the Commission authority to disapprove

a conference agreement without a

specific finding as a fact that th

agreement operates in one of the four ways set out in the section

2 The Commission s attemptto enforce its General Orders by threa

of disapproval of the conference agreement is an illegal sanction in

violation of section 9 ofthe AdministrativeProcedure Act APA

3 The Commission s show cause procedure precludes the admission

of any facts relating to the reasonableness of respondent s procedures

or operations in these three areas and accordingly no adverse con

elusion can be reached

4 General Orders 7 9 and 14 are invalid in any event an

unenforceable

5 General Orders 7 9 and 14 cannot be applied extraterritorially

Respondent cites Aktiebologet Svemka v F M O 351 F 2d 75

D C Cir 1965 and U S Atlantic and Gulf Australia New Zealan

Oonference v F M O 364 F 2d 696 D C Cir Nos 19637 19704

decided June 30 1966 as the basis for its contention that we canno

disapprove its agreement without a specific finding as a fact that the

agreement operates in one of the four ways set out in section 15 4

The above cited cases however in no way concerned either the self

policingrequirements conference admission requirements orshippers

req lests and complaints procedures which are involved here In addi

tion tothe four general grounds for disapproval of a conference agree

ment which governed in the Svemka case section 15 specifically

provides for disapproval of conference agreement for failure of a

conference to maintain adequate policing reasonable procedures fo

Section 15 reads inpertinent part

The Commission shall by order after notice and hearing disapprove cancel o

modify any agreement or any modification or cancellation thereof whether or no

previOUSly approved by it that it finds to be unjustly discrimina tory or unfair a

between carrier s shippers exporters importers or perts or between ex porters from

the United States and their foreign competitors or to operate to the detriment of th

commeIce of the United States or to be contrary to the public interest or to be in

