j





xiv FEDERAL MARITIME COMMISSION

i

Aleutian Marine Transport Co Rates Between

Seattle and Ports in Alaska 7 FMC 392

Allen Bradley Co v Local 3 325 US 797

American Export Isbrandtsen Lines v FMC 380 F2d

609

American Export Isbrandtsen Lines Inc v FMC 417

F2d 749

American Mail Line Ltd v FMC 303 F2d 157

j

i

A P St Philip Inc v Atlantic Land Improvement

Co 13 FMC 166

Archibald v Pan American World Airways Inc 460

F2d 14

Armement Deppe S A v United States 399 F2d

794

Arrow Transportation Co v Southern Ry Co 372

US 658

Atlantic Gulf West Coast of So America Confer

ence 13 FMC 121

Atlantic Refining Co v Ellerman Bucknell Steam

ship Co Ltd 1 USSBB 242

Australia Atlantic and Gulf Conference 16 FMC

27

Ballmill Lumber v Port of New York Authority 11

FMC 494 12FMC 29 13 FMC 262

Baltimore Ohio RR v United States 345 US

146

Banana Distributors Inc v Grace Line Inc 5 FMB

615

Beaumont Port Commission v Seatrain Lines Inc 2

USMC 500

Bolton Mitchell 15 FMC 248

Bolton Mitchell 16 FMC 284

Boston Shipping Assn v Port of Boston Marine Ter

minal Assn 10 FMC 409

Boston Shipping Assn v Port of Boston Marine Ter

minal 11 FMC 1

Boston Shipping Assn v United States CA 1 No

721004 May 31 1972

Boston Wool Trade Assoc v Merchants Miners

Trans Co 1 USSB 32

i

I

Page

231

208

476

470

165 451

453 455

488

106

104

462

177

459

468

177

160

229

104 107

241 242

64 75

75 81

153

109

210

104










FEDERAL MARITIME COMMISSION

DOCKET No 71 93

VIKING IMPORTRADE INC

AND BERNARD LANG CO INC

POSSIBLE VIOLATIONS OF SECTION 16

FIRST PARAGRAPH SHIPPING ACT 1916

ADOPTION OF INITIAL DECISION

August 12 1974

This proceeding is before us on exceptions to the Initial Decision of

Administrative Law Judge Ashbrook P Bryant served December 13

1973 in which he concluded that the record would not sustain a

finding that either Bernard Lang Co Inc Lang a licensed ocean

freight forwarder acting solely in its role as a customhouse broker or

VikingImportrade Inc Viking a consignee ofthe shipments at issue

had violated section 16 First ofthe Shipping Act 1916 by obtaining

or attempting to obtain transportation by water for property at less

than the rates or charges which would otherwise be applicable

Hearing Counsel excepted to the Initial Decision while Lang and

Viking supported the Judge s position

Hearing Counsels exceptions generally fall into two categories

They are either 1 a recapitulation of arguments which we have

addressed ourselves to and answered in Ross Products A Division of

NMS Industries Inc and Taub Hummel Schnall Inc Possible

Violations of Section 16 First Paragraph Shipping Act 1916 16

F M G 333 1973 and Equality Plastics Inc and Leading Forward

ers Inc Possible Violations ofSection 16 FirstParagraph Shipping

Act 1916 Docket No 71 94 served November 29 1973 Denial of

Petition ofReconsideration served May 16 1974 and or 2 a reargu

ment of contentions already advanced before the Administrative Law

Judge and properly rejected by him in his Initial Decision Therefore

upon a careful review and consideration ofthe record in this proceed

ing as well as the exceptions and replies ofcounsel we conclude that

theAdministrative LawJudge s findings and conclusions with respect

1

18 F M C
2 FEDERAL MARI1 IME COMMISSION

thereto are proper and well founded and we accordingly adopt his

Initial Decision as olrown

TherejQfe it ordered That this proceediIg

be discontinued

By th Commission

SEAL 8 FRANCIS C HURNEY

Secretary

i

18 FM C
FEDERAL MARITIME COMMISSION

No 71 93

VIKING IMPORTRADE INC

AND BERNARD LANG CO INC

POSSIBLE VIOLATIONS OF SECTION 16

FIRST PARAGRAPH SHIPPING ACT 1916

Evidence insufficient to show knowing and wilful violation of section 16 First of the

Shipping Act 1916 by respondent Viking Importrade Inc in connection with

misdescriptions of various commodities on bills of lading and obtaining transporta

tion by water of some of those commodities at rates lower than rates otherwise

applicable

Evidence found insufficient to establish that Bernard Lang Co Inc violated section