violation of this Act

10 F M C
OUTWARD CONTINENTAL NORTH PACIFIC FREIGHT CONF 353

hearing shippers complaints and reasonable and equal provisions

governing conference membership 5

vYhen examining a conference

agreement wemust first determine ifthese three standards are met If

so we thenproceed to see iftheeffect of the agreement will be such that

it as a fact operates in Qne ofthe four ways set out in that section

by Congress Svenslca 351 F 2d at 766 If however our first analysis

of the agreement shows that any or all of the three requirements of

policing admission procedures and shippers complaints are not met

disapproval is warranted on that basis alone and no further inquiry

as to general effect ofthe agreement is necessary

We reached the same conclusion in Admission to Oonference Mem

bership Pacific Ooast European Oonference 9 F M C 241 1966

and most emphatically stressed it later in our Denial of Petition for

for Rehearing in the same docket served March 22 1966 We stated

In our report and order on this proceeding we found that respondents agree

ment failed to meet the requirements of General Order No 9 Therefore since

General Order No 9 was as we took care to point out in explanation and

effectuation of the reasonable and equal provision of section 15 we found that

the agreement failed to meet the requirements of section 15 Nothing more was

required certainly not a further finding of detriment to commerce or one of the

other alternative grounds for disapproval of a conference agreement Section 15

could not be more specific when it states nor shall continued approval be per

mitted tor any agreement which fails to provide reasonable and equal

terms and conditions for admission and readmission to conference member

ship

6

Respondent also seeks to establish that the Commission s attempt to

enforce its general orders by threat of disapproval of the conference

agreement is an illegal sanction in violation of section 9 oftheAPA

Section 9 reads that no sanction shall be imposed or substantive

rule or order issued except as authorized by law Respondent

argues that we have no statutory penalty for enforcement of our gen

eral orders

In Admission to Oonference Membership Pacifio Ooast European

Oonference supra the respondent conference there argued that it was

unlawful to withdraw approval oftheconference agreement for failure

to comply with General Order 9 We rejected that argument and

ordered the disapproval of the agreement upon the failure to amend

for noncompliance with the requirements of section 15 We further

held that inasmuch as General Order 9 is a valid promulgationofrules

interpreting and explaining the statutory terms contained in section

15 noncompliance with that General Order constitutes noncompliance

1

See p 850 supra forsection 15 language

6

Emphasis supplied

10 F M C

299 843 0 68 24
354 F EDERAL MARITIME COMMISSION

with the statute and accordingly is a

proper ground for disapproval 

a conference agreement

vVhat we said in Admission to Oonference Membership Pao

Ooast EU1 opean Oonference supra about General Order 9 has equ

applicability to General Orders 7 and 14 These rules are also issu

to explain interpret and give substance to section 15

Failure to meet the minimum requirements of the rules results 

failure to abide by section 15 The sanction authorized for violation 

sectio 15 is also applicable to a violation of the rules which are valid

issued pursuant to that section Accordingly disapproval of respon

ent s agreement for failure to comply with General Orders 7 9 and 

will not result in a sanction unauthorized by lay

Respondent cites Unapproved Section 15 Agreel1wnts Gulf Unit

Kingdo1n Oonference 7 F l1 C 536 1963 for the proposition th

the Commission has previously stated that violation of a gene

order is not the equivalent of violating section 15 We need only po

out that the general order involved in that case was not one issued 

explain interpret or implement section 15 It is not inconsistent 

say that violation of such a general order need not be a violation 

section 15 vVe are dealing here however with general orders adopt

to explain interpret and implement section 15 and violation there

results in violation of section 15

Respondent maintains that the show cause procedure has preclud

it from establishing any facts which might prove that its operatio

in these three areas meet the requirements ofthe statute Itis respon

ent s contention that although it does not comply with the gener

orders it has nevertheless not operated in a manner inconsiste

with the statute Itmaintains that its policing has been adequate

that it has adopted reasonable and equal conditions for conferen

admission and that its shippers complaint procedures have be

reasonable Itclaims to have been precluded from showing the sam

however by the Commission s use of the show cause procedure whic

forecloses a hearing on thesubject

Respondent s contention would be valid were we attempting to sho

that its actual operations did not meet the statutory requiremen

Such is not the purpose ofthis proceeding however As a result of th

promulgation ofGeneral Orders 7 9 and 14 conferences are obliged 

inform the Commission of the procedures they have adopted in t

areas of policing conference admission and shippers complaint

Conferences are also required to submit periodic reports on action

taken by them pursuant to their established procedure Although w

realize that compliance with these general orders does not guarante

10 F M C
OUTWARD CONTINENTAL NORTH PACIFIC FREIGHT CONF 355 

that a conference is operating in a fair manner consistent with the

statute it does nevertheless guarantee that each conference has estab

lisheda general framework under which the mandates of the statute

can be carried out We have determined that if a conference has not

satisfied us that ithas established such a suitable framework ithas not

taken the necessary first step toward assuring the protections outlined

in thestatute

Inview ofthefact that we conclude thatrespondent has not properly

met this initialrequirement there is no need to have a fullevidentiary

hearing to determine whether respondent s actual operations meet the

statutory requirement No genuine issue of fact is presented and

accordingly there is no need for an evidentiary hearing We recognized

this same point very recently in Docket No 66 52 In the matter of the

Modifieation of Agree1nent 5700 in which case we noted language

from Produoers Livestock Marketing Assoc v U 8 241 F 2d 192

10th Cir 1957 Aff d 346 U S 282 1958

the Supreme Court has defined full hearing as one in which ample

opportunity is afforded to all parties to make by evidence and argument a

showing fairly adequate to establish the propriety or impropriety from the

standpoint of justice and law of the step asked to be taken Vhere no genuine

ormaterial issue of facts is presented the court or administrative body may pass

upon the issues of law aDter affording the parties the right of argument

Respondent was given an opportunity to submit affidavits of fact

memoranda of law and to present oral argument Nothing further is

required in this proceeding

Respondent has also challenged the validity of General Orders 7 9

and 14

There can be no dispute that the rules wereissued pursuant to proper

procedure When the Commission proceeded to adopt its rules imple

menting the statutory requirements with respect to self policing

admission of conference members and shippers complaints a separate

rulemaking proceeding was instituted for each of the three areas In

each instance lengthy proceedings were held with opportunity givento

interested parties to participate These proceedings resulted in the

adoption of General Orders 7 9 and 14

The gist of respondent s challenge to the validity ofthe rules is that

the Commission cannot by use of such a rule prescribe the system to be

used by a conference in fulfilling the statutory requirements in these

three areas Respondent feels that each conference should be allowed

to choose its own form ofmeeting the requirements and the Commission

should only be concerned with the fairness of actual operations under

whatever form of compliance is chosen

10 F M C
356 FEDERAL 1ARITIME COMMISSION 

An analysis or the three general orders will show that responden

rears on this matter arewithout basis inasmuch as the general orde

do not dictate any single rorm or compliance

General Order 7 pertains to self policing and requires that a pr

vision for self policing be contained in the Conference Agreement 

requires a provision describing the method or system used by th

parties in policing the obligations under the agreement a descriptio

of the procedures ror handling complaints and a description or th

functions and authority or every person having responsibility for a

ministering the system Conrerences are required to file reports twic

a

year showing nature or complaints action taken notice or violation

round and penalties imposed General Order 7 in no way dictates wh

method or system or self policing is to be used It merely requires 

description or the system and a minimum or reporting concerning th

operation or the system to aid the Commission in discharging i

responsibility to insure adequate policing

As we noted in the preratory language or General Order 7 in r

sponse to objections voiced to the possibility or requiring specific type

of provisions Nothing in the rules specifies the particular method 

procedure which must be used ror self policing 7

General Order 9 pertains to admission withdrawal and expulsio

provisions or conrerence agreements Itrequires that conrerence agre

ments contain provisions in substantially the form of the nine pro

visions enumerated therein These nine provisions contain standard

designed to guarantee that the essential elements or qualification ro

admission and sarety rrom expulsion are met Such provisions a

designed to prevent arbitrary conrerence action which would be poss

ble under respondent s suggested provisions which allow ror exampl

denial or admission for just and reasonable cause General Order 

does not require that the enumerated provisions be incorporated ve

batim It does require however that all the protections containe

therein be present in some rorm in that which the conrerence adopt

Only irthese protections are included is it possible that the terms an

conditions ror admission etc or a particular conrerence are reasonab

and equal within the meaning of section 15 These are the minimu

sareguards The mere statement or these procedures in the agreeme

willnot however guarantee reasonableness and equality or treatmen

General Order 9 thererore also contains reporting requirement s as 

actions taken under the agreement to enable us to determine the exte

ofcompliance

7

See General 01 der 7 28 F R 9257 Aug 22 1 963

10 F M C
OUTWARD CONTINENTAL NORTH PACIFIC FREIGHT CONF 357

In drafting this rule we were faced with objections on both ends

calling for either greater generality or more specificity in spelling out

the criteria for admission We stated in the final order

The rule as drafted isneither extremely general nor overly specific butrather

it attempts to strike a balance giving the conferences some discretion in sub

mitting for approval other conditions on admission to membershil

8

General Order 14 pertains to conference procedures for hearing and

considering shippers requests and complaints Itrequires that pro

cedures adopted by a conference be reasonable It defines shippers

requests and complaints It requires that conferences file with the

Commission a statement outlining in complete detail their procedures

for handling shippers requests and complaints Conferences must also

file a quarterly report describing all requests and complaints received

and the nature of action taken Conferences domiciled outside the

United States are required to designate a resident representative in

the United States with whom shippers situated in the United States

may lodge their requests and complaints General Order 14 does not

specifically dictate the type of procedures to hadopted It only

requires that the CommiSsion be informed of the type procedure used

The requirements of General Order 14 are designed to enable the

Commission to determine whether such procedures are reasonable as

required by the statute

As in General Orders 7 and 9 objection was made to adoption of

rigid requirements in formulating General Order 14 and once again

we noted that we werenot attempting to adopt any such rigid require

ments We said in the prefatory language to General Order 14

Because of the many ramifications which may arise in dealing with these

matters we agree that set and rigid procedures cannot be applied in all cases

1I

It is obvious from the preceding discussion of the three general

orders that respondent has completely distorted the picture when it

claimsthat these general orderslimit a conference to a single method of

compliance withthestatute

Afurtheraspect ofrespondent s attack onthe validity of the general

orders is that conference compliance with the general orders is no

guarantee that the fairness required by the statute is being upheld

We are well aware that we have no guarantee that conferences which

inform us of their procedures and report on actions taken thereunder

have necessarily operated fairly Compliance with the general orders

does guarantee however that conferences have established a general

framework under which the mandates ofthe statute can be carried out

8

See General Order 9 29 F R 5797 May 1 1964

See General Order14 30 F R 7490 June 8 1965

10 F M C
358 FE DERAL MARITIME COMMISSION

Also by use of the reporting requirements we can easier look at t

actual operations of a particular conference One of responden

objections here is that wecannot condemn its actions since wehave n

observed or have not taken evidence concerning respondent s actu

operation in these three areas Such however is not necessary sin

respondent has not satisfied our initial requirements of reporting 

actions to us Once we receive such reports we can decide whether 

make further investigation to determine if a conference s operation

are proper

In Admission to Conference Membership Pacific Coast Europea

Conference supra we reviewed the history of the Commission s poli

toward conference admissions in view of the reasonable and equa

provisions of the statute and concluded that General Order 9 is 

complete harmony with section 15 merely seeks to realize the Co

gressional intent behind that section and is necessary to carry out th

provisions ofthe Shipping Act The same is true of General Orders 

and 14

Respondent has expounded at length on the propositionthat we ca

not enforce our general orders abroad In so doing respondent attac

our decision in Docket No 916 Investigation of WIN AC decide

August 22 1966 10 in which we determined the provisions of the A

extend to conduct abroad performed by persons engaged in the foreig

commerce of the United States Respondent cites several cases whic

it says are contra ourdecision in Docket No 916 and which should pr

clude us from attempting to enforce these general orders again

respondent

Among the cases cited by respondent are Empresa H ondurena D

Vapores v McLeod 300 F 2d 222 2d Cir 1962 372 U S 10 a

Lauritzen v Larsen 345 US 571 1953 These two cases howeve

involved a question of whether a statute of the United States may 

applied to regulate the internal activities of a foreign nation 

neither instance would the activities sought to be regulated hav

affected U S interests Or US commerce The U S district court 

New York recognized this distinction in Vs v Anchor Line Ltd 2

F Supp 379 1964 atp

384

Respondent however would have us believe that our attempts 

enforce these general orders upon it is an attempt to regulate activiti

which have no effect on our foreign commerce or on U S interes

This simply is not true

Respondent does not deny that it serves the foreign commerceofth

United States Respondent has operated under an approved basic co

10 F M C

10 10 F LC 95
OUTWARD CONTINENTAL NORTH PACIFIC FREIGHT CONF 359

ference agreement since 1927 The mere fact that its conference agree

ment is subject to our jurisdiction should preclude itfrom questioning

the applicability of these general orders to its activities These general

orders are designed to assist this Commission in carrying out its

statutory duty to insure that thebasic protections sought to be achieved

by requiring section 15 approval are retained We cannot see how the

activities of a conference serving the U S

foreign commerce can have

no effect onU S shippers orU S carriers which might seek to join the

conference

On the basis of the foregoing and after analysis of respondent s

agreements we find and conclude that respondent has failed on the

specific respects enumerated above to meet the requirements of Gen

eral Orders 7 9 and 14 and further that respondent has failed to show

why Agreement No 93 as amended should not be disapproved An

appropriateorder will beentered

10 F M C
FEI ERAL l1ARITJME COMMISSION

ORDER

This proceeding having been initiated by an Order to Show Cau

issued by the Federall1aritime Commission upon its own motion a

the Commission having fully considered the matter and having th

day made and entered of record a Report containing its findings a

conclusions which Report is hereby referred to and made a pa

hereof

Itis ordered That pursuant to section 15 of theShipping Act 191

Agreement No 93 be disapproved effective 60 days from the date 

this Order unless within that time the Outward Continental Nor

Pacific Freight Conference and its member lines shall have

a amended the conference agreement to comply with the requir

ments of section 15 oftheShipping Act 1916 and the requirements 

the Commission s General Order 7 by inserting a

provision describin

the method or system used by the parties in policing their obligation

under the agreement including the procedure for handling complain

and the functions and authority ofevery person having responsibil

for administering the system

b submitted to this Commission a

report satisfying the requir

ments of Section 528 3 of General Order 7 covering the period fro

January 1 1964 to January 1 1967

It is further ordered That pursuant to section 15 of the Shippin

Act 1916 Agreement No 93 be disapproved effective 60 days fro

the date of this Order unless within that time the Outward Con

nental North Pacific Freight Conference and its member lines sha

have amended the conference agreement to comply with the requir

ments of section 15 of the Shipping Act 1916 and the requiremen

of the Commission s General Order 9 in the following respects

a by deleting the phrase just and reasonable cause from Artic

3 and substituting the phrase to carriers meeting the above requir

ments therefor Sec 523 2 c

b to provide that no party may be expelled against its will exce

for failure to maintain a common carrier service between the por

360 10 F M C
OUTWARD CONTINENTAL NORTH PACIFIC FREIGHT CONF 361

within the scope of the agreement or for failure to abide by all the

terms and conditions of the agreement Sec 523 2 h

c to provide for furnishing a detailed statement of the reasons

for expulsion to theparty expelled Sec 523 2 i

It is further ordered That pursuant to section 15 of the Shipping

Act 1916 Agreement No 93 be disapproved effective 60 days from the

date of this Order unless within that time the Outward Continental

North Pacific Freight Conference and its member lines shall have

complied with the requirements ofsection 15 oftheShipping Act 1916

and the requirements of the Commission s General Order 14 in the

followingrespects

a by filing a statement with the Commission outlining in detail

procedures for the disposition of shippers request and complaints as

provided in Sec 527 3

b by publishing in the tariff fullinstructions as to where and by

what method shippers may file their requests and complaints as pro

vided in Sec 527 6

c by designating a resident representative in the United States

with whom shippers situated in the United States may lodge their

requests and complaints as required by Sec 527 5

d by submitting to this Commission a

report satisfying the re

quirements of Sec 527 4of General Order 14 covering the period from

July 1 1965 to January 1 1967

Bythe Commission

Signed THOMAS LISI

Secretary

10 F M C
FEDERAL MARITIME COl1MISSION

DOCKET No 6616

PORTALATIN VELAZQUEZ MALDONADO ET AL

V

SEA LAND SERVICE INC ET AL

Truckers performing the pickup and delivery portion of a door t door contra

of ocean transportation on bebalf of a common carrier by water found n

sUbject to tbe Sbipping Act 1916

Complainants baving failed to establisb tbat a respondent bas violated any p

vision of tbe Shipping Act 1916 found not entitled to reparation

Complaint dismissed

Samuel M Oole and John Glynn for complainants

Warren Price Jr and Hugh Ii Shull for respondent Sea Lan

Service Inc

H rbert Burstein for respondent truckers

Donald J Bi Ulnnerand Thomas Ohristensen I

Iearing Counsel

REPORT

By THE COMMISSION JOM HarIlee Ohairman Ashton C Barre

Vice Ohairman James V Day Oommissioner

This proceeding is before us on exceptions of Hearing COillls

to the initial decision of Examiner Herbert K Greer Hearing Cou

sels exceptions merely constitute a

reargument of the same issues aI

gations and contentions considered by the Examiner in his init

decision Hearing Counsel cite one additional case not mentioned 

their prior briefs Tariffs Embracing Motor Ti UCk or Wagon Transf

Service 91 LC C 539 1924 but this case does not support the co

clusion that the trucker complainants and respondents in this procee

ing are other persons subject to the Shipping Act 19 16 any mo

than the cases previously cited to the Examiner to support this concl

sion and rejected by him

After a careful review and consideration of the record in this pr

ceeding we conclude that the Examiner s disposition of the issu

i Note JThis decision became the decision of the Commission on Apr 3 1967

10 F lC

362
PORTALATIN VELAZqUEZ MA QONADO V SEA LAND SERVICE INC 363

herein was well fmmded and proper Accordingly we hereqy ad pt

the Examin r s decision which is set forth below

INITIAL DECISION OF HERBER IIC GREER PRESIDING EXA tINER 1

Complainants 2

are Puerto Rican truckersrengaged in the busine 3q of

hauling goods between ocean terminals and inland points They ek

reparation in the amount of 900 000 00 from four trucking corpora

1ions operating in competitions with them and frOln Sea Land Service

Inc a common carrier by water The claim for reparation is found d

on alleged violations of sections 14 15 16 17 and IS ofthe Shipping

Act 1916 Complainants further ask for the issuance of an order re

quiring respondents to cease and desist from continuing viplations of

the Act and for such further relief as may appear pr oper

THE FACTS

1 Respondent Sea Land Service Inc Sea Land is a common car

rier by water and in 1958 began providing service between U S ports

and ports in the Commonwealth of Puerto Rico At all material times

this respondent offered a door to door service which included ocean

transportation and the pickup and delivery of cargo to and from its

terminals and shippei s and consignees places of business It also

offered a port to port service under which the shipper or consignee

picked up or delivered its own gF

ds at Sea Land s terminals

2 Respondents Valencia Service Co Inc Valencia Baxt Express

Inc 1aritime Trucking Co Inc and Francisco Vega Otero Inc

herein collectively referred to as respondent truckers or Big Four

operate a trucking business in the Commonwealth ofPuerto Rico and

engage in hauling goods between Sea Land s terminals and inland

points

3 Truckers operating commercially within the Commonwealth are

subject to regulation by the Public Service Commission of Puerto

Rico 3

4 From 1958 to June 1962 Sea Land carried out the Puerto Rican

portion of its pickup and delivery service under individual agree

ments with Puerto Rican truckers including but not limited to com

plainants and respondent truckers Three pickup and delivery zones

were established with different rates for each zone

1 This decision was adopted by the Commission on Apr 13 1967

2

portalatin Velazquez Maldonado Ramon Gonzalez Diaz Santos Soto Rivera Ismael

Almodovar Angel L Rios Torbec Trucking Inc Metropolitan Confidential Corporation

Justo Torres Gutierrez Carlos Crespo Carlos Lopez Ramon Narvaez Adolfo Villalobos

3 The record does not disclose whether the Public Service Commission acted on the

rates agreed upon between the truckers and Sea Land for performance of a pIckup and

delivery service However the truckers were licensed to operate by that Commission

10 F M C
364 FEDERAL MARITIME COMMISSION

5 During April of 1962 a new manager took over Sea Land 

Puerto Rican operation He met with a delegation oftruckers to ass

them in the formation of an association which would be operated an

controlled by the truckers and have for its purpose the establishme

of a common understanding and cooperative working agreement Su

sequently the United Freight Haulers Association Inc the associ

tion was formed Complainants and respondent truckers wer

together with othertruckers members ofthe association

6 On October 16 1962 the association entered into a so calle

Trailer Interchange Agreement with Sea Land which was designe

to govern the relations between individual members ofthe associatio

and Sea Land with respect to the pickupand delivery service inciden

tal to Sea Land s door to door full trailerload contracts of transpo

tation Eight pickup and delivery zones were established in lieu o

the existing three zones itbeing agreed that truckers would be com

pensated at the same rate Sea Land charged shippers or consignee

which rate was set forth in the tariff filed by Sea Land with the Fe

eral Maritime Commission These zones and the rates applicable 

each zone were established by Sea Land after negotiations with ass

ciation members and the Puerto RicanPort Authority and werebase

on distance condition of the roads traffic congestion and trucker

maximum costs Under the terms of the agreement the trucker pr

vides the tractor and Sea Land leases to him an individual trail

sometimes referred to as a van the lease to be effective during th

time the trailer is away from Sea Land s premises The trucker lesse

among other things agrees to retain possession of the trailer 

promptly make delivery to a shipper or consignee and return to Se

Land s terminal The les see assumes complete control and supervisio

of the trailer during the lease period and the lessor relinquishes a

right to control the workof any lessee employee or agent operating 

using the trailer or in possession of it the agreement providing th

such persons are not the agent or employee ofthe lessor for any pu

pose whatsoever The trucker lessee agrees tohold the lessor harmle

for damage to the Sea Land trailer from all liability for damages 

persons or property arising out of the operation to assume all leg

responsibility for cargo loss or damage and to maintain insuran

covering the cargo all owned hired and nonowned vehicles involve

personal orproperty damage to third persons Sea Land is to be nam

in the policies as an additional insured

7 Subsequent to its execution the agreement was modified to 

lieve association meinbers from responsibility for damage to car

in excess of the limits described in the insurance policies to obliga

10 F M C
PORTALATIN VELAZQUEZ Mi LDONADO V SEA LAND SERVICE INC 365

Sea Land not to sign agreements with nonmembers except when

shippers or consignees transported trailers with their own equipmeIlt

and provided the same insurance coverage required of association

members and obligating individual association members to be pr

son ally responsible for full compliance with the agreement An addi

tional modification provided that the insurance requirements would

be satisfied by Sea Land under policies held by McLean Industries

Inc in consideration of a premium which shall charged at a com

bined rate of 3 percent that will be applied against the cost of hire

for all operators hauling Sea Land container and ch ssis units This

latter modification followed Sea Land s offer to help truckers in ob

taining better insurance coverage at less cost

8 Individual association members may solicit shippers and con

signees in Puerto Rico to obtain the privilege of hauling their ship

ments to and from Sea Land s terminal In connection with this full

trailerload door to door service Sea Land honors a request from the

shipper or consignee to permit a designated trucker to pe form the

pickup or delivery service There are shipments as to which the ship

per or consignee has not designated a trucker herein referred to as

unassigned or unrouted shipments Originally Sea Land agreed to

rotate such shipments among association members but this arrange

ment did not materialize

9 Sea Land was experiencing difficulty in connection with the pick

up and delivery of less than trailerload LTL cargo The agreement

between Sea Land nd the association did not cover such cargo and

individual members would accept for hauling only such LTL cargo

as they elected to carry Many association members did not own the

type of equipment designed to handle LTL cargo and did not desire

to purchase additional equipment in view of a possible loss which

might develop because of the high cost involved in hauling Ln

cargo To solve this problem Sea Land approached the association to

determine which members would be willing to make available equip

ment for handling LTL cargo in return for the privilege of hauling

unassigned orunrouted fulltrailerload cargo Only respondent t ck

ers the Big Four accepted and thereafter Sea Land gave them the

privilege of hauling full trailerloads except for those trailers as to

which a shipper or consignee had stated a preference for another

trucker When the volume offulltrailerload cargo exceeded the ability

of theBig Four to handle Sea Land would designate an9ther Btssocia

t

ion member as the hauler

10 Sea Land will enter into a Trailer Inte ange Agr ment w th

any Pu r o Rican truck r provided h has a

liqeD Se to p rate rom

10 F MQ
366 FEDERAL MARITIME COMMISSION

the Public Service Commission presents evidence of proper insuran

coverage a d has custolners specifying the use of his services Pr

ently approximately qne hundred tr1lckers have signed agreeme

with Sea Land See finding No 16 as to complainant Villalobos

11 Any trucker may bring his equipment to Sea Land s termi

to pick up ordrop a trailer he ha been selected to transport Atot

times truckers are required to keep their tractors outside the termi

because of space limitations Truckers handling LTL cargo are p

mitted to keep equipment involved in such transport inside the term

nal area for convenience in loading and for the protection of t

cargo The Big Four are accorded telephone office and yard privileg

not available to othertruckers

12 Truckers do not own or control facilities located on Sea Lan

elminal They enter the terminal with their tractors to pick up or d

liver Sea Land trailers Inconnection withthe handlingofLTL carg

they furnish the trucks necessary to haul the cargo and the labor 

load or unload their trucks The cargo is either delivery service carg

which it is Sea Land s responsibility to deliver to a consignee s pre

ises or pick up at a

shipper s premises or nondelivery cargo as 

which the shipper or consignee has the responsibility to pick up 

deliver

13 The arrangement between Sea Land and the association 

In ined in effect for approximately 2 years Complainant Maldona

sometimes referred to on the record as Velazquez became preside

of the association He and other association members met with Se

Land representatives for the purpose of discussing changes in the

agreement to include increased rates and a different method of d

tributing among truckers the privilege of hauling unassigned or u

routed cargo Sea Land refused to modify the existing arrangemen

and advised association members to take or leave the existi

contract

14 By letter dated June 2 1964 and signed by complaina

Maldonado as president ofthe association Sea Land was advised th

the agreement would be cancelled effective midnight June 12 196

Sea Land then reverted to the system used between 1958 and Octobe

1962 and entered into Trailer Interchange OTeements with indivi

ual truckers

15 On June 13 1964 association members formed a picket line 

Sea Land s terminal A truck driven by an employee of responde

Valencia Baxt attempted to run down Maldonado who was in th

picket line and forced him to seek safety by getting out of the stree

After several of such occurrences Maldonado went to his home and r

10 F M o
PORTALATIN VELAZQUEZ MALpONADO V SEA LAND SERVICE INC 367

turned armed He recognized the driver of the truck fired at him

missed but the bullet struck a Sea Land employee Maldonado was

tried for the offense and convicted He did not apply to Sea Land for

an individual Trailer Interchange Agreement and has been unable to

transport Sea Land trailers for that reason Maldonado has lost his

equipment and no longer operates as a trucker

16 Complainant Villalobos executed an individual agreement with

Sea Land on June 13 1964 and continued to haul trailers destined for

his customer Pueblo Supermarket Subsequently a strike by the Team

sters Union involved a picket line at Sea Lands terminal and Villa

lobos could not get into the terminal to receive trailers containing

PuebloSupermarket cargo A Sea Land employee dispatc4ed a trailer

to Pueblo Supermarket by another trucker and Villalohos complained

A fight ensued and the Sea Land employee was severely beaten

Villalobos was convicted of simple assault One week after the alter

cation Villalobos presented himself at the Sea Land terminal to pick

up a trailer destined for one of his customers not Pueblo Super

market After an argument which involved calling the police Sea

Land gave Villalobos a letter terminating his contract with them and

they have not permitted him to enter the terminal from that time

on His business has substantially decreased

11 At all material times complainant Ramon Gonzales Dia has

hauled Sea Land trailers under a Trailer Interchange Agreement as

an individual or as an association member He has been charged and

has paid 3 percent of the revenue received for hauling a trailer as

insurance premium and has been required to pay for damage to a Sea

Land trailer He has at times been delayed at least an hour in picking

up a trailer because other trailers in the line ahead of him were being

subjected to inspection by Sea Land personnel to determine whether

they werein condition to bemoved

18 Sea Land Sales of Puerto Rico is a sales agency owned by

Alfonso Valencia who owns part interest in respondents Valencia

Service Co Inc and Valencia Baxt Express Inc Sea Land does not

own or control the sales agency but pays the agency a fee on business

produced

19 Sea Land does not retain any portion of the 3 percent insurance

charge paid by truckers but passes the entire amount on to the in

surance carrier No charge is made by Sea Land for administrative

service involved in handling the insurance

10 F M C
368 FEDERAL MAR TIME COMMISSION

DISCUSSION 

The primary issue is the Commission s

jurisdiction over the 

spondent truckers Sea Land is a common carrier by water and does n

contest the Commission s jurisdiction 4

Respondent truckers are n

common carriers by water They do not carry on the business of fo

warding nor do they furnish wharfage dock or warehouse faciliti

Ifjurisdiction attaches they must be found to be other persons w

furnish otherterminal facilities in connection with a common carr

by water 6

Complainants take the position that respondent truckers furni

terminal facilities in connection with a common carrier by wa

because their work was totally intertwined with the shipping ope

tion in the light of the door to door service offered by Sea Land a

that the service involved asingle inseparable transaction conducte

maintained and exclusively controlled through Sea Land and 

agents

Hearing Counsel argue that all truckers involved both compla

ants and respondents furnish labor and equipment in the performan

of the pickup and delivery service which regardless of their co

tractual relationship with the ocean carrier amounts to the perfor

ance of a link in the interstate commerce intended to be covered 

the Shipping Act They cite U S v American Union Transport 3

US 437 1946 to support the position that if the Commission is 

effectively regulate water carriers it must have supervision of 

incidental facilities connected with the main carriers They argue th

a pickup and delivery service has been held to be a terminal facil

incidental to ocean commerce by the courts and the Commission a

cite American Trucking Association v U S 17 F 2d 655 1963 O

tain Tariff Practices of Sea Land Service Inc 7 F M C 504 1963

Pickup and Delivery Service in Official Territory 218 IC C 4

1936 and Status of Oarloaders and Unloaders 2 U S MC 7

1946

Respondenttruckers contend that they do not as principals furn

any service whatsoever and that in their capacity as Sea Land agen

they are exempt from this CommIssion s

jurisdiction in accordan

6

Th controversy between the parties hereto was Originally submitted to the 

District Court for the District of Puerto Rico The court granted respondents motion 

dismiss on the ground that primary jurisdiction waswith the Federal Maritime Commiss

a

Section 1 of the Shipping Act 1916 in pertinent part provides

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

the term common carrier by water carrying on the business of forwarding 

furnishing wharfage dock warehouse orother terminal facilities in connection w

a cmmon carrier by water

10 F MO
PORTALATIN VELAZQUEZ MALDONADO V SEA LAND SERVICE INC 369

with the decision in Matson Navigation Oo Oontainer Freight

Tariffs 7 F MC 480 1963 Complainants also rely on this decision

but take a diverse view as to its meaning and effect

The Matson decision does not support complainants position that

truckers performing a pickup and delivery service on behalf of or

under contract with a common carrier by water become subject to the

provisions oftheShipping Act The Commission did not assume juris

diction overthe land carriersbut made clear that its regulatory author

ity attached only to thewater carrier stating

The service is offered by Matson inits capacity as a common carrierby water

and itis inthis capacity that Matson is subject to the regulatory jurisdiction of

theCommIssion

Further

We aremerely subjecting to regulation a service authorized by theprovisions of

the Shipping Act offered by a common carrier subject to that act Ifa portion of

that service is conducted by acarrier subject to another agency s regulation and

the carrier performs that service in violation of the laws adminiStered by that

agency that is a matter for the agency concerned Practical difficuLties may arise

but jurisdictional conflictsshould not

Moreover the Commission did not attempt to regulate therates agreed

upon between the ocean carrier and the land carrier for performance

ofthe pickupand delivery service stating

Once the charge of the motor carrier to Matson becomes fixed it is like any

other fixed cost of a water carrier and is to be considered as such in determining

the reasonableness of the rate which that water carrier charged the shipping

public

Hearing Counsel do not consider the Matson decision as applicableto

the situation here because the truckers performing the pickup and

delivery service for Matson were subject to the regulatory authority of

the Interstate Commerce Commission 100 and this Commission is

precluded by section 33 of the Shipping Act from exercising any con

current jurisdiction over ICe regulated carriers but that in this pro

ceeding the truckers are subject to regulation by the Public Service

Commission of Puerto Rico an agency not specifically excluded from

this Commission s

jurisdiction by statute They reason that if as they

contend the truckers furnish other terminal facilities and are for

that reason subject to the provisions of the Shipping Act this Com

mission s

jurisdiction is not diminished because of the Public Service

Commission s concurrent jurisdiction

Quoted above is the Commission s comment in the Matson decision

that in connection with a pickup and delivery service performed by

truckers subject to another agency s

regulatory authority Practical

difficulties may arise but jurisdietional conflicts should not The

10 F M C

299 843 0 68 25
370 FEDERAL MARITI E COMMISSION

matter of concurrent or conflicting jurisdiction is not deemed decisiv

of the issue here present ed In any event the issue would not aris

unless it was determined that the truckers are subject to this Conunis

S Ol1 s jurisdiction because they furnish terminal facilities as that term

isused in the act

The truckers involved in thisproceeding enter the ocean terminal fo

the purpose of picking up or delivering cargo which they transpo

between the terminal and a shipper s or consignee s place of busines

They do not furnish labor or equipment to transfer the cargo from on

place on the terminal to another place thereon as in 0arloaders an

Unloaders supra They do not furnish labor or equipment to load o

unload a vessel as did the contractor in Philippine lI ercMnts Steam

ship 00 v Oargill Inc FMC Docket 996 9 FM C 155 In thos

two proceedings the contractor s service wasperformed entirely withi

the terminal area and was a function necessary to the terminals opera

tion Here the truckers do no more than any other person who bring

cargo to an ocean terminal or comes to the terminal to take deliver

of an ocean shipment Sea Land unloads the vessels Itplaces inboun

cargo on the terminal and it is from thisplace of rest that trucke

pick up a trailer or LTL cargo and transport it inland Outboun

cargo is brought to the terminal from inland origins placed on th

terminal and from this place of rest Sea Land takes over to load th

full trailer on a vessel or to stow LTL cargo in trailers for subseque

loading on a vessel Equipment furnished by the truckers is limited t

tractors for hauling Sea Land trailers or trucks for hauling LT

cargo The truckers do not furnish labor for loading or unloading fu

trailerload cargo although ithey do load and llilload LTL cargo at 

place ofrest on theterminal

The term other terminal facilities is not defined by statute I

Status of Oarloaders and Unloaders sUPra the Commission adopte

the definition of terminal facilities as All those arrangement

mechanical and engineering which make easier transfer of passenge

and goods at either end of a stage of transportation service A com

mon carrier by water has only the dbligation to provide a reasonab

available place for the receipt and delivery of property and has n

obligation to deliver the cargo to its ultimate destination America

President Lines Ltd v Federal Mariti fneBoard 317 F 2d 887 1962

Thus the transportation service offered by a water carrier whe

viewed as an obligation which attaches to common carriage begins o

ends at the place provided on aterminal for the receipt or delivery o

property The Commission and the courts have recognized that 

common carrier by water may by contract extend its obligation to 

10 F M C
PORTALATIN VELAZQUEZ MALDONADO V SEA LAND SERVICE INC 371

shipper to include a pickup and delivery service The fact that an ocean

carrier employs a land carrier to perform this contractual obligati n

does not place such land carrier in the position of performing an

obligation imposed by statute on a common carrier by water

A person by virtue of a contract with a water carrier or terminal

operator may become subject to the Commission s

jurisdiction pro

vided the contract involves an activity covered by the act But enter

ing an ocean terminal for the sole pnrpose ofpicking up or delivering

cargo does not amount to the furnishing of a terminal facility within

the purview of section 1 of the Shipping Act The cases cited to sup

port the principle that a picktlp and delivery service is a terminal

facility involve the question of a Federal agency s regulatory author

ity over the activity of a carrier otherwise subject to its jurisdiction

The Federal agency regulates the carrier s service to the public includ

ing its activities incidental to the common carriage of goods But no

authority is found to support the proposition that a contractor who

carries out a pickup and delivery service independently or on behalf

of an ocean carrier is subjected to the Commission s

jurisdiction

Alleged Violations of theShippingAct

Section 22 of the act provides that reparation may be awarded for

injury caused by persons subject to the act and as respondent truckers

are not within that category the right to reparation would depend on

proof ofa violation ofthe act by respondent Sea Land

Complainants brief furnishes but little guidance in relation to the

evidence they adduced and their allegations that sections 14 15 16 17

and 18 of the Shipping Act 1916 have been violated Counsel s pre

liminary statement at the hearing indicated an intent to prove that the

rates applied to the pickupand delivery service were less than properly

applicable that Sea Land required a rebate from the truckers for in

surance tires repairs and demurrage which although counsel did not

so specifically state might amount to Sea Land receiving more from

the shippers than the applicable rate that undue and unreasonable

reference was gi ven to certain persons by Sea Land in connection

with the pickup and delivery service particularly respondent truckers

to whom Sea Land paid a higher rate than to other truckers and that

the pickup and delivery zones established by Sea Land and the rates

charged were improper

Hearing Counsel find no violations of the act except that all parties

failed to file their interchange agreement as required by section 15 of

the act Inasmuch as the truckers have been found to be persons not

subject to the act and as the statute requires only the filing of agree

to F M C
372 FEDERAL MARITIME COMMISSION

ments between persons subject to the act that issue has been dispose

of aJbove

Section 14 of the act prohibits deferred rebates to any shipper an

complainants presented no evidence whatsoever to establish that an

shipper received a rebate from Sea Land much less the particula

kind ofrebate to which this section relates

Section 16 First makes it unlawful to give any undue or unreaso

able preference or advantage to any particular person locality o

description of traffic in any respect whatsoever The only evidenc

which might relate to preference or advantage is that Sea Land a

signed a greater portion ofthe cargo involved in its door to door serv

ice to the so called Big Four than to othertruckersEven if section 

could be extended to include a

requirement that an ocean carrier mu

equally distribute the hauling of its cargo between inland trucker

which certainly the provision does not require any preference show

was neither undue nor unreasonable Under the circumstances show

on the record it was reasonable for Sea Land to agree with trucke

that in return for accepting LTL cargo which required the purchas

of additional equipment and was at best a marginal operation from

a financial viewpoint those truckers would be permitted to carry s

called unassigned or unrouted cargo

Complainants evidence does not even remotely relate to any charg

rate or fare which is unjustly discriminatory between shippers or po

or unjustly prejudicial to exporters of the United States as compare

with their foreign competitors The allegation that pickup and delive

zones and rates therefor were improper orunlawful is not borne out b

the evidence Sea Land established the zones and rates after consulta

tion with PuertO Rican Port Authority representatives and certa

truckers The zones and rates were based on maximum trucker cost

distance road conditions and traffic congestion within the vario

areas No violation of section 17 has been shown iri the absence 

proof of unjust or unreasonable practices in connection with receivin

ordelivery of property

Section 18 requires reasonable rates just and reasonable regulation

and practices in all matters relatingto or connected with the receivin

handling tr nsporting storing ordelivery ofproperty The zones an

rates in connection with the receipt and delivery of cargo were n

shown to be other than just and reasonable

Complainants evidence that Sea Land required a 3 percent dedu

tion from the rate established for pickup and delivery service does n

establish that Sea Land received more than the tariff rate require

to be paid by shippers or consignees The recordclearly establishes th

10 F M o
PORTALATIN VELAZQUEZ MALDONADO V SEA LAND SERVICE INC 373

this insurance premiurn was passed on by Sea Land to an insurance

agent and that instead ofprofiting thereby Sea Land assumed the cost

of administering the insurance program for thebenefit ofthe truckers

Complainants have failed to substantiate their allegations that re

spondents have violatedthe provisions oftheShipping Act as set forth

in the cortiplaint

ULTIMATE CoNCLUSIONS

1 Truckers performing the pickup and delivery portion of an ocean

carrier s door to door contract of carriage with shippers the services

of the tru kers being limited to eIltering an ocean terminal for thepur

pose of pIcking up or delivering cargo and transporting the cargo

between a place of rest on the terminal and shipper s or consignee s

inland establishment do not furnish terminal facilities in connection

with a common carrier by water within the purview of section 1 ofthe

Shipping Act 1916

2 Inthe absence ofproof to support the allegations ofthe complaint

that a person subject to the act has violated a provision of the Ship

ping Act 1916 complainants are not entitled to reparation

The complaint is dismissed

Signed HERBERT K GREER

Presiding Ewaminer

COMMISSIONER HEARN dissenting

I

disagree with the opinion of the majority in its discussion of the

Federal Maritime Commission s

jurisdiction over the truckers and the

conclusions following therefrom

There is today a tremendous amount of discussion in the shipping

and transportation industries about the revolutionary changes arising

from increased usage ofcontainerization There can be little doubt that

containerization offers substantial benefits to the transportation indus

try and the general business community Neither can it be doubted that

containerization requires significant revision oftraditional transporta

tion concepts to meet the requirements of effective movement of con

tainerized cargo It is therefore essential that we do not seek to per

petuate old strictures intended to meet the needs and problems of cargo

movement of yesteryear

Ifind the reasoning of the majority shortsighted in respect to the

Commission s

jurisdiction over the Puerto Rican truckers The facts

and circumstances ofthis case are sufficiently set forth in thePresiding

Examiner s Initial Decision and Ishall therefore proceed to the

discussion

Itake issue first of all with the Examiner s

reading of the decision

i Matson Navigation Oo Oo taine1 F1eight TaTi fs 7 F M C 480

10 F M C
374 FEDERAL MARITJME COMMISSION

1963 The Examiner states that the Mat80n case does not stand fo

the propOsition that truckers performing a

pickup and delivery servic

are subject to the ShippingAct of1916 That decision neither howeve

supports the position of the Examine and the Respondent trucker

i e that such truckers are not subject to the act In this regard the d

cision stands solely for the proposition that the Commission is mere

subjecting to regulation a service authorized by the provisions of th

Shipping Act offered by a common carrier subject to that act 7 F M C

480 491

More specHically the Commission said in the Matson decision th

the motor carriers did not by their actions rernove themselves from

the jurisdiction of the Interstate Commerce Commission 7 F M C

480 491 Emphasis supplied Section 38 of the Shipping Act pro

hibits usurpation or concurl ence of jurisdiction by the Federal Mar

time Commission of matters within the jurisdiction of the Interstat

Commerce Commission Itdoes not follow however that the Commis

sion would not have been prepared in Alatson to extend its jurisdictio

over the truckers were it not for the limitations of section 33 an

should be similarly prepared here since the Interstate Commerce Com

mission admittedly has no jurisdiction overthe truckers herein

In fact the Matson decision states that practical difHculties an

problems may arise but jurisdictional conflicts should not 7 F M C

480 492 The Commission was apparently anxious to avnid O

preycn

reg latory inconsistencies but was unable to do so by law No suc

jurisdictional restriction is present here Although the Public Servic

Commission of Puerto Rico has jurisdiction over the truckers the

is no legal restriction to the concurrent jurisdiction of the Federa

Maritime Commission It is not at all clear as stated by responden

truckers that the Commission may not pre empt the jurisdiction o

the Public Service Commission ofPuerto Rico Brief p7 1oreove

there is reason to favor extension ofthe Federal Maritime Commission 

jurisdiction

Pickup and delivery services which are presently beyond the reac

of any Federal agency are not limited to Puerto R co and it canno

be disputed that uniformity of regulatory control over such service

especially when involving federally regulated carriers is desirable

Even were this not so it should not be left open to such agencies a

the Public Service Commission to create hindrances to the movemen

of cargo by carriers regulated by the Federal Maritime Commission

Interstate Commerce Commission etc Containerization and Inter

modal movements should not be handicapped by outmoded unrealist

and or inapplicable regulatory schemes

10 F M C
PORTALATIN VELAZQUEZ MALDONADO V SEA LAND SERVICE INC 375

I also take issue with the argument of the Examiner that the

truckers are not other persons within the meaning of the Shipping

Act The Examiner acknowledges that pickup and delivery services

are terminal services but concludes that the truckers performing the

services are not subject to Federal Maritime Commission jurisdiction

absent authority to the contrary Admittedly there is no administra

tive or judicial decision which holds such truckers to be subject to the

act but neither is there any decision that holds them not to be so

subject The Examiner s reasoning in support of his conclusion serves

to require the opposite conclusion as well As the Examiner states

prior cases have not presented the question of the Commission s

juris

diction over truckers furnishing pickup and delivery services Initial

Decision p

12 Those cases dealt solely with the lawfulness of tariffs

and other issues

This is a case of first impression As such it should not be decided

on the basis of principles formulated without consideration ofpresent

conditions The law is not static As circumst ances change so must the

la Yo Technological advances in the transportation of cargo should not

outstrip advances in regulatory practices

The Examiner s statement that a common carrier by water has no

obligation to deliver the cargo to its ultimate destination Initial

Decision pp 11 12 exemplifies the parochial nature of the decision

The phrase or other terminal facilities in section 1 of the Shipping

Act should not be limited by the preceding words wharfage dock

warehouse Such limitation attributes to the wording a redun

dancy which the act cannot have been intended to convey A more

realistic reading of the words is that other terminal facilities include

not only those related to wharfage dock and warehouse facilities

but also such others as may become current in the development of

water transportation

Iadmonish the Commission not to lose sight of its purposes to

meet the requirements of the commerce of the United States with its

territories and possessions and with foreign countries Pre

amble ShippingAct 1916 In conclusion I

cannot overemphasize the

need for progress in regulatory thinking to keep pace with progress

in cargo transportation

Signed THo rAs LISI

8ecreta1Y

10 F M C
FEDERAL MARITIME COJ1J 11SSI

No 1182

RATES FROM JACKSONVILLE FLORIDA 10 PUERTO RICO

Decided May 8 1967

Sea Land because its Jacksonville operation is profitable and its continued op

eration is notthreatened has shown no competitive necessity foreliminating

TMT s differential Since rate paritywould probably drive TMT out of the

trade rMT may m inits differential

Sea Land ha nQt justifiec l its prop o

ed differentially lower rates between Jack

sonville and Puerto Rico as compared with its rates between other Atlantic

ports and Puerto Rico by sufficient proof of advantages in cost of operation

value fservice to shippers or other transportati nconditions warranting

such reduction

As Sea Land s lower rate on scrap metal from Puerto Rico to Jacksonville was

not suspended Sea Lend did not have the burden of proving its lawfulness

and in the absence of evidence to support a finding that the rate is unlawful

it is lawful

WarrenPrice Jr H1gh H Shull Jr apd J Scot Provan for

re

spondent Sea Land Service Inc

Homer S Oarpenter John O Bradley and Ed ward T Oornell for

respondent TMT Trailer Ferry Inc C Gordon Anderson trustee

SiWrwy Goldstein General Counsel F A Mulhern attorney Arthwr

L Winn Jr Samuel H Moerman J Raymond Olark and James M

Henderson for intervener Port of New York Authority

JohnRigby for intervener Commonwealth of Puerto Rico

Donald J Brunner and Thomas Ohristensen Hearing Counsel

REPORT

By THE COMMISSION John Harllee Ohai lTTl4n Ashton C Barrett

Vice Ohairman JamesV Day Oommissioner

THE PROCEEDINGS

The general purpose ofthisproceeding is to examine the competitive

relationship between Sea Land Service Inc Puerto Rican division

10 F M C

876
RATES FROM JACKSONVILLE FLORIDA TO PUERTO RICO 377

and TMT Trailer Ferry Inc C Gordon Anderson trustee The

specific issues are as follows

1 WhBther TMT may maintain rates differentially lower than Sea

Land s rates from Ja ksonville OOcause of TMT s method of service

orlevel of cost

2 Whether Sea Land may charge different rates from Jacksonville

to Puerto Rico than it charges from other Atlantic ports to Puerto

Rico

3 The lawfulness of Sea Land s rate on scrap or used metal north

bound from Puerto Rico

FACTS

TMT commenced the original roll onjroll off trailer service in the

Florida Puerto Rico trade in 1954 1

TMT serves only the port of San

Juan in Puerto Rico Itoffers two sailings each week from Jackson

ville alternate voyages include a stop at Miami Fla Transit time for

direct sailings to San Juan from Jacksonville is approximately 7 days

and from Jacksonville via Miami to San Juan approximately 9 days

Because ofthe nature ofthetug and barge operation scheduled service

is frequently delayed from 1 to 3 days

Sea Land began its service ootween Jacksonville and Puerto Rico in

1959 with transshipment at Port Newark N J In April 1963 Sea

Land instituted a direct weekly service between Jacksonville and

Puerto Rico and except for a temporary reversion to the indirect serv

ice due to vessel dama ge Sea Land has continued this service 2

It

serves in addition to San Juan the Puerto Rican ports of ponce

Arecibo and Mayaguez and operates terminals at each Puerto Rican

port as well as at Jacksonville Transit time between Jacksonville and

San Juan is 3 days Sea Land uses containerships which are loaded by

crane Notall of Sea Land s vessels return toNorth Atlanticports via

Jacksonville

Upon entering the Jacksonville Puerto Rico trade Sea Land filed

rates based on the existing rates ofother carriers TMT thereupon filed

lower rates which motivated Sea Land to reduce its rates Sea Land

has not fully met the most recent TMT reduction

On the 11 major moving commodities viaTMT s southbound service

its truckload rates are lower than Sea Land s corresponding rates with

theexception ofthe rate on tin plate For theyear 1964 approximately

1 TMT oders a tug and barge service the barges being LSTs which have been modified

to permit the movement of highway trallers on their own wheels between the dock and the

deck of the vessel The tugs operated in the service are chartered and owned by the Florida