16 First of the Shipping Act 1916 and thus continues to qualify to be licensed as

a freight forwarder

Lawrence 1 Drath for respondent Viking Importrade Inc

Bernard Lang for respondent Bernard Lang Co Inc

DonaldJ

Brunner and Joseph B Slunt as Hearing Counsel

INITIAL DECISION OF ASHBROOK P BRYANT

ADMINISTRATIVE LAW JUDGE 1

1 Pursuant to section 22 of the Shipping Act 1916 the Act the

Commission on December 1 1971 instituted this proceeding by issu

ance of an order directing that a proceeding be instituted to deter

mine whether respondent Viking Importrade Inc Viking and or

respondent Bernard Lang Co Inc Lang violated section 16 ofthe

Act by knowingly and willfully directly or indirectly by means offalse

classification or by any other unjust or unfair device or means ob

tained orattempted to obtain transportation by water ofproperty at

less than the rates or charges which would otherwise be applicable

The Commission s order further provided that a determination be

made whether because of alleged activities of respondent Bernard

Lang Co Inc said respondent continues to qualify to be licensed

as an ocean freight forwarder orwhether its license should be revoked

IThis decision became the decision of the Commission 8 12 74

3
4 FEDERAL MARITIME COMMISSION

I

i

or suspended pursuant to section 44 of the Act and sections 510 9 a

ofthe Commission sRules ofPractice and Procedure 46 CFR 510 9

Itwas alleged in the Commission s order that certain shipments con

signed to Viking during the period from August 2 1969 throug

December 29 1969 appeared to have been misclassified resulting i

the assessment of incorrect ocean freight charges

2 Hearing was held at New York N Y on May 9 1973

3 The bills oflading involved described the seven shipments as toy

ornovelties whereas the customs papers shippers invoices and pack

ing lists and inspections disclosed that the shipments were compose

ofcommodities other than toys ornovelties which in most cases wer

subject to higher freight rates The evidence adduced throughstipula

tion ofthe parties and from four witnesses and a number ofpapers an

documents establishes the following with regard to the seven ship

ments here involved The shipments in question were as follows

4 Sea Land Service Inc Sea Land Bill ofLading No 90543809

covered the shipment of 311 cartons listed on the bill of lading a

Toy from Kobe Japan to Elizabeth New Jersey This cargo wa

being shipped by the Oriental Merchandising Agency Osaka Japa

Oriental to Viking Importrade Inc Moonachie New Jersey Be

nard Lang Co Inc acted as the customhouse broker on behalf o

Viking The cargo consisted of items which were properly describe

on the commercial invoice The Consumption Entry filed by Lan

with the Bureau ofCustoms describedthe cargo as other illuminatin

articles non electric waxcandles notebooks pencils articles nspf o

brass rubberized linen cloth shopping bags handbags of veg fibe

articles of base metal and bamboo baskets

5 The shipment was collect and Lang paid the ocean freigh

charges for Viking The charges were based on the freight rate for 

shipment oftoys As a result ofan inspection ofthe cargo bySea Land

Viking was billed for additional freight charges in the amount o

72 85 based on a determination by Sea Land that the cargo shou

have moved atdifferent rates Viking by letter of December 5 196

challenged the freight classifications Sea Land applied to three ofth

items shipped namely that the northlite candle lamps should hav

moved as Lamps Lanterns Value under 200 per revenue ton a

38 75 per weight or measurement ton W1M instead of as Lamps

Lanterns Unitized at 43 25 S M the jockey shoehorns should hav

moved as Iron Steel Manufactures NOS at 46 25 W1M instead 

as Instruments at 54 00 W M and the garden tool sets should hav

moved as Tools Hand NOS Value under 400 per revenue ton 

36 00 W M instead of as Tools Hand NOS Value over 400 per rev

nue ton at 46 25 W1M Viking thus calculated the additional freigh

18 F M 
VIKING IMPORTRADE INC 5

due as 2129 but as Sea Land never confirmed this amount Viking

did not make any additional payment to Sea Land

6 Sea Land Bill ofLading No 905438502 covered the shipment of

275 cartons listed on the bill oflading as Toy from Kobe Japan to

Elizabeth New Jersey This cargo was being shipped by Oriental to

Viking and Lang acted as the customhouse broker onbehalfofViking

The cargo consisted ofitems which were properly described on the

commercial invoice The Consumption Entry filed by Lang with the

Bureau ofCustoms described the cargo as bamboo fruit baskets table

knives address books postcard stands boxes ofpapers pencils garden

tool sets articles for serving food canvas saddle bags and kerosene

lamps

7 The shipment was collect and Lang paid the ocean freight

charges for Viking The charges were based on the freight rate for a