Towing Co

2 Sea Land also operates out of the North Atlantic ports of Ellzabeth N J and Baltimore

Md and recently began operating out ot the South AtlantIc port ot CharlestoD S C

10 F M C
378 FEDERAL MARITIME COMMISSION

20 percent of TMT s revenue from major moving commodities came

from cargo originating in areas rail rate favorable to North Atlantic

ports 37 percent from origins rail rate equal to North Atlantic ports

and Jacksonville and 32 percent from origins rail rate favorable to

Jacksonville the balance of cargo originating in areas rate favorable

to Miami or from othersources

The preponderance ofSea Land cargo moving throughJ acksonville

originates in areas rail rate favorable to Jacksonville s

Sea Land s

major commodities moving throughJacksonville are paper and pape

products animal feed food products beer sand and clay iron and

steel products piece goods and refrigerator cargo ofpoultry eggs ice

cream fish produce and frozen foods TMT carries small amounts of

these commodities Sea Land s rates on bottles and paper products

southbound are lower than the TMT rates on such commodities Be

cause ofTMT s lower rates Sea Land has been unable to participate in

thecarriage of certain commodities

The rates of Sea Land from Elizabeth to Puerto Rico and from

Jacksonville to Puerto Rico are on parity with the principal excep

tions of stoves and ranges southbound and rum coconuts arid pine

apples northbound the latter rates being lower to Jacksonville than

to Elizabeth These northbound rates were reduced to meet TMT

competition

In establishing rates TMT s principal consideration is the necessity

to maintain a differential under the prevailing rates of Sea Land

because it feels it could not remain in business without a differential

due to its inferior service as compared to the service offered by com

petitors operating self propelled vessels

The trade between the United States and Puerto Rico has grown

rapidly from 1952 to 1964 Both Sea Land and T 1T have increased

their tonnage during this period and have expanded their services

Sea Land upon entering the Jacksonville Puerto Rico trade devel

oped new cargq and also obtained cargo formerly handled by other

carriers Sea Land has become the dominant carrier in the trade

Sea Land established its present rate on scrap or used metal for

the purpose of meeting T 1T competition northbound Now the rates

are identical except that TMT absorbs insurance costs As the south

bound traffic s bstantially exceeds the northbound traffic revenue

derived by Sea Land on the carriage of scrap and used metal serves

to defray a portion of round voyage expenses TTh1T does not carry

scrap or used metal northbound

8

Sea Land carries furniture out of Jacksonville from origins rall rate faorable to

North 4tlantlc ports

10 F lIC
RATES FROM JACKSONVILLE FLORIDA TO PUERTO RICO 379

At rate parity with Sea Land TMT probably would lose all cargo

from origins rate favorable to North Atlantic ports approximately

20 percent of its major moving commodities based on 1964 data and

would lose substantial amounts of cargo it has handled from origins

rate equal to Jacksonville and other ports served by Sea Land At rate

parity TMT s ability to compete probably would be seriously crippled

Elimination of TMT from the Jacksonville Puerto Rico trade would

leave Sea Land in virtual control of that trade

DISCUSSION

Examiner Herbert K Greer issued an initial decision in this pro

ceeding Examiner Greer decided that TMT was entitled to set rates

differentially lower than Sea Land Although the Examiner approved

Sea Land s northbound rate on scrap metal to Jacksonville he re

fused to permit Sea Land as a general practice to charge rates lower

between Jacksonville and Puerto Rico than between other Atlantic

ports and Puerto Rico Sea Land excepted to the initial decision and

we heard oral argument

TAfT s Rates

Generally Tl1T quotes rates on important commodities lower than

Sea Land s and under this rate structure TMT has retained a sig

nificant share of the traffic offered at Jacksonville Indeed TMT by

this lower rate policy has attracted cargo from inland points that

could also readily be served by North Atlantic ports

TMT s ratemaking practices present several important questions

1 1ay we permit a carrier to fix rates differentially lower than its

competitor s rates because of a service disability

2 Is TMT amenable to section 16 First which prohibits undue pref

erence to one locality port and undue prejudice to another locality

port where Tl1T does not serve the area which is allegedly preju

diced

3 If so has Tl1T through its ratemaking practices unlawfully

prej udiced other ports

TMT attempted to justify its rates on important conunodities be

cause of its inferior service specifically slower transit time and in

ability to maintain aregular schedule TMT simply contends that

it cannot compete with Sea Land at rate parity

Sea Land argues that TMT is not entitled to a differential as a

matter of law Itcontends that TMT s rates are unjust and unreason

able in violation of section 18 a Shipping Aot 1916 and section 4

Intercoastal Shipping Act 1933 to the extent that they are lower than

10 F M C
380 FEDERAL MARITIME COMMISSION

Sea Land s rates or the rates applicable generally in the North At

lantic Puerto Rican trade because TMT s rates a are lower than

necessary to meet the competition b result in needless dissipation

of carrier revenue and c are destructive of an entire rate structure

The Examiner found that TMT s competitive position depends on

its lower level of rates and given rate parity TMT s survival would

e improbable Consequently the Examiner concluded that TMT is

entitled to a rate differential to prevent its elimination from the

trade 4

The Examinerconcluded that whileTMT attracted cargo from areas

from which the inland rail rate was lower to aNorth Atlantic port

than to Jacksonville thisdiversion of cargo does not amount to an un

lawfulpreference orprejudice in violation of section 16 First Nor did

the Examiner find that the prospect of a rate war between TMT and

Sea Land would be so imminent as to require rate parity between the

two

Under the system of regulation of domestic offshore commerce en

unciated in the Shipping Act 1916 and the Intercoastal Shipping Act

1933 carriers have the initiative to set rates which fall within a gen

eral range of reasonableness and are not otherwise unlawful Thus

various levels of rates in a single trade ordifferentials are not unlaw

ful as such 5

Consequently TMT ifit meets thebroad statutory stand

ards may set rates lower than a

competitor s On the other hand Sea

Land has the rightto initiate rates to meet competition provided that

the rates are compensatory and not lower than necessary to meet the

competition Alabama GS R 00 v United States 340 U S 216 224

1951 Eastern Oentral Association v U S 321 US 194 200 02

1944 and cases ited at note 8 U S v Ohwago M St P P R

00 294 US 499 507 1935 OleO Jll4rgarine Jincinnati and Ool um

bus to tM East 294 IC C 349 1955 But a carrier s right to meet

competitive rates is not absolute Atl Refining 00 v Ellerman

Bucknall SS 00 et al 1 U S S B 242 1932 Switching Rates in

Ohwago Switching District 220 IC C 119 1937 Foodstuffs Be

tween Mwh and Pa and to N J and N Y 310 IC C 343 1960 Rate

However the Examiner stated that the record would not support the conclusion that

TMT is entitled to lower rates as the low cost carrier Cost wise the Examiner could go no

further than to indicate that TMT operates profitably and its rates are not wasteful of

revenue We concur

G Originally the Commission regarded the offering of differentially lower rates as per 86

subjecting competing carriers to undue and unreas onable prejudice and disadvantage See

Intercoa8tallnv68tigatim 1985 1 US S BB 400 1935 However the Commission sub

sequently departed from this strict approach as explicated in Anglo Oanadian Shipping 00

Ltd et al v Mit8uiSteam8hip Oompany Ltd 4 F M B 635 540 1955 See also Huber

Mfg 00 v N V Stoomvaart Maat8chappij ltNederland 4 F M B 343 1953 and Eden

Mining 00 v Bluefteld8 Fruit and8 8 00 1 U S S B 41 1922

10 I M C
RATES FROM JACKSONVILLE FLORIDA TO PUERTO RICO 381

reductions for that purpose must be just and reasonable and not

discrimin3ltory Regulation of rates should not only prevent dis

criminwtion and prejudice but should prevent destructive and unfair

competition as well including competition which threatens the traffic

or financial position ofanother carrier A r8ite reduced for a destructive

purpose is neither just norreasonable and thelaw will interfere

when competition becomes destructive and wasteful Interaoastal

Investigation 1935 1 D S S BB 400 430 1935 see also Oanned

Goodsin Offioial Temtory 294IC C 371 390 1955

Whether TMT may preserve its rate differential depends upon its

ability to attract cargo at rate parity with Sea Land Of course a

primary shipper consideration in selecting a carrier is total cost of

transporting acommodity from origin to destination 6 Where ocean

freight rates are equal minor considerations assume amajor role For

instance with slower transit time TMT s vessels are exposed to the

hazards of ocean transportation for approximately twice the time ex

perienced by Sea Land s vessels And hazard and the probable condi

tion of the cargo upon arrival is a shipper concern

7

Furthermore a

tug and barge service is inherently less stable and less reliable Sea

Land s service is modern and efficient TMT s vessels are not particu

larly modern or in view of the inability to adhere to a schedule ef

ficient We find that shippers would as a rule prefer the more modern

faster and more dependable service of Sea Land if rates were equal s

Sea Land argues however that we must consider frequency of service

as a factor inducing shippers to patronize a particular carrier Sea

Land contends that since it has a weekly service and TMT has a twice

weekly service Sea Land operates under a service disability We can

not agree Because TMT s service is quite erratic we find that at rate

parity shippers would prefer Sea Land s dependable service

TMT s service with respect to the commodities in question is not

of such value to shippers that they would eontinue to patronize TMT

irrespective of higher rates Indeed TMT will be injured if its rates

e Reduced Rates on Autos N AU Ooast toPuerto Rico 8 F M C 404 1965

7

Sea Land Service Inc v S Atlantic Oaribbea nLine Inc 9 F M C 838 1966

where a shipper of trucks to Puerto Rico used another carrier because TMT s

servi eexposed the trucks to a g eater risk of damage

6 Sea Landmoved to strike an attachment to TMT s

reply to exceptions which contained

a statement of a Sea Landofficial in aproceeding before the Interstate Commerce Comtnis

sion Since the for going discussion of the requirements of shippers in ocean commerce restS

not upon the attachment of TMT s

paper but upon this record and our general knowledge

of the subject derived overthe years it isunnecessary to rule on the motion Likewise it is

unnecessary to rule upon the proprh ty ot the Examiner s exclusion from the record of

letters from Shippers because such letters would not change the above findings We also

overrule Sea Land sexceptions that the Examiner erred in making simUar findings in the

absence of shipper testimony Such testimony is not indispensable for a discussion of the

general needs of shippers

iO F M C
382 FEDE RAL MARITIME COMMISSION

are increased through loss of traffic upon which the inland rail rate

is favorable to North Atlantic ports TAfT would also be deprived o

a substantial portion of its cargo from inland rate equal origins and

from the Jacksonville area as well At rate parity with Sea Land

TMT would in all probability be forced out of business Therefore

TMT s rates must serve as its inducement to shippers

Furthermore Sea Land has no competitive necessity for lowering

its rates and eliminating the TMT differential Its Jacksonville op

eration is profitable and its continuance in the trade is not threatened

It carries substantial volumes of cargo in the Jacksonville trade de

spite TMT s rate advantage In the face of these facts Sea Land

would in establishing rate parity drive TMT out of business and

thus obtaining virtual control for itself of the trade between Jackson

ville and Puerto Rico 9 We therefore will not on this record permit

Sea Land to lower its rates to TAfT s levels nor will we order TMT

to increase its rates to the levels prevailing in the North Atlantic

Sea Land also asserts that the Examiner should have found tha

Sea Land is the low cost carrier We agree with the Examiner tha

the cost data of record are inadequate to determine which is the low

cost carrier The Sea Land study purports to show the cost per box

while TMT shows cost per measurement ton A comparison of these

data is meaningless and no restatement of these figures is particularly

trustworthy Accordingly we cannot decide this issue on the basis o

cost data in thisrecord

Sea Land also argues that cargo is diverted to Jacksonville from

origins inland rate favor3Jble to Elizabeth and Baltimore in violation

of section 16 First 10 In response TMT argues that as a matter of law

it cannot be held to have violated section 16 First because it does no

serve the ports in the NorthAtlantic which itallegedly has prejudiced

We cannot agree with TMT s reading of section 16 First which

reads

That it shall be unlawful forany common carrier by water

First To make or give any undue or unreasonable preference or advantage to

any pavticular person locality or description of traffic in any respect whatso

ever or to subject any particular person locality or description of traffic to any

undue or unreasonable prejudice or disadvantage in any respect whatsoever

This provision turns upon the correlatives preference and prej

udice Aviolation depends upon these ingredients not whether a car

9

See Alcoholic Liquors in Official Territory 283 I C C 219 1951

10 Sea Land cites Reduced Rates on Machinery ana Tractors trom United States Atlantic

Ports to Ports in Puerto Rico 9 F M C 465 1966 to support the argument that such a

diversion subjects North Atlantic ports to undue prejudice and disadvantage in violation

of section 16 First

10 F M C
RATES FROM JACKSONVILLE FLORIDA TO PUERTO RICO 383

liar serves both ports Thu TMT erroneously contended that as a

matter of law it cannot be held to have violated section 16 First As

we stated in a similar context in Reduced Rates on M achine ryand

T1aCtors supra at 481 if any injury to a port is caused by the rat e

making praetices of a c3Irrier section I6 First may be applicIDhle u

Under iliese circumstances it is appropriate to determine whether

TMT s rates prefer Jacksonville and prejudice other ports

Undoubtedly the existing TMT rates attract cargo from origins

which based upon inland rail rates are tributary to North Atlantic

ports This does not itself establish a violation of section 16 First

Whether the drawing away of traffic results in unjust or unfair dis

crimination or undue or unreasonable preference is a question of fact

for determination in each instance Oity of Portland v Pacific West

bOlJJfUi Oonference 4 F MB 664 1955 Beawmont Port Oowmission

v Seatrain Lines Inc 3 F MB 556 1951 Thus we must determine

whether the rates ofTMT divert traffic from a port to which the area

of origin is wturally tributary to a port to which the area is

not naturally tributary Sea Land SelVice Inc v S Atlantic Oarib

bean Line Inc 9 F MC 338 1966 Naturally tributary is an

econorpic concept It depends upon the shipper s cost the value of a

carrier s service to a shipper or otherfactors Here the paucity of the

record is patent The record shows only that TMT pursuant to an

apparently reasonable rate structure attracts cargo overland from

areas which could be served by other ports Those persons who would

attack TMT s rates must show more

12 We will not find a violation

of section 16 First on s ch a meager showing Nor will we artificially

allocate cargo among ports particularly where that course would have

a disastrous impact onTMT 13

It is argued that TMT is amarginal operator with little promise

for the future and that to base port relationships on TMT s survival

would be inappropriate The Commission is not fixing port relation

ships Rather it is regulating competition between Sea Land and

TMT TMT s entitlement to a differential is not based on TMT s right

to survive lawfulcompetition Nor does slow transit time alone support

our endorsement of TMT s differential No transportation condition

n

Accord Proportional Oommodity Rates on Oigarettes and Tobacco 6 F M B 48

M55 1960 Beaumont Port Oommission v Seatrain Lines Inc 3 F M B 556 56566

1951 Cf Imposition 01 Surcharge by the Far East Oonlerence 9 F M C 129 139 1965

But Cf Oalilomia Packing Gorp v States Steamship 00 et 01 1 U S S BB 546 1936

Sugar Irom Virgin Islands to United States 1 U S M C 695 1938 American Peanut

Oorp v M 4M T 00 et 01 1 US S B 78 1925

19 US v American EllJport Lines et 01 8 F M C 280 290 1964 and cases cited there

18TMT competes at rate parity with South Atlantic Caribbean Lines Inc SACL

out of another Florida port To require TMT to raise its rates would destroy its ab111ty to

compete with SACL

10 F M C
384 FEDERAL MARITIME COMMISSION

warrants rate parity but to the contrary the elimination of a differ

ential would result in TMT s

inability to remain competitive thus

leaving to Sea Land the virtual control of the trade between Jack

sonville and Puerto Rico We believe that the Puerto Rican trade is

best regulated and coordinated by the preservation of TMT s service 14

The lack of a

compelling transportation condition here serves to dis

tinguish this proceeding from Reduced Rates on MMhinery and

Tractors supra

Sea Land s Rates

Generally speaking Sea Land maintains uniform rates from Atlan

tic ports including Jacksonville to Puerto Rico Sea Land however

contended that because it must meet TMT s competition out of Jack

sonville it should be allowed to publish lower rates from Jacksonville

than from NorthAtlantic ports The Examiner usingas a

test whether

Sea Land wasunabe to compete with TMT concluded that the record

would not support a

finding of competitive necessity to justify a

difference in Sea Land s rates between various Atlantic ports The

Examiner based the determination upon the fact that Sea Land is a

strong competitor ofTMT and has obtained its full share of business

out of Jacksonville

Sea Land because of competition charges a lower rate on scrap

or used metal to Jacksonville than it charges to North Atlantic ports

The Examiner stated that a difference in the rates on one commodity

to different destinations is not unlawful per se and since there was no

evidence upon which he could otherwise find the rate to be unlawful

he found it to be lawful In effect the Examiner found no explicit

evidence one way or the other as to the proper level ofthe northbound

rate on scrap metal 15

Sea Land s proposed rate structure presents the following question

To what extent may Sea Land charge different rates at Jacksonville

than other Atlantic ports in order to meet local competition

l This philosophy was expressed in IntercoastaZ Rate Structure 2 U S M C 285 311

1940

the record points clearly to the almost inevitable result of a one rate level

a gradual mastery of the trade by carriers furniShing the better service We should

not ignore the fundamental fact that shippers will pay only in proportion to the value

of the service rendered In recognition of this principle the carriers have always found

it necessary to establish differentials in order to bring about a fair distribution of

intercoastal traffic When these differentials have been narrowed or abolished the

traffic has invariably gravitated to the better equipped lines The question posed there

fore is whether a merchant marine is best promoted and encouraged by a few strong

lines with a monopoly of the traffic or a larger number offering a variety of services

atratesbased on the value and cost of such services

15 No exceptions were filed to this holding Therefore wewill not disturb this result

10 F M C
RATES FROM JACKSONVILLE FLORID TO PUERTO RICO 385

As stated Sea Land maintains a single level of rates between

Atlantic ports in luding Jacksonville and Puerto Rico It contends

however that the necessity of meeting TMT competition out ofJack

sonville is a transportation condition warranting modification of this

rate structure In effect Sea Land proposes that if the Commission

does not order TMT to increase rates to the prevailing level out of

North Atlantic ports Sea Land has the right to reduce its rates out

of Jacksonville to TL1T s level without alteration of the rates outof

North Atlantic ports Sea Land does not present as justification any

difference in distance between North Atlantic ports to Puerto Rico

than from Jacksonville nor does it rely on any cost difference in

relation to carriage between Jacksonville or between North Atlantic

ports and Puerto Rico Sea Land propounds only its legal right to

meet competition as the basis for its proposed rate policy

Sea Land s avowed purpose in seeking approval of different rates

between North Atlantic ports and Jacksonville to Puerto Rico is to

meet TMT scompetition Certainly no carrier should be required to

maintain unreasonably high rates for the pmpose of protecting the

traffic of a competitor 16 As a general rule each carrier should have

the opportunity to set rates which reflect the inherent advantages each

has to offer so that the public may

exercise its choice on cost and service

lVest bound Alcoholic Liquor Oarload Rates 2 U S MC 198 205

1939 And carriers may reduce rates to a reasonable level to meet

competition if they do not create undue preference or prejudice Iron

and Steel to Iowa Minn Mich and Wise 297 IC C 363 1955

Brick from Mason Oity Iowa to La Orosse Wise 251 IC C 267

1942 Macaroni Between L T L and SW Territories 238 IC C

121 1940 Furthermore a carrier may set rates in order to retain

or secure traffic which might otherwise move viaa competitor provided

the rate is Iawful

However Sea Land has not demonstrated its cost capacity to reduce

rates out of Jacksonville Thus the Commission may not lawfully

permit such a reduction without a concurrent reduction in Sea Land s

rates out of North Atlantic ports without ashowing that cost orother

transportation conditions justifies a rate policy which on its face works

a preference to Jacksonville and prejudice to other Atlantic ports

served by Sea Land The burden of showing these circumstances is

upon Sea Land the carrier applying to change its rrutes 17

16 Seatrain Lines Inc v Akron O Y Ry 00 243 I C C 199 214 1940 New Auto

mobiles in InterstateOommerce 259 IC C 475 1945

17 Where the Commission has instituted an inquiry into the lawfulness of proposed rates

the carrier must prOduce evidence to justify them Financial data relating to operations

and reasons which impelled proposed rates are in the carrier s sole possession Puerto

RicanRates 2 U S M C 117 124 1939

JO F M O

299 843 0 68 26
386 FEDERAL MARITIME COMMISSION

With regard to the cost data that should be adduced in justification

of a proposed differential there must be more than just ashowing tha

the cost of operation at one port is greater than that at another com

peting port Volume of traffic competition distance advantages o

location character of traffic frequency of service and others are prop

erly to be considered in arriving atadjustment of rates between ports

PortDifferential Investigation 1 D S S B 61 69 1925 Portof New

YorkAuthorityv AbSvenska et al 4F M B 202 209 1953

Had Sea Land adduced evidence of the difference in cost of opera

tion between North Atlantic ports and Puerto Rico as compared to

cost ofoperation between Jacksonville and Puerto Rico it might have

been determined that arate difference wasjustified on thebasis of costs

ofthe respective services However the only issue offact presented for

determination is whether a rate difference between ports is justified by

competitive necessity

Competitive necessity should be approached from the standpoint

that a carrier finds itself unable to compete and not on its ability to

deprive a

competitor of cargo Intercoastal Investigation 1935 Supra

Here Sea Land is a

strong competitor Sea Land in competition

with TMT out of Jacksonville has obtained its share of cargo

IS Sea

Land s olJeration is profitable Undoubtedly TMT s lower rates have

prevented Sea Land from capturing cargo from TMT but Sea Land

also obtains a share of cargo from inland rate equal origins regardless

of rate differences Therefore the probable result of permitting Sea

Land to maintain lower rates for its Jacksonville service than for its

North Atlantic service would 1

seriously impair TMT s ability to

attract cargo and 2 induce the movement of cargo from Sea Laud s

service at North Atlantic ports to its service at Jacksonville On this

record we find that Sea Land has not justifiedits proposed rate policy

COMMISSIONER IEARN dissenting

Iwould remand this case to the Examiner for the further taking

ofevidence

The majority states that the basic question is the competitive rela

tionship between TMT and Sea Land and sets forth the three specific

issues involved 19 It then engages in a discusSion of the issues replete

with admissions of insufficiency of evidence to support satisfactory

conclusions 20 The parties are therefore now left in status quo ante

because the record is devoid of evidence to warrant any satisfactory

conclusions as tothebasic issues

18 Sea Land excepted to the Examiner s

finding that Sea Land can compete with TMT

despite the latters

lower rates We overrule this exception

19 Majority Opinion page 376

llOSee for example Majority Opinion page 380 footnote 4 page 382 and page 383

10 F M C
RATES FROM JACKSONVILLE FLORIDA TO PUERTO RICO 387

These issues are of substantial significance They involve funda

mental principles ofrate regulation and economics and should not be

treated so ineffectually as they are herein Ido not think the Commis

sionshould have attempted to decide this case on this incomplete record

when further production of evidence would doubtless have permitted

the development of a more productive case and a more meaningful

and instructive decision

Signed THOMAS LISI

Secretary

10 F M C
FEDERAL l1ARITIl1E COMl1ISSION

No 66 66

CORN PRODUCTS COMPANY

V

HAMBURG AMERlKA LINES

HAMBURG AMERIKANISCHE PACKETFAHRT ACTIEN G ESl LI JSCHAF l

Proceeding determined under Shortened Pr edure Rule 11 of tbe Rules o

Praetice and Proc edure

Hamburg Amerika Lines a common canier by water found to have violate

section 18 ib 3 if the aet by charging a higher rate for a shipment i

foreign commerce than the rate on file inits tariff properly applicable at th

time

Pursuant to section 22 of the act complainant is entitled to payment of repara

tion inthe amount of 2 477 84

Complainant is entitled to interest at 6 percent per annum on the amount foul

due as reparation

SaJJ i1Juel W Earnshaw attorney and M A Greene for th

complainant

Ewrton H White Elliott B Nixon and Randolph W Taylor attor

neys for respondent

INITIAL DECISION OF EXAMINER BENJAMIN A TUE JMAN 1

The complaint herein filed under Rule 11 Shortened Procedure o

the Rules of Practice and Procedure of the Federal Maritime Com

mission the Commission alleges that respondents violated section

18 b 3 and 22 of the Shipping Act of 1916 as amended the ac

by charging and receiving payment of an inapplicable rate for th

ocean transportation of 195 drums of dried onion powder Complain

ants allege an overpayment of 2 764 57 and request reparation wit

interest thereon at six 6 percent per annum The respondent gene

ally denied the allegations

All necessary parties have consented to the application of Rule 1

Accordingly this proceeding has been conducted without oral heaTin

and upon written submission offacts and arguments

1

This decision became thedecision of theCommission on May 9 1967

388 10 F M C
CORN PRODUCTS CO V HAMBURG AMERIKA LINES 389

A The Undisputed Facts Are

1 Respondent Hamburg Amerika Lines Hamburg Ameri

kanische Packetfahrt Actien Gesellschaft is a common carrier by

water in foreign commerce as defined in section 1 of the act

2 On or about October 22 1965 complainant shipped prepaid from

New York to Rotterdam viathe respondent 195 drumsof dried onion

powder weighing 62 650 pounds The cargo designation in the bill of

lading was Drums Dehydrated Onion Powder

3 Respondent billed complainant and the latter on November 10

1965 paid 3 575 66 for ocean freight at the general cargo r te of

72 75 per 40 cu ft

4 Respondent s tariff on file with the Commission applicable to

said shipment was North Atlantic Continental Freight Conference

Tariff 26 FMO1 The tariff contained the following items

Item 5175 Condiments Packed NO

S

39 5per 2 240 pounds

Item 5287 O ions N O S Freight Must Be Pre 2900 per 2240 pounds

paid

Item 9161 General Cargo NO S 7275 W 14

5 The shipment was dry dehydrated onion pmvder without addi

tives orother processing than dehydration 2

6 On or about December 27 1965 complainant filed a claim with

respondent alleging an overcharge Respondent denied that claim

DISCUSSIO N8

Complainant s

request for reparation is stated as though the appli

cable rate was Item 5287 Onions N O S However complainant s

entire presentation shows that the request wasbeing made in the alter

native with the greater emphasis on Item 5175 Condiments Packed

N O S or seasoning as it is also referred to by complainant

Respondent has chosen to respond as ifthe request was only on the basis

ofIem 5287 In its answe ing brief respondent states

Complainant has incidentally urged some alternative classifications for the

dried onion powder in drums Complainant has not raised the question

as to theapplicability of seasoning although complainant has distinctly stated

that thepowder was and was intended for use as a seasoning Ifovercharges

nre alleged on the basis of these alternative classifications respondent would

wish to meet whateyer arguments are subsequently raised

Examination of the record shows that the alternative classification

Ite 5175 has not been incidentally urged but has bee substan

tially presented Item 5175 was the basis upon which complainant

2

The manufacturing process as described by complainant involved peeling fresh onions

slicing tbem and dehydrating them with warm Eilr then grlnd lng them without any

additive to the dry powdered product

10 F M C
390 FEDERAL MARITIME COMMISSION

requested payment in a letter to the conference dated June 23 196

attached as an exhibit to respondent s answering brief Item 5175 

dealt wirth fully in complainant s opening brief and is the obviou

purpose for the attachment of Exhibits II and IIIIn its openin

brief complainant states that the shipment here was both a cond

ment and a product within the description of Onions N O S Com

plainant then continues with an entire paragraph to show why th

shipment was a condiment Complainant sreply brief again stated th

alternative classification Paragraph 1 reads as follows

The sole issue before the Commission here is whether the North Atlan

Continental Tariff No 26 description and rate on General Cargo N O S 

on Onions NO S or on Condiments applied on complainant s shipment 

dehydrated onioll powder in drums freight charges prepaid

The respondent has shown that it is fully aware of complainant 

alternative classification contention As stated above one of respon

ent s exhibits is a

copy of a letter from complainant demandin

reparation on the basis of the condiment rate In its answering brie

respondent makes specific reference to complainant s Exhibit IIwhic

contains an opinion that onion powder is commercially considere

seasoning Neither respondent nor the conference is naive in tar

matters or in proceedings of this nature before the Commission

The purpose of shortened procedure is self evident to save tim

and money for all parties including the Government As of the tim

of the issuance of this decision nothing further has been heard from

respondent nor under the rules is areply to a reply permitted Th

record clearly shows that respondent has in no way been misled by th

papers submitted by the complainant in this case In failing to respon

to the alternative classification contention respondent has not exercise

due diligence To permit further presentation under shortened pro

cedure would be unreasonable

In Ludwig Mueller 00 Inc v Peralta Shipping Oorporation etc

8 FMC 61 1965 the Commission laid down the rule that it ha

since consistently adhered to section 18 b 3 shall be strictly applie

InPeralta the Commission stated that the clear obligation imposed b

section 18 b 3 is

No common carrier by water in foreign commerce shall charge or dema

or collect or receive a greater or less or different compensation forthe transport

tion of property than the rates and charges which arespecified inits tarif

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

Emphasis added

The Commission stated onpage 364

Moreover an unintentional failure to file a partiCUlar rate a bona fide ra

mistake a hardship visited upon an innocent shipper by inadvertence of a carrie

JO F M C
CORN PRODUCTS CO V HAMBURG AMERIKA LINES 391

or a stenographic omission are not sufficient reasons for departing from the

requirements of section 18 b 3 Footnotes omitted

In a recent case Ocean Freight OonsUltants v Bank Line Ltd 9

FMC 211 decided fT anuary 11 1966 the Commission citing court

precedent reaffirmed p 213 that the principle is firmly established

that the rate of the carrier as duly filed is the only lawful charge

In keeping with the foregoing this case boils down to one issue

To determine the rate in Tariff26 applicable to the 195 drums of dried

onion powder

Complainant contends though not too strongly that Item 5287

Onions N O S is the applicable rate In support of this contention

complainant urges acopy of a letter signed by the Chief Division of

Tariffs and Informal Complaints of the Commission The letter states

ih part

Ifin fact the commodity shipped was onions dehydrated powdered withont

additives it is our informal opinion that in theabsence of a specific rate named

in the tariff for dehydrated onion powder the description provided oin the tariff

for Onions N O S is broad enough to cover the commodity in question

This informal opinion states a conclusion but the facts upon which

it is based are not in the record Respondent contends that Onions

N O S dealt generally with fresh onions and not onion powder Com

plainant in the past showed agreement with respondent s contention

In the above mentioned letter to the conference first presenting com

plainant s claim the latter stated that it had noted the Onion N O S

rate but felt that it had reference to fresh onions and therefore did

not seek adjustment ofthe freight based on this latter rate

The Dictionary of Oommodities Oarried by Shill Captain Pierre

Garoche published 1952 Cornell Maritime Press contains on page

204 the following information concerning onions as merchandise

transported by ship

ONIONS Dry onions amount to a big item in shipping Packing hngR

or crates EXllortt d from Itnly Rpnill Portngal nllo u t EnrOllnt

be thoroughly dry before shipping Green onions heat and yield a considerable

amount of moisture They are satisfactorily carried only in refrigerated

compartments Smelly Affected by heat crushing due to pressure or shock

Sometimes the packing is deteriorated by contents They require carefnl

throngh ventilation stowage in a lry and cool place preferably twpeJllecks

or in a

refrigerated compartment away from products affected by melIs

and moisture Careful handling to avoid shocks Do not overstow

Inview ofthe foregoing in which no reference is made to powder and

the substantial evidence shown in the next paragraph that onion

powder is a condiment it is concluded that the rate for Onions N O S

Item 5287 was not the applicable rate for this shipment

10 F M C
392 FEDERAL MARITiME COMMISSION

Complainant offers undisputed evidence to show that the cargo w

a condiment to wit A letter from the U S Department of Agricultur

Consumer and Marketing Service signed by the fIead Standardize

Section Processed Products Standardization and Inspection Branc

Fruit and Vegetable Division states that in the United States the

are no mandatory or legal standards for the product commercia

known as Onion Powder that the United States purchases onio

powder by means of Federal specification that the latter is n

mandatory nor does the specification refer to onion powder as a cond

ment per se The letter continues as follows

Nonetheless ina generic sense onion powder is an aromatic or savory vegetab

substance used to impart a special taste to food Itis not used as a single artic

of food nor is it used to garnish foods as are some other dehydrated vegetab

diced green or red pepper forexample

In commercial trade onion powder is grouped with other styles of dehydrat

onion products regardle s of the kind of packing and sold as seasoning for food

As seasoning onion powder is unquestionably a condiment 

Complainant points out that in Rogets International Thesaurus Thi

Edition Page 182 onion is listed as a condiment Vebster s Thi

New International Dictionary Unabridged shows seasoning and cond

ment to be in effect interchangeable The definition of condiment 

page 473 states

eondiment eo Something usually lJUngent acid salty or spicy added to 

served withfood to enhance its flavor or to give added flavor SEASONING 

an appetizing and usually pungent substance of natural origin as pepp

vinegar or mustard b any of variousComplex compositions having simi

qualities as curry or chili powder pickles or catsup

The definition ofseasoning on page 2049 states

seasoning 1 iSometJhing that serves to season as a an ingrelient as a con

ment SlPice or flavoring added to food primarily for the savor 

imparts II

In light of the foregoing it is reasonable that onion powder 

classed as a condiment 4

The Commission laid down the rule of reasonability in dealing wi

the interpretation of tariff terms many years ago in Natio1Ull Oab

and Metal 00 v American HawaiiSS 00 2 US M C 471 1941 A

page473 it stated

S TheChief Division of Tariffs and Informal Complaints of the Commission indicated th

onion powder was not a condiment However when he rendered his Informal opinion 

rHrl not have the benefit of the letter from the Department of Agrlcnulture and as 

Informal opinion Indicates he was under the erroneous impression that the manufactu

of a condiment required addition of another substance or an additive process to the ba

component

4 Ct Atlantic Bridge 00 v Atlantlc Ooast lAne R 00 ri6 F 2d 163 DC S D Fl

1932

10 F M C
CORN PRODUCTS CO V HAMBURG AMERIKA LINES 393

In interpreting a tariff the terms used must be taken in the rsense in which

they are generally understood and accepted commercially and neither carriers

nor Shippers could be permitted to urge for their own purposes a strained and

unnatural construction Tariffs are to be interpreted according to the reasonable

construction of their language neither the intent of the iiramers nortile practice

of the carriers controls for the Shipper cannot be charged with knowledge of

such intent orwith carrier s canons of construction A proper test is whether the

article may be reasonably identified by the taTiff description

In any event it i evident that the General Cargo N O S rate is

inapplicable to the shipment because ofthe existence of the condiment

rate in the tariff sAccordingly it is found that Item 5175 is the tariff

rate applicableto the shipment herein

It is clear that the collection by respondent of the rate of 72 75 is

not in accord with the tariff on file with th Commission This action

constitutes a violation of section 18 b 3 Section 22 of the act pro

vides for the payment of Full reparation to the complainant for the

injuries caused by said violation In this case fullreparation repre

sents the difference between the rate that complainant should have

paid on Item 5175 for 195 drums and the rate it actually paid or the

sum of 2 477 84 with interest at six 6 percent per annum from

November 10 1965 See States Marine Lines Inc v F flIJ O 313 F 2d

906 909 CADC 1963 and cases cited therein Oakland Motor Oar

00 v Great Lalces Transit Om p

1 D S S B B 308 312 1934

UVl IIATE FINDINGS AND CONCLUSIONS

On the record as awhole it is foundand concluded

a The applicable rate in Tariff No 26 in effect at the time of the

shipping of 195 drums of dehydrated onion powder is Item 5175 Con

diments Packed N O S at 39 25 per 2 240 pounds

b Hespondcnt violated section 18 b 3 of the act by charging a

rate of 72 75 peL 40 cu ft

c Complainant is entitled to reparation under seetion 22 of the

act in the amount ofthe overcharge

d Pursuant to section Z2 of the act respondent is directed to pay

to complainant the sum of 2 477 84 representing the difference be

tween the rate charged and the applicable rate with interest thereon

tt six 6 percent per annum from November 10 1965

Signed BENJAMIN A THEEMAN

P1 esiding Exa111iner

APRIJ 10 1967

cr ConeBrothers Coust CO Y Georgia RR Vo ct I i 159 ICe H2 where on page H

the IeC set out two principles 1 as between two unequal commodity rates both ade

qllptely nescriptive the applicable rate is the lower 2 where a commodity shipped is

included il1 more than one commodity dcscrilltioll ill the same tariff that description

which ismorespecific willbe found applicable

10 F M C
FEDERAL 1ARITIME COMMISSION

ADOPTION OF INITIAL DECISION

May 9 1967

By rHE COMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ohairman George H Hearn Oommissioner