shipment oftoys As a result of a review of the shipment Viking was

billed by Sea Land for additional freight charges in the amount of

46 35 based on a determination by Sea Land that the cargo should

have moved at different freight rates The additional freight charges

were paid by Viking

8 Sea Land Bill ofLading No 937 411723 covered the shipment of

270 cartons listed on the bill of lading as General Merchandise of

Japanese Origin Novelties Toys from Yokohama Japan to Eliza

beth New Jersey This cargo wasbeing shipped by Silva Wilson Co

Ltd Tokyo Japan to Viking and Lang acted as the customhouse

broker on behalf ofViking The cargo consisted ofitems which were

properly described on the commercial invoice The Consumption

Entry filed by Lang with the Bureau ofCustoms described the cargo

as metal ash trays toothpick holders trick brandy glasses candle

holders and salt pepper sets

9 The shipment was collect and Lang paid the ocean freight

charges for Viking The charges were based on the freight rate for a

shipment oftoys As a result ofan inspection ofthe cargo bySea Land

Viking was billed for additional freight charges in the amount of

62 95 based on a determination by Sea Land that the cargo should

have moved at higher freight rates Viking by letter ofFebruary 17

1970 challenged the freight classification Sea Land applied to one of

the items shipped namely that the trick brandy glasses should have

moved as Novelties at 36 00 W M instead of as glass manufacturers

NOS value under 500 per revenue ton at 4150 W M Viking thus

calculated the additional freight due as 48 82 and upon receipt of a

corrected freight bill paid this sum to Sea Land

10 Sea Land Bill ofLading No 905 401438 covered the shipment

of207 cartons listed on the bill oflading as toy from Kobe Japan

18 F M C
6 FEDERAL MARITIME COMMISSION

to Elizabeth New Jersey This cargo was being shipped by Orient

to Viking and Lang acted as the customhouse broker on behalf 

Viking The cargo consisted ofitems which were properly describe

on the commercial invoice The Consumption Entry filed by Lan

with Bureau ofCustoms describedthe cargo as shopping bags ofoth

materials wooden household articles baskets ofbamboo articles 

iron or steel and promenade bags

11 The shipment was collect and Lang paid the ocean freig

charges for Viking The charges were based on the freight rate for 

shipment oftoys As a result ofan inspection ofthe cargo by Sea Lan

Viking was billed for additional freight charges in the amount 

496 The additional freight charges were paid by Viking

12 Sea Land Bill ofLading No 905 404202 covered the shipme

of 104 cartons listed on the bill of lading as Toy from Kobe Japa

to Elizabeth New Jersey This cargo was being shipped by Orienta

to Viking and Lang also acted as the customhouse broker on beha

ofViking Thecargo consisted ofitems which wereproperly describe

on the commercial invoice The Consumption Entry filed by Lan

with the Bureau of Customs described the cargo as bamboo basket

articles of steel household implements of iron or steel and cotto

netting

13 The shipment was collect and Lang paid the ocean freigh

charges for Viking The charges were based on the freight rate for 

shipment of toys

14 Sea Land Bill of Lading 905 41092 covered the shipment o

1228 cartons listed on the bill of lading as Novelties Toys Earthen

ware Stoneware Ironstone Ware Bone China and Procelain Ware

from Nagoya Japan to Elizabeth New Jersey This cargo was bein

shipped by the Mogi Trading Co Ltd Nagoya Japan toViking an

Lang acted as the customhouse broker on behalfofViking The carg

consisted ofitems which were properly described on the commerci

invoice The Consumption Entry described the cargo as articles o

aluminum articles ofbase metal chrome plated ware wooden house

hold articles table knives cotton furnishings table forks plates earth

enware and bone china ware mugs procelain ware and sanitar

ware

15 The shipment was collect and Lang paid the ocean freigh

charges for Viking The charges were based on the freight rates for 

shipment of novelties toys stoneware ironstone ware bone china

procelain and earthenware

16 Sea Land Bill ofLading No 937 414890 covered the shipmen

of 534 cartons listed on the bill of lading as Wood Novelty from

Shimizu Japan to Elizabeth New Jersey The cargo was being

18 F M C
VIKING IMPORTRADE INC 7

shipped by Kurito Bros Co Ltd Shizuoka Japan to Viking and

Lang acted as the customhouse broker on behalf ofViking The cargo

consisted ofitems which were properly described on the commercial

invoice The Consumption Entry described the cargo as wooden

household articles glass containers household articles ofplastic arti

cles nspf of wood picture frames of wood and hand tools

17 The shipment was collect and Lang paid the ocean freight

charges for Viking The charges were based on the freight rate for a