No exceptions having been filed to the initial decision of the Exam

iner in thisproceeding and the Commission having determined not to

review same notice is hereby given in accordance with Rule 13 g

of

the Commission s Rules of Practice and Procedure 46 CFR 502 227

that the initialdecision became the decision ofthe Commission on May

12 1967

This proceeding is hereby discontinued

JAMES V DAY COJ UnSSIONER concurring

The Commission has laid down therule ofreason in dealing with the

interpretation of tariff items Inthis case the evidence shows that cargo

was a condiment Therefore tariff Item 5175 condiments should

apply and not Item 5287 onions or Item 9161 general cargo In

charging the general cargo rate the respondent overcharged com

plainant Reparation should be awarded in the amount of 2477 84

with interest thereon at 6 percent per annum

Signed FRANCIS C HURNEY

SpecialAssistant to the SeCl eta ry

10 F lfC 394
FEDERAL lVIARITIME COMMISSION

No 1218

SEA LAND SERVIQ INC

v

TMT TRAILER FERRY INC

C GORDON ANDERSON TRUSTEE

Decided 2Jfay 11 1967

Section 18 a of the Shipping Act 1916 requires a common carrier by water to

make an affirmative disclosure in its tariffs of the fact that it is offering to

transport refrigerated cargo whenever such is the case

Respondent TlIr found to have violated section 18 a of theShipping Act 1916

and section 2 of the Intercoastal Shipping Act 1933 by failing to disclose the

availability of refrigerated cargo service and by charging demanding and

collecting compenl5ation different from the greater than that specified in its

tariff legally on file with theCommission

Experimental services are not exempt from the operation of the Shipping Act

1916 and theIn tercoastalShipping Act 1933

Record in this case does not support

a finding of violation of section 16 First

H01ner S Oa1 1ente1 Esq and Edward T Oornell Esq for TMT

TrailerFerry Inc

J S Provan Esq and lVa1 1en P1lCe J1 Esq for Sea Land Serv

ice Inc

REPORT

By THE COlIlnSsION John H arllee Ohairman Ashton C Barrett

Vice Ohairman James V Day and George H Hearn

Oommissioners

Complainant Sea Land Service Inc a common carrier by water in

the domestic offshore trade between Florida and Puerto Rico alleges

that respondent T T Trailer Ferry Inc a competing carrier in the

same trade is in violation of section 2 of the Intercoastal Shipping Act

1933 and sections 16 First and 18 a of the Shipping Act 1916 by

initiating and operating a

refrigerated cargo service without having

first published and filed rates applicable to the carriageof such com

modities with the Commission Respondent TMT joins issue in its

10 F M C 395
396 FEDERAL MARITIME COMMISSION

answer admitting that it does not publish a pccific tariff for refrig

erated cargo but asserting that its Cargo N O S Cargo NotOthe

wise Specified rate is the legally applicable rate especially where th

service is experimental in nature

THE FACTS 1

TMT is a common carrier by water operating between ports i

Florida and Puerto Rico This carrier utilizes seagoingtugs which to

unmanned barges converted LSTs which in turn carry trailers i

a roll on roll off operation Since there are no personnel aboard th

barge during the voyage to service and tend machinery orelectrica

systems this type of operation in the past did not lend itself to th

carriage of refrigerated cargo and prior to 1964 TMT did not hol

itself out to the shipping public by tariff publication or otherwis

as engaging in reefer service

In October 1964 however TMT embarked upon an experimenta

program by which specially equipped insulated trailers could b

transported safely even though there was no one aboard the barges t

service themachinery for fa period ofseveral veeks

TMT publishes two freight tariffs in the Florida Puerto Rico trad

Freight Tariff No 1 FMC F No 2 names rules regulations an

charges and Freight Tariff No 4 FMCF No 5 names class an

commodity rates Freight Tariff No 4 TIlakes no provision for com

modities requiring refrigeration 01 controlled temperature protection

Item No 1 subparagraph G of Freight Tariff No 1 provides tha

where freightis not

susceptible of being loaded in carriers standard equipment by reaso

of weight size of other characteristics special arrangements must be mad

withthe carrier and cargo must bear all additional expenses incident to th

furnishing of equipment and transportation of such cargo Quotation o

chargeswillbe made forfurnishing of such special equipment

The minimum ocean freight charge assessed by TMT on refrigerate

cargo is 866 40 per trailer which is the Cargo Not Otherwise Spec

fied rate of 60 per cubic foot subject tn 1 444 cubic feet minimum In

addition TMT assesses a special equipment charge of 33 60 pe

trailer for the insulated trailer and liquid nitrogen used in the refrig

eration process This charge is assessed pursuant to the provision

ofthe special equipment regulation quoted above

Between October 1964 and March 31 1966 TMT carried more tha

1

By agreement of the parties there were no evidentiary hearings The record therefore

consists SOlely of the uncontroverted assertions of the parties admissions and stipulation

as to the facts

10 F M C
SEA LAND SERVICE ING V TMT TRAILER FERRY INC 397

2 411 000 pounds of refrigerated cargo

2

for which it has collected a

total in charges of some 67 000 TMT has never charged less or more

than 866 40 for the movement of the refrigerated cargo in each of its

trailers plus the 33 60special charge referred to above

Sea Land is also a common carrier by water between ports in

Florida and Pureto Rico It maintains a weekly sailing from Jackson

ville to Puerto Rico and carries refrigerated cargo It has specific

refrigerated cargo rateson filewiththe FederaI Maritime Commission

From October 1964 to the present time there has been an increase in

the number of refrigerated containers that Sea Land transports from

the Jacksonville area to Puerto Rico and duringthe same period Sea

Land has also increased the n u m bel of refrigerated trailers

that it owns

THE INITIAL DECISION

In his initial decision served February 2 1967 Examiner Edward C

Johnson concludedthatTMT s failure to filespecific refrigerated cargo

rates and assessment of unspecified special equipment charges con

stitute violations of section 2 of the Intercoastal Shipping Act and

section 18 a of the Shipping Act and that TMT s failure to file

refrigerated cargo rates is a violation of section 16 First of theShip

ping Act He rejected TMT s argument that experimental services are

exempt from theoperation oftheShippingActs

EXCFPTIONS TO THE INITIAL DECISION

TMT excepts to each of the conclusions contained in the initial

decision Sea Land has filed its reply in opposition Neither party

requested oral argument andnone washeld

ISSUES INVOLVED

This case presents three basic questions

1 Whether a carrier which engages in the carriage of refrigerated

cargo is required to establish and file a specific tariff or classification

for such cargo

2 Whether TMT collects a rate different from or greater than that

specified in its tariff and

3 Whether TMT s practices constitute a violation of section 16

First ofthe Shipping Act in that it gave apreference to shippers who

used TMT s refrigerated service and prejudiced those shippers who

were unaware thattheservice wasavailable

These issuesare discussed seriatim below

1I The cargo moving by TMT Is primarily frozen poultry fresh eggs frozen seafood and

meat and some frozen citrus concentrates and Ice cream

10 F M C
398 FE DERAL MARITIME COM ISSION

DISCUSSION

1 Establi8hment of aSpecific Tariff or Cla88ificatlon fO1 Refrigerate

Cargo

Section 18 a of the act provides in pertinent part that every com

mon carrier by water in interstate commerce shaH establish ju

and reasonable classifications regulations and practices relatin

thereto

Section 2 of the Intercoastal Shipping Act 1933 requires that ca

riers subject to its pravisians shall file with the Cammission all th

rates fares and charges far orin cannectian with thetransportatia

affered and makes it unlawful far a carrie rtoengage in transportatia

until its tariffs are filed

As was said in Inte 1 coa8ta7 hyoes1igation 19iL1 U S S B H 40

1935 at447

Itcannot be too strongly stressed that every transportation service or servi

in connection therewith must be clearly shown in the tariff before a carrier ma

lawfully engage therein and thisapplies with equal force to services forwhich 

charge ismade aswell as to services forwhich no charge is made

Prior to Octdber 1964 TMT wasnat equipped to and did nat car

refrigerated cargO and as has already been nated T lTs tariff

contained nO rate rule 01

regulation specifically cavering the carriag

of such cargo When in October of 1964 TMT achieved refrigerate

cargO carrying capability nO change was made in its existing tariff t

reflect this significant change inservice 3

TMT insists that the applicatian to refrigerated cargO ofthe CargO

N O S rate coupled with the special handling charge satisfies th

requirements af the statutes But the fact remains that nathing in th

tariffs af TMT wauld disclase the fact that it carried refrigerate

cargO The very nature af its operation would lead to the appasite con

clusion and as for shippers whO had salight refrigerated space in th

past and faund that none wasavailable with respondent nO change wa

made in the tariff to reflect the change in service 4The failure ofTM

to apprise the public af its newly acquired capability far handlin

refrigerated cargo constituted a failure to establish just and reasanah

8

TMT would no doubt contend that because it was only an experimental or pilo

pro am its refrigerated cargo service consisting as it did then of only one trailer w

not significant Indeed TMT offers the experimental nature of the service as a defen

for its failure to establish a specific refrigerated cargo tariff or classification The signi

cance of refrigerated capab111ty Is not founded on the amount of space afforded but rath

upon the addition of another and specialized service to the total capab111ties of the carrie

As for the defense posed by the experimental nature of the program it is sufficient 

point out that the statutes make no exception for experimental or pilot programs

ISee Puerto Rican Rates 2 US M C 117 130 1939 where the failure of responden

to affirmatively disclose the maintenance of precooling plants and the eharge therefore 

their tarids was found contrary to section 2 of the 1933 act

10 F M C
SEA LAND SERVICE ING V TMT TRAILER FERRY INC 399 

classifications regulations and practices within the meaning of

section 18 a

2 Oha1gtng Rates Not on File

As we noted above in aadition to charging the basic Cargo N O S

rate TMT assesses a surcharge of 33 60 per trailer under the authority

of its special equipment regulation Section 2 of the 1933 act re

quires every corrunon carrier in domestic commerce to file with the

Commission all rates fares and charges for or in connection with

transportation on its own routes

The language of section 2 is clear and specific the precise rates ana

charges for transportation must be filed at least where they are known

or knowable 5

No other reading of the anguage will achieve the pur

pose soughtthat of closing the door on possible unlawful rebates 01

concession to favored shippers See Matson Navigation 0

ompany

7 FMC 480 at 488 But the regulation relied upon by respondent to

justify this extra charge does not specify any charges it says merely

that Quotation of charges will be made for furnishing such special

equipment

Moreover it is our view that the so called special equipment charge

was in this instance nothing more than a portion of the basic rate

which did not become a charge merely by labeling it so Tl1T

charged exactly the same amount for each trailer carried The 33 60

wasa constant and unvarying additive to the cargo N O S rate This

can only lead to the conclusion that the proper rate for the movement

vas the N O S rate plus 33 60 6

On the basis of the foregoing we conclude that TMT has charged

a rate for refrigerated cargo which is other than and greater than that

specified in its tariff in violation of section 18 a of theShipping Act

and section 2 of the Intercoastal Shipping Act 1933

3 Section 16 FirstAllegation

Sea Land argues that TI1T s use of its Cargo N O S rate to cover

the shipment of refrigerated cargo violates section 16 First 7

because

it constitutes an unjust orunreasonable preferenceto shippers actually

6

See Intercoastal Rates 0 Nelson S S Co 1 U S S BB 326 where rule authorlzln

port equal1zatlon but which faned to peclfy the actual amount of equal1zll tlon were

condemned

o

Its validity under the rule relied upon b Tl 1T become even more doubtful when It Is

considered that there Is nothing unu ual or extraordinary about the furnlshlng of the

refrigerated trallers by TMT They are a part of the carrier s standard equipment No

special arrangements had to be made by the shipper with the carrier since TMT cho e

to equil itself with tJlil rs which could ac olllmodate refrigerated Cllr o

7

Section 16 Firstof the Shipping Act forbids any common carrier by water

to make or give any undue or unreasonable preference or advantage to any particular

person locality or lescrllltioll of traffic 111 allJ respect whatsoever

10 F l1C
400 FEDERAL MARITIME COMMISSION

using the service and its prejudicial to shippers who did not kno

about the availability of this service but would have used ithad th

known and the Examiner so found in his initial decision

Vhile the record would indicate the possible existence of shippe

who were unaware of TMT s refrigerated service hut who would ha

used it had they known a violation of section 16 First should not 

based on such speculation It may well be that were there actual e

dence of such shippers and such a lack of knowledge worked a

prej

dice a violation ofthe section could be found However we reserve th

question for theproper case

CoNCLUSIONS

Insummary we conclude

1 That the failure of respondent TMT to make affirmative d

closure in its tariff that it is engaging in the carriage ofrefrigerate

cargo violates section 18a of the Shipping Act 1916 in that it co

stitutes a failure to establish a

just and reasonable classification

2 That the practice of respondent TMT whereby it assesses a

unspecified special handing and equipment charge in addition to 

Cargo N O S rate is in violation of section 2 of the Intercoast

ShippingAct in that it constitutes a chargeotherthan that on filewit

the Commission

3 That this record contains insufficientevidence to support a fin

ing that section 16 First has been violated

An appropriate order will be entered

sj THOMAS LISI

Secretary

111 JtAIC
FEDERAL MARITIME COl1MISSION

DOCKET No 1218

SEA LAND SERVICE INC

v

TMT TRAILER FERRY INC

C GORDON ANDERSON TRUSTEE

ORDER

This proceeding having boon instituted on the complaint of Sea

Land Service Inc and the Commission on this day having made and

entered of record a Report stating its findings conclusions and de

cisions thereon which Report is hereby referred to and made a part

hereof

Now therefore it is ordered That respondent TMT Trailer Ferry

Inc C Gordon Anderson Trustee cease and desist from

a engaging in the carriage of refrigerated cargo or in any other

specialized class of service unless and until the availability of such

s rvices and the terms and conditions pertinent thereto are affirma

tively disclosed in the applicabletariff

b

failing to specify with particularity in its tariffs all rates

charges or assessments made in connection with the performance of

such services where such charges are of a

recurring ordinary or regular

nature or where they may be reasonably predicted in advance

c charging demanding or collecting or receiving a greater or

less or different compensation for the transportation ofproperty or for

any service in connection therewith than the rates fares and or

charges which are specified in its schedules filed with the Commission

in compliance with section 2 ofthe Intercoastal Shipping Act 1933

I

tis further ordered That said respondent shall withinthirty 30

days of the service hereof filean amended tariff with the Commission

By the Commission

10 F MC

Signed THOMAS LISI

Secretary

401

299 843 068 27
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 401 AARl IO BRISTLE PROCESSING BRUSH CO

v

ZIM ISRAEL NAVIGATION CO lim

Decided June 6 1967

Application to charge shipper inforeign trade less than specified in tariff on fi

denied

REPORT

By THE COMMISSION Jolm Harllee Ohairman George H Hearn

James F Fanseen Oommissioners

Zim Israel Navi gation Co Ltd Zim a member line ofthe Nort

Atlantic Israel Eastbound Freight Conference has filed this applica

tion for an order authorizing adjustment of ocean freight charges i

the sum of 1 224 08 in connection with a shipment ofhorsehair from

New York New York to Haifa Israel

Examiner Paul D Page Jr issued an initialdecision denying Zim 

application This proceeding is now before us on our own motion t

reVlew

The facts alleged in the verified application and found by the Exam

iner are substantially as follows

Historically the Conference has maintained a rate of 8 50 per 10

lbs for the carriage of horsehair from the east coast of the United

States to Israel The Conference however inadvertently deleted th

horsehair item and the corresponding 8 50 rate from its tariff whe

it prepared a new tariff to comply with the Comnlission s Genera

Order 13 46 CFR 356 1

Subsequently but before it realized that the 8 50 rate had been de

leted Aarmo Bristle Processing and Brush Co by bill oflading date

February 10 1966 consigned a shipment of horsehair to Halvaave

1

General Order 13 which waR published in the Federal Register on May 27 1965

governs the form and manner of filing tariffs by common carriers by water in the foreig

commerce of the United States and conferences of such carriers

402 10 j M C
AARMO BRISTLE V ZIM ISRAEL NAVIGATION CO 403

kisachon Jaffa Tel Aviv Cooperative Society Ltd The shipment was

carried on the Zim vessel SS Israel Voy 87 Since Zim had no rate

on file for horsehair the appropriate tariff classification for this com

modity was the General Cargo rate of 8150 w1m Therefore Zim

had no choice but to assess freight in the amount of 2 294 23 based on

that rate

The freight was to be paid at destination in Israel by Messrs Zipim

the receivers of the shipment When the shipment arrived however

these receivers declined to take delivery They advised Zim that they

considered the freight charges excessive and that they were not in a

position financially to pay the freight as billed Zim alleges that they

have been advised that unless the charges are reduced the shipment

which remains in custom custody at the Port of Haifa will be

abandoned

As soon as the Conference realized its tariff error it immediately

filed and reinstated its 8 50 per 100 lbs rate on horsehair

Zim now requests that the 8 50 rate be regarded as continuously in

effect and governing the above mentioned shipments and that the

Commission authorize it to charge and collect freight based on this

rate in order to meet the good faith intentions and expectations of all

concerned Freight based on the 8 50 rate would amount to 1 070 15

whereas freight based on the General Cargo rate of 8150 wlm the

rate legally in effect at the time of shipment produces an additional

charge of 1 224 08

In his initial decision the Examiner denied Zim s application and

determined that the Commission s decision in Ludwig Muelle1 00

Inc v Peralta Shipping Oorporation Agents of Torm Line 8 FMC

361 1965 was controlling and required the denial of the application

DISCUSSION AND CONCLUSION

Our decision in Ll ulu ig jhtelle1 sUJJra wherein we held that we

were without authority to permit deviations from field tariffs in the

foreign trades is clearly dispositive of this proceeding

Zinl recognizes that Ll ulwig Mueller is applicable here Itneverthe

less takes the position that since the shippers shipped in reliance upon

historical rate levels and the arriers carried at a rate caused by in

advertence the Commission should waive its holding in Lud loir

lJfueller and grant the relief requested

In Ludwig Mueller we specifically stated that an unintentional

failure to file a

particular rate is not sufficient reason for

departing from the requirements of section 18 b 3

2

which reads

28 FM C 361 at 364

10 F M C
404 FEDERAL MARITIME COMMISSION

3 No common carrier by water in foreign commerce or conference of such

carriers shall charge or demand orcollect orreceive a greater orless ordifferent

compensation for thetransportation of property or for any service in connection

therewith than therates and charges which arespecified inits tariffs on file with

theCommission and dUly published and ineffect at thetime

Zim characterizes our holding in Ludwig Mueller as a rather stern

rule We are well aware of that fact In this regard however we can

merely reiterate what we stated in The East A8iatic Oo Inc Applica

tion for Permission to Waive Oollection of Undercharges Special

Docket 382 9 F MC 169

We arewell aware now as we were inLudwig Mueller that this strict interpre

tation of our statutes withrespect to special docket applications may result in

hardship in certain instances but the statutes enacted by Congress and admin

istered by tbis Commission areabundantly clear and we must adhereto them

An order denying this application will be entered

VICE CHAIRMAN BARRE IT and COMMISSIONER DAY dissenting

Upon ascertainment that no other shipments of horsehair were car

ried under similar circumstances we would grant the relief prayed for

in accord with our position in Ludwig Mueller 00 Inc v Peralta

Shipping Oorp etc 8 F M C 361 367

ORDER

In the absence of exceptions to the initial decision in this proceed

ing the Commission served notice of its intention to review the

decision

The Commission having reviewed the decision and on the date

hereof having made and entered ofrecord a

report containing its con

clusions and decision thereon which report is hereby referred to and

made a part hereof

It is ordered That the application of Zim Israel Navigation Co

Ltd to waive the collection of certain freight charges be and hereby

is denied

By the Commission

Signed THOMAS LISI

Secretary

10 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 402

AYRTON METAL AND ORE CORP AND ASSOCIATED METALS AND

MINERALS CORP

V

AMERICAN EXPORT ISBRANDTSEN LINES INC

Decided June 13 1967

Application to charge shippers in foreign trade rates less than specified in tariff

on file denied

REPORT

By THE CoMMISSION John Harllee Ohai flnJnGeorgeH Hearn

James F Fanseen OOmJm IJ18ionel8

American Export Isbrandtsen Lines Inc has filed this application

for approval to pay a total of 5 861 62 to the nominal complainants

herein Ayrton Metal and Ore Corp and Associated Metals and

Minerals Corp as alleged overcharges on shipments of brass and or

copper scrap from New York and Baltimore to ports in Italy

Examiner Benj amin A Theeman issued an initial decision denying

the application This proceeding is now before us on exceptions filed

jointly by the nominal complainants and applicant and by Ayrton

individually

The exceptions are but a restatement of the arguments made in

the application These arguments were properly reject d by the

Examiner in line with our decision in Ludwig Mueller 00 Inc v

Peralta Shipping Gorp 8 F M C 361 1965 Accordingly we hereby

adopt the Examiner s decision which is set forth below

INITIAL DECISION OF BENJAMIN A TIfEEMAN

PRESIDING EXAMINER 1

This application under rule 6 b signed by the steamship company

requests on behalf of the steamship company and the shippers ap

1

This decision was adopted by the Commission on June 13 1967

10 F M C 405
406 FEDERAL MARITIME COMMISSION

proval for the voluntary payment by American Export Isbrandtsen to

Ayrton of 2 468 65 and to Associated of 3 392 97 as alleged over

charges on 5 shipments of brass and or copper scrap Three shipments

went from New York to Venice one from New York to Genoa and one

from Baltimore toNaples

All the shipments moved during the month of February 1966 pur

suant to B Ls dated during thatmonth The charges were paid during

March 1966

The applicable and existing tariff rate for each shipment was the

general cargo rate of 8150 w m as set forth in the North Atlantic

Mediterranean Freight Conference TariffNo 9 FMC 22 filedwith the

Commission by the Conference on December 10 1965 effective Janu

ary 1 1966

Historically the Conference has maintained a rate on the brass

scrap of 3175

per long ton When the Conference prepared and filed

Tariff No 9 it deleted the brass scrap item and the corresponding

31 75 rate from thetariff

Tariff No 9 was filed by American Export Isbrandtsen to comply

with FMC General Order No 13 30 F R 7138 5 27 65 establishing

ruJes dealing with the codification of tariffs Nothing in the general

order required the steamship company to delete the hrass scrap item

from its tariff

American Export Isbrandtsen alleges that the deletion was error

that as soon as the tariff discrepancy wascalled to the attention of the

Conference the latter filed with the Commission and duly made public

the reinstated rate of 3175 per long ton

The freight collected totalled 8 439 55 the freight sought to be

applied totals 2 577 93 The difference of 5 86162 is the refund

sought to bemade

Insupport oftheir position the parties state

Respondent American Export Isbrandtsen Lines Inc recognizes that the

Oommission has held in several recent cases that in the foreign trade governed

by section 18 b 3 of the Shipping Act it is without statutory authority to

allow the voluntary payment by a steamship line to a Shipper of the difference

in the amount between the higher rate on file in the tariff and the lower rate

which the canier and the shipper joIntly agree should have been on file for

the COlnmorlity Ludw i

fJ Mueller Co v Peralta SMpping Gorp 9 FMC 361

1 Uton TC1 tilr Corp et al Y Thmi Dines Ltd 9 FMC 145 We submit that

this is a rather harsh and stern rule which in this instance should be waived in

an enlightened exercise of the admini Strative discretion which the Commission

must be endowed with to administer its regUlatory duties Accordingly it is

2

American Export Isbrlmdtsen at all times mentioned was amember of theConference

3

There is no eontentlon madE nor evidence submItted to slow that the filed rate is un

reaonably high withIn themeanIng of section 18 b 5

10 F M C
AYRTON METAL CORP V AMERICAN EXPORT LINES mc 407 

respectfully requested tbat the 31 75 rate be regarded as baving been contin

uously in effect and as governing tbe brass scrap movement

But for tbe requirements of tbe Commission s

own new foreign tariff circular

tbe 31 75 rate for brass scrap would bave been applied Similarly if tbe tariff

rate situation bad been called to theConference s attention prior to tbese sbip

ments it would bave corrected the tariff provision by publisbing tbelower rate

These two complainant shippers shipped in reliance upon tbe well known and

bistorical rate level To disallow the requested refund would not in our con

sidered judgment serve any regulatory purpose To allow the refund and issue

an order of payment would merely conform to tbe Commission s earlier practice

inspecial docket applications under Rule 6 b 46 CFR 502 92 wbicb tbe Com

mission s recent action pursuant to Rule 13 g in giving notice of intention to

review tbe InitialDecision in Special Docket No 401 Aarnw BristleProcessing

Brush 00 v Zim IsraeZ Navigation 00 Ltd suggests may be about to be

resurrected

DISCUSSION

In the Peralta case Special Docket No 377 4

cited above by the

steamship company the Commission laid down the principle that by

virtue of section 18 b 3 the Commission has no authority as to

shipments in foreign commerce to permit deviations from rates on

file or to give effect to an unfiled or unpublished tariff regardless of

the equities involved 5

The Commission has since adhered to that

principle Until the Commission holds otherwise there is no basis

under the act to grant special docket relief as to foreign commerce

shipments

Accordingly it is concluded that the decision on Special Docket

No 377 is dispositive of the application herein An order denying the

application will be entered

Signed BENJAMIN A THEEMAN

Presiding Ewaminer

NOVEMBER 18 1966

ASHTON C BARRETT VICE CHAIRMAN and JAMES V DAY COM ns

SIONER dissenting

In accord with our position in Ludwig Mueller 0 v Pm alta

Shipping Corp 8 F MC 361 1965 we would grant the relief re

quested upon ascertainment that there were no other shippers sim

ilarlysituated

4 8 FM C 361

6

See Special Docket No 400 Waterman Steamship Oorporation v Ohrysler International

B A decided by the Commission Apr 21 1966 9 FMC 428

10 F M C
408 FEDERAL MARITIME COMMISSION 

ORDER

The Commission having this date entered a report in this proceed

ing adopting the initialdecision ofthe Examiner herein which report

is hereby referred to and made a part hereof

Itis ordered that the application of American Export Isbrandtsen

Lines Inc to refund certain freight charges is denied

By the Commission

Signed THOMAS LISI

Secretary

10 F M C
FEDERAL MARITIME COl1MISSION

No 6 28

THE BOSTON SHIPPING ASSOCIATION INC ET AL

1

PORT OF BOSTON MAmNE TERMINAL AsSOCIATION ET AL

Decided Jwne f3 1967

Assessment of strike storage charges for cargo remai ing on premises of

terminal during longshoremen s strike is slJbject to the jurisdiction of the

Commi sion as a practice within the meaning of section 17 of the Shipping

Act 1916

A change inthe terminaltariff rule governing the assessment of stri e storag

which shifted charge from cargo to vessel did not require prior approval

by the Commission under section 15 Ship ping Act 1916 where role is con

tamed iil a tariff filed with the Commission under au existing approved

section 15 agreement such change constituting neither a modification to

the already approved basic agreement nor a new agreement within the

meaning of section 15

The asessment of the strike storage against the vessel forcargo still in free

time when the strikebegins does notconstitute an unjust and unreasonable

practice within the meaning of section 17 Shipping Act 1916

Vhile the assessment by a termmal of a

charge against the vessel for services

rendered to the cargo for benefit of the onsignee raj es is uea under section

17 as to the justness and reasonableness of the allocation it does not con

stitute an undue or unreasonable prejudice under section 16 since thecargo

and vessel arenot usersof the same service

C rgo of the consign s wa prevent froPl I nlov l

l

wjthin tbe meaning of

the strike storage provision of respoodents tariff by the longsh9rem e

strike amd the application of that provi ion for the Perioo in qu esti Ii did

not constitute an unjust and unreasonable practice within tbe meaning of

section 17 Shipping Act 1916

Leo F Glynn Esq 8Jttorney for the complainants

John M Reed Esq attorney for respondents other than Massa

chusetts Port AuthQrity

George lV Stuart Esq and Neil L Lynch Eaq attorneys for

Massachusetts Port AUJthority

Donald J Brunner Esq and SqlMel E N emi P w Esq Hearing

Atmsel

409
410 FEDERAL MARITIME COMMISSION 

REPORT

By THE CoMMISSION John Harllee Ohairman Ashton C Barrett

Vice Ollai1 11Ultnj James V Day George H Hearn Oommission

ers

This proceeding arises out of a complaint filed April 21 1966 by

theBostonShippingAssociation Hearings were held beforeExaminer

Benjamin A Theeman who issued his decision February 17 1967 Oral

argument washeld May 11 1967 The complainant the Boston Ship

ping Association Inc is anonprofit Massachusetts corporation whose

members are ocean steamship companies their agents or stevedores

while the respondent PBMTA is an association of other persons

subject to the Shipping Act f16 each of which owns or operates a

marine terminal in conneqtion with a common carrier by water The

complainant alleges thatrespondent has violated section 15 of the Act

hy putting certain tariff modifications into effect without first securing

the approval of the Commission and sections 16 and 17 of the Act

by unjustly assessing againstthe vessel the charge for so called strike

torage of cargo during strikes of the vessel employees instead of

ssing itto the cargo as had previously been the practice The Ex

aminer foun violations of sections 16 and 17 but not section 15

Resp ndent and in rvenor hearing counsel have taken exception to

the Initial Decision and complainant has replied Our conclusions

differ somewhat from those ofthe Examiner

FACTS

Respondent PBMTAOperates under approved Agreement No 8785

Article Third o which provides that the agreement autporizes the

fixi of and ch rges for wharfage d9ckage free tme whaTf

derPurrage and all termInal facilities and services Articie Sixth of

the agreement provides that rate charges classifiC3itions rules and

regulations adopted tinderthe agreement and any additions or changes

inthem Will bepromptly filed with theQommisSion

Phrnuant to Agreement No 785 PMBT A issuE d Terminal T riff

No 1 effective July 1 1962 This tariff proy ded among otJher thi

ngs

for wharfage l wharf d murrage

2

dockage and free time It con

Cb mlssioner Fanseen did not participate

1

The term wharfage refers to the charge assessed against all cargo passing or conveyed

ov ronto orunder wharves orbetween vessels or overside vessels when berthed at pier or

wharf Wharfage fs solely the cha ge for use of pier orwharf and does not lnciude charges

for any other service

I he te m wharf demurrag refers to the chargeasses ed agaInst cargo remaining on It

pier orwharf after the expiration of free time

10 F M n
THE BOSTON SHIPPING ASSOC INC V PORT OF BOSTON 411

tained no provision specifically dealing with strike storage Under

the tariff as originally filed dockage was assessed against the vessel

on general cargo at 20 cents a ton wharf demurrage was assessed on

import cargo at 21h cents per 100 pounds perday Free time of 5 days

was allowed on import cargo and 7 days allowed on export cargo

There is no issue presented as to the rea olulbJeness otthese periods

Vhen cargo was prevented from removal by factors beyond the

consignees control su h as strikes weather conditions or similar situ

ations affecting the entire Port area wharf demuragewas assessed

on cargo at a reduced rate of 1 cent per 100 pounds per day 5

All the

services at the terminals operated by respondents were governed by

these provisions and subsequent amendments made during the period

of record

Ocean freight rates on general cargo into the Port o Boston cover

transportation from a place or rest to a place or rest which is general ly

a point and place in a designated area inside the pier shed to whioh

cargo is removed from where it las been landed under ship s hook

Itis the vessels obligation to move the cargo to the place ofrest This

is accomplished by stevedoring companies performing under contract

with the vessels and under the direction or thechief clerk an employee

of the vessel The longshoremen employees of 11he stevedore and the

clerks belong to union locals affiliated with the ILA

On inbound shipments the vessel sends an arrival notice to th con

signee who usually receives it the morning bhe vessel docks but in no

event later than the time the vessel finishes unloading The notice con

tains thedate that free time willexpire The majorportion ofthecargo

is picked up by the consignee during free time The usual pro

cedure is for a truckman or a railroad freight handler on the con

signee s behalf to arrive at tJhe pier with an order for the cargo the

cargo is tallied by a clerk an employee of the vessel and whilebeing

tallied the cargo is loaded by the consignee s representatives one df

whom signs the tally The procedure is reversed hut substantially simi

lar in the case of export cargo Vharf demurrage is asessed against

the consignee for cargo left on the pier atter free time expires Insome

instances cargo in demurrage is not moved from the place or reSt In

others tJhe terminal moves the cargo to another area of the terminal

to place it in demurrage or storage

I

The term dockage refers to the charge assessed for the service of providing space 8long

side of wharf pier orseawall structure for the docking or berthing of watercraft or f

r

the mooring theroof or other watercraftdocked

The term free time refers to the period whicb cargo is allowed to remain on a pier tree

of charge immediately prior to loading of the vessel orsubsequent to its discharge fiom a

vessel

5

The terminal tariff further provided that When removal of cargo is prevented by strike

of terminal employee8no wharf demurrage w1ll be assessed Emphasis ours

10 FMO
412 FEDERAL MARITIME COMMISSION

Each ofthe complainants enjoys the continuousor exclusive use of an

assigned pier for the berthing of its vessels Before all the cargo un

loaded from one vessel is delivered or removed from the pier another

vessel will have berthed and unloaded its cargo This process is re

peated as succeeding vessels unload Thus there regularly exists on the

pier a mix ofgeneral cargo in different stages of discharge and deliv

ery some in free time and some in wharf demurrage Because of this

complainants do not consider that their responsibility toward the cargo

on their piers ends at the expiration of free time Rather they believe

that they should use average care to see that cargo is delivered in the

same condition in which it was received Complainants employ watch

men to guard against such things as pilferage and complainants insure

the cargo while it is on their piers Complainants consider delivery

takes place when they receive a signed receipt of some kind from the

party that next takes over the cargo The record reveals that complain

ants consider that when this occurs their obligation ceases

I

The terminal maintains guards to police the terminals and service

employees for the upkeep and maintenance of the terminal piers and

premises Both the terminals guards and the complainant s watch

men belong to unions not affiliated withthe ILA

InAugust of 1964 PBMTA received a letter from one of its mem

bers the Massachusetts PortAuthority stating in part

Over the years terminal operators and the Port of Boston have been severely

criticized by consignees of import cargo or the shippers of export cargo when

wbarf demurrage charges areassessed during strike periods Many times itseems

almost useless to advise them that a red tion in charges is established in the

tariff fortbatpurpose

Shortly after this letter PBMTA decided to reduce wharf demur

rage to lh cent per 100 pounds per day and to assess it against the

vessel instead of the consignee In September 1964 BSA found out

about the proposal to shift the charge to the vessel and protested by

telegram to PBMTA In the next few months two or three meetings

took place which ended with the parties still at odds PBMTA told

BSA that itwould continue to assess the charge against the vessel and

that if there was any complaint to file it here with the Commission

BSA s

reply was that it would not pay the charge A longshoremen s

strike that had been brewing Jor about a month in thePort of Boston

commenced on September 30 1964 Tally clerks and other clerks of the

eOther common carriers in Boston whose schedules provide only an occasional call at a

particular pier operate Urer tly and di 8cl

a

Jge at the pier ends their operation there

Cargo left on the pier at the end of free time would be turned over to the terminal for

storage

o fMo
THE BOSTON SHIPPING ASSOC INC V PORT OF BOSTON 413 

BSA also struck On November 18 1964 whar f

demurrage assessed

against the vessel for cargo remaining on the pier during a strike o

the vessels employees or employees of the agent of the vessel was re

named strike storage On December 21 1964 this strike storage

charge was eliminated from the wharfage section ofthe tariff and set

aside as a separate item On October 1 1964 a court injunction stayed

the strike but itbegan again on January 11 1965 and lasted 33 days

During this time truckmen and railroad men representing the con

signees refused to enter the terminal and pick up cargo All guards

andwatchmen remained on duty during thestrike

Pursuant to the tariff strike storage was assessed against compla

ants Upon refusal of complainants to pay the assessed ch rges

PBMTA brought an action in the U S District Court District of

Massachusetts The Court stayed proceedings holding that the matter

was vithin the primary jurisdiction of the COIIimission The present

complaint resulted

DISCUSSION

A PriorApproval of the Strike Storage Provision Under Section 15

Athreshold issue 7

to be disposed of before dealing with the validity

ofthe strike storage charge under sections 16 and 17 is the question of

whether the tariff revisions containing the present strike storage rule

required our approval under section 15 prior to their implementation

The Examiner found no merit in this contention of complainant and

we agree

Prior to the present rule the tariff contained a

provision providing

for reduced wh3lrf demurrage to be assessed against the cargo in the

event removal ofit was prevented by a strike The present charge is in

effect this same wharf demurrage though now called strike storage

Thus theonly real change effectedby the controversial provision is the

shift ofthe charge from cargo to vessel

Approval ofAgreement No 8785 the basic agreement under which

the terminals operate assumed that the various costs of providing ter

minal services would be allocated as between users of those services

The authority granted under the agreement to jointly fix charges car

ied with it the continued authority to properly allocate those charges

7

Taking the position that this is aratemaking case complainants also contended that we

were without jurisdiction They do not however challenge the level of the strike storage

charge nd their only concern iswith its asseBBment against them That the proper alloca

tion of the costs of providing terminal services as between users of those services is amatter

within our juriSdiction under section 17 is too well settled to be disputed now Practice8

etc San Franci8co Bay Area Terminals 2 U S M C 588 1941 aff d Oalifornia v US

320 U S 577 1944 Free Time and DemUfTage Ohflroe8 New York 3 U S M C 89

1948

10 F M C
414 FE DERAL MARITIME COMMISSION

and while a particular change in allocation may be an unreaso able

practice under section 17 or unlawful under section 16 or some other

section oftheAct itdoes not constitute a new agreement or amodifica

tion to the existing agreement calling for a new anticompetitive

monopolistic or rate fixing scheme not contemplated in the original

agreement See International Packers Ltd v F MO 356 F 2d 808

810 C AD C 1966 Agreement No 9025 lfliddle Atlantic Ports

Dockage Agreement 8 F MC 381 384 citing Empire State Highway

Transportation Association v Federal Maritime Board 91 F 2d

336 C A D C 191 c d 368 U S 931 1961 For changes outside the

scope of approved agreements and needing prior approval see those

items listed in ThePersiaJn Gulf OutwardFreight Oonf Ag1 7700

Establishment of aRateStructure Providing for Higher Rate Level8

J01 Service via American Flag Vessels versus Foreign Flag Vessels

Docket 6627 10 FMC 61 and the discussion on the subject in

0ontract Between the North Atlantic Mediterranean F1eight 0on

ference and the United Arab 00 etc Docket No 663 9 FMC 431 No

prior approval under section 15 was required

B The Allocation of the Strike Storage Oharge Under Section 17

As other persons subject to the Shipping Act 8

terminals are

required by section 17 of that Act to establish just and reasonable

regu1lations and practices relating to or connected with the receiving

handling or storing of proPerty We are authorized by sectioh 17

whenever we find a

regulation orpractice to be unjust or unreasonable

to prescribe a just and reasonable one

Terminal operators form an intennediate link between the can iers

and vhe shippers or consignees In consequence the terminal operators

perform some Services for the caflriers and other services for the ship

pers Terminal Rate Irwreases Puget Sound Ports 3 U S MC 21 23

1948 Ajust and reasonable allocation ofcharges under section 17 is

one which results in llhe user ofaparticular service bearing at least the

burden of the cost to the terminal of providing the service Practices

Etc San Francisco Bay Area Terminals 2 U S M C 588 1941 aff d

Oalifornia v United States 320 US 577 1944 Investigation Free

Time Practices Port of Smn Diego 9 F MC 525 1966 Where the

users of a particular service do not provide their share of essential

8 S ectionl provides

The term other person SUbject to this Act means any person not included in the

ter common carrier by water carrying on the business of furnishing wharfage dock

warehouse or other terminal facilities inconnection with a common carrier by wa

LO F M C
THE BOSTON SHIPPING ASSOC INC V PORT OF BOSTON 415

terminal revenues a disproportionate share of the burden is unjustly

and unreasonaibly shifted to users dfother terminal services P1 actices

Etc San Francisco Bay Area Terminals sltpra see also Terminal

Rate Structure Oalifornia Ports 3 US M C 57 1948 In view of

the multiplicity of methods used by terminal operators in furnishing

facilities to carriers shippers and consignees it is essential in con

sidering whether a particular allocation or assessment is just and rea

sonable to first determine for whom the service is performed The

l1ecessary distinction to be made is between those services which are

attributable to the transportation obligation of the carrier and those

which are not the latter normally being performed for the shipper

oroonsignee Terminal Rate Increases PugetBownd Ports supra This

df course involves a clear delineation ofthe dbligations ofthe carrier

to the shipper Or consignee in performing its transportation service

Complainants simplistic characterization of a common carrier s

duty as the duty to carry does not go far enough and the carrier s

Qbligation does not end with the deposit ofthe goods upon a reas n

able pier The carrier must also tender for delivery which dbliga

tion requires that the carrier unload the cargo onto a dock segregate

it iby bill of lading and count put it at a place of rest on the pier so

that it is accessible to the consignee and afford the consignee a reason

able opportunity to come and get it American President Lines Ltd v

Federal jJlaritime Board 317 F 2d 887 888 D C Cir 1962 Once

this has been done and absent a special contract the carrier s trans

portation obligation is discharged

In discharging its dbligationto tender for delivery tJhe carrier must

provide a convenient and safe place to receive the c3rgo from the

shipper and for the consignee to acoept delivery Terminal Rate In

creases Puget Sownd Ports 3 U S M C 21 1948 Thus the carrier

must provide adequate terminal facilities Intercoastal Rates to and

jr01n Berkeley 1 U S S B B 365 1935 Intercoastal Investigation

1935 1 U S S B B 400 1935 A carrier may notdivest tself Of this

obligation Terminal Rate Increases Puget Sound Ports supra

though it may contract for tJhe facilities of another person such as a

terminalo perator in which case the terminal operator is in effect the

agent ofthe carrier Free TimePractices PortofBan Diego 9 F M C

25 1966

AtBoston free time or the period reasonably required to allow a

consignee to pick up his cargo appears in the respondent terminals

tariff ahd no compar3lble provision appears in tJhe carrier s tariff The

piers and wharfs are actually provided by respondents The obligation

it o provide free time and effective facilities to make that free time

10 F l

IC
416 FEDERAL MARITIME COMMISSION

meaningful and realistic remains thecarrier s At Boston the free time

period is 5 days Once the cargo has remained on the pier for these 5

days the transportation obligation of the carrier is ended and the

services performed by the terminal for the carrier are also at an end

Any other services performed by the terminal in receiving handling

storing or delivering the property are normally performed for the

consignee or the shipper

With the foregoing in mind we move to a discussion ofthe applica

tion of the strike storage provision during the period in question The

strike storage rule clearly would apply to 1 cargo on the pier which

is in free time when the strike begins and 2

cargo which is on the

pier in wharf demurrage when the strike begins 9

1 Oargo in Free Time

When the cargo is in free time the terminal facility the pier is

being provided by the terminal to the carrier so that the carrier may

discharge its fulltransportation oblig3ition to the consignee It is the

duty ofthe carrier to provide this service to the consignee and it has

chosen to do so through an arrangement with the terminal No one

would argue th3it the carrier should pay the terminals cost of provid

ing the pier for the free time period itself Why then should the con

signee pay for the interim period of the strike The Examiner would

appear to conclude thaJt the consignee should pay for two reasons 1

that the terminal services rendered that is the supplying ofthe pier

and the attendant services as well as the free time involved were being

supplied to the cargo and 2 thaJt the reasonsadvanced by PBMTA

for making the change from cqnsignee to vessel were not valid

That the services in question were supplied to the cargo is in one

sense a valid statement In transportation 311 the services be it the

actual carriage orthe variety of attendant services are performed for

or supplied to the cargo the ultimate object being to move the cargo

from the point of origin to its ultimate destination But the cargo

cannot be divorced from the persons owing oblig3Jtions to it In the

past when considering the proper allocation of terminal charges it

has been customary to divide terminal services into two general cate

gories those performed for the vessel and those performed for the

cargo While we have no desire to change this custom1ary usage it

must always be borne in mind that the cargo is not some separate

9

The Examiner concluded that abroad reading of the rule could lead to Its appllcatlon to

cargo the terminal had signed for and removed from the pier used by the vessel presumably

to another pier since strike storage is defined as a

charge assessed against cargo on the

pier at the commencement of a strike Emphasis ours We do not read the rule as apply

Ing to cargo removed from the pier by the terminal itself after Ithas signed for the cargo

In any event as will appear later an attempt to apply the rule to such cargo would as

respondents themselves appear to recognize constitute a reasonable practice

10 11 M C
THE BOSTON SHIPPING ASSOC INC V PORT OF BOSTON 417

ntity Yhich is itself capable of paying for services rendered The

charges must always be paid by some person standing ina prescribed

relationship to the cargo

10 Thus where the terminal is the intermedi

ate link between the carrier and the shipper or consignee one of these

two persons must pay the terminals cost of providing the services

rendered The question here is which of these two should pay the

charge in issue llWe would place the burden upon him who at he

time of the strike owes an undischarged obligation to the cargo Thus

where the cargo is in free time and a strike occurs it is the vessel

whio has yet to discharge its fullobligation to tender for delivery

and it is to the vessel that the terininal is at thispoint in time supply

ing the attendant facilities and services Itis therefore just and rea

sonable to require the vessel to pay the cost of the supervening strike

which renders the discharge of that responsibility impossihle

After reviewing respondents past practices under the old reduced

wharf demurrage provision which governed charges for storage dur

ing a strike the Examiner concluded that the reasons advanced by re

spondents for shiftingthese charges from the consignee tothe vessel

were invalid Thus in the Examiner s view The terminals are arbi

trarily and unfairly chaTging the vessel strike costs for services

not rendered to them Respondents contend that the Examiner has

misconcei ved the past practice We find it unnecessary to resolve this

dispute

We have already concluded that the charge in question was for a

service rendered the vessel in order to allow the vessel to discharge

its duty to tender for delivery Therefore the practice is a just and

reasonable one under section 17 Its validity under section 17 is not

affected by respondents motives A bad motive does not make a rea

sonable allocation unreasonable just as a good motive does not make

an unreasonable allooation reason ble The nature of the practice itself

is of course controlling

2 Oargo in Dem WT 1

age

Once free time has expired the vessels

transporation obligationhas

ended Absent a special contract the carrier has done all that its trans

portation obliga tion requires itto do Thus in our view itis only just

and reasonable that the consignee who has failed to avail himself of

the opportunity to pick up his cargo during free time should bear

10 We can only assume that convenience alone led to the substitution of cargo fortbe

term shipper or consignee depending inter aUa whether the shipment was outbound or

inbound

No party to this complaint case has argued that the terminal1tself should absorb the

cost of providing strike storage and the record here Is aUent as to the terminal s ablUtJ

to do so

10 tM b

299 843 0 68 28
418 FEDERAL MARITIME COMMISSION

the risk of any additional charges resulting from a strike o cu rrin

after rreetime has expired The fact that the carrier may remain liable

for loss or damage to the cargo due to its own negligence American

Pre8ident Line8 v F MB 317 F 2d 887 C A D C 1962 in no way

relieves the consigneoo of its duty to pick upthe cargo or bear those

risks attendant to a failure to do so Thus we conclude that as tocargo

which is in demurrage when the strike begins it is an unjust and un

reasonable practice within the meaning of section 17 to assess strike

storage against the vessel

C Application of the StrikeStorage Rule as a Violation of Section 17

The Examiner further concluded that the language of the strike

storage itself rendered it ilapplicable to the situation here in question

Pointing to the fact that under the rule itself strike storage was

assessable only on cargo prevented from removall by a strike the

Examiner found that The refusal by consignee s employees was vol

untary and evidently was not pressed possibly in order to avoid fur

ther complications and danger The key to the Examiner s conclusion

would seem to be his finding that a

longshoremen s strike does not

present a legal obstacle preventing the agents or emp1loyees of the

consignee from picking up its cargo

12

To adopt the Examiner s conclusion is to place a strained and un

natural interpretation upon the language ofthe rule As the Examiner

himself points out The parties to this proceeding have been acting

under the assumption that the longshoremen s strike prevented the

consignee from receiving his cargo Thus only the Examiner has

construed the language to mean legal obstacle Giving the language

the fair and reasonable construction required ThOma8 G 010100 v

Southe7 i1SS 00 1 U S S B at 147 1929 we do not agree that the

language prevented from removal means or was intended to mean

prevented from removal by a legal obstacle We have long ago recog

nized the physical and moral force of picketlines and the impact of

a strike which effectively prevents consignees from removing their

shipments Free Time and Demu1 1

age Oharge8 New York 3

U S MC 89 1948 13 When the truckers and railroad men uponwhom

the consignees must rely to pick up their cargo refuse to enter the ter

minal because of the longshoremen s strike it can hardly be said that

the consignee s r fusal to pick up their cargo was voluntary We

12 The Examiner cltecl sectioll SfbH 4 1 and inB of theNational Labor Relatione

Act and certain casesdealing with secondary boycotts in support of this conclusion

i

That the FnfJ 2fi1W 9Ud D ntM ta 6 case tnvol led a

truckel s strike ss opposed to a

longshoremen sstrlke isof no con8eque to our concluSions here

10 D M C
THE BOSTON SHIPPING ASSOC INC V PORT OF BOSTON 418

therefore conClude that the strike storage rule was applicabTe to the

situation in issue and of itself did not constitute an unreasonable

practice under section 17

D The Assessment of Sf1rike Storage Under Sectwn if First

There remains O y

the Examiner s conclusion that a violation of

section 16 first 1100 been committed Citing only our recent decision in

Investigation of Free Time Practices San Diego 9 F MC 525

1966the Examiner concluded that the San Diego decision would

seem to make any undercharge or overcharge to any user preferential

or prejudicial To tlhe Examiner Itrollows that a section 16

violption exists in the present instance since the vessel is beingcharged

ror a service to the cargo even though the cost allooation system under

which the ternlinal operates has not been shown The Examiner tJhen

suggests that we may wish to consider whether a distinction

should be drawn between the San Diego case and tlie present one in

sofar Jat least as San Diego would appear to apply to different cla

or users of terminal services ie bebyeen cargo and vessel

Dhe distinction to be drawn is not between the San Diego case and

this one but between section 16 and section 174 The practice nvolved

in San Diego was the granting of excessive free time to shippers and

conSignees We discussed the validity practice under both sections 16

and 17 Under section 16 we stated that because the business practices

or some shippers would not allowthem to take advantage of the full

free time granted the obstensible offer to all shippers was illusory and

the practice vorked preference and prejudice within the meaning of

section 16 15 We further pointed out that the practice could be an un

reasonahle one under section 17 since ibyproviding valuaJble services

free or at reduced rates the tenninal was placing a disproportionate

share of the burden of providing essential terminal revenues upon

users of other services

Thus under section 16 there were two users of the same service

free time In the present case this ingredient is missing rorthe very

question in issue is wlhich of the twd interests

cargo or vessel is the

actual user of the service in question The distinction to be made is not

betweeil classes of users

16 but whether there are two interests seeking

IiThe Examiner felt that Under such circumstances any distinction between section 16

and section 17 seems to be eUmlnated insofar as termInals are concerned

15 We also pointed out that because of the nature of the service free time or free storage

It was unnecessary to show any competitive relatlons hIp between partiCUlar shippers or

consignees See eg New York Foreign Freight F B 48811 v FM O 337 F 2d 289 1964

18 We can forexample see no reason for a terminal to charge say a

shIpper one rate for

Jlure storageand carrier yet another rate fOr such storage

10 MC
420 FEDERAL MARITIME COMMISSION

thesame orsubstantially the same service Here the servieeis for either

the consigneeorthevessel depending upon whether the par ti ular cargo

is in free time ordemurrage While the particular assessment of strike

storagemiay result in an unreasonab epractice under section 17 it

does not in the situation at hand result in a violationoi section

1

On the basis of the foregoing we conclude th3 it the assessment

of strike storage against the vessel for cargo on yvhieh free time has

expired constitutes an unjust and unreasonruble practice under section

17 oftheShipping Act 1916 and respondents willbe ordered to amend

their strike storage rule accordingly

By the Commission

ORDER

The Commission has this day made and entered a

report stating its

findings and conclusions herein which report is made apart hereof

by reference and

It is ordered That respondents herein shall amend their Terminal

Tariff NO 1 iua manner not mconsistent with the Commission s deci

sion herein

By the Commission

SEAL Signed THOM 4 S LISI

Seoretary

10 F M c


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