shipment ofnovelties

18 The bills oflading for the above shipments were not prepared

by Viking or Lang but by the shipper or its agent in Japan Eabh bill

made reference to an attached sheet of marks and numbers which

consisted ofa description ofthe items being shipped together with the

number of cartons shipped

19 Lang is an ocean freight forwarder licensed under the Act

20 Lang is also a customs broker subject to the jurisdiction ofthe

Bureau of Customs Ithandles approximately 8 000 customs entries

per year Viking accounts for approximately 400 such entries Viking

is a very active importer covering a wide variety ofitems Bernard

Lang has been in ownership management ofvarious custom broker

age firms since 1951Lang was incorporated in July 1960

21 In the case of import shipments as contrasted with export

shipments which are handled by Lang as a licensed freightforwarder

the importer Viking in this case sends Lang the Documents

including the bill or bills oflading and the commercial invoice or

invoices Bernard Lang described the process on import shipments

Viking sends me the documents for incoming shipments Until I receive these

documents I have noknowledge that anything exists I don tknow goods that have been

otdered sic I don t know that they have been shipped I don t know that freight has

been gauged how ithas been described At no point prior to my receiving documents

from Viking am I involved in obtaining transportation by order in their behalf or

anybody s behalf

The sevenshipments from Viking were all handled inthe same manner Documents

came down to us Viking indicated on the document what they believed based upon

their knowledge of the commodity should be the applicable rate of customs duty

These are reviewed by my alBee changes that ought to be made are discussed with

Viking The duty is calculated the papers are presented to the United States Customs

together with the bill of lading as received from abroad and the customs entry which

I prepared in my office myolBce prepared

22 After the correct duty had been paid Customs issued a permit

and Lang sent it to the pier and a delivery order for the commodities

was given to Viking In each of the shipments Lang paid the ocean

freight charges in behalf of Viking based on the freight being

charged as indicated on the bill of lading Lang made no effort to

18 F M C
8 FEDERAL MARITIME COMMISSION

determine whether the correct ocean freight rate was being

charged and paid Bernard Lang testified that his firm which acts a

ocean freight forwarder on export shipments is familiar with freigh

rates from United States to Japan but would not have familiarity with

inbound freight rates from Japan to the United States which may b

quite different from the outbound rates

23 Bernard Lang differentiates sharply between his status and re

sponsibility as a customs broker and his duties and responsibilities a

freight forwarder under the Act He testified to his understanding o

the dual relationship

I ama customs broker and as customsbroker amsubject to the customs regulation

of the United States and whenever we are faced with a situation where the custom

regulations of the United States are at variance with the laws of another agency I a

bound to follow those of the customs regulations since I amlicensed by the Bureau o

Customs to act as a customs broker and nootheragency in the United States can licens

me to act as a customs broker other than the Bureau of Customs

24 Bernard Lang understands that as customs broker he was re

quiredto complywith all requirements ofother government agencie

that are specified in the customs regulations However he does no

have a

responsibility to verify the accuracy ofclassifications of com

modities and freight charges appearing on bills of lading covering

inbound shipments for which he acts as customs broker

25 As above stated Lang paid the freight on behalf of Viking i

each ofthe seven instances of shipment involved in this matter Wit

regard to the procedure involved in these payments Bernard Lan

testified as follows

Q By Mr Slunt In these specific instances do you know whether ornotSea Lan

released the cargo upon receipt of this delivery order

A Upon receipt of this delivery order and supporting documents yes sir

Q Sea Land would have released these specific shipments when they did receiv

these specific shipping orders and documents

A Not only would they but they did

Q What were the supporting documents that go along

A The original bill of lading

Q Any further documents

A Not to Sea Land other than the payment of the Ocean Freight

26 As above stated Viking is an importer of novelties and im

ports approximately 400 shipments of merchandise from the Or

ent each year The 400 shipments are made up of a wide variety o

items of merchandise which sell at retail in a price range of one t

two dollars

27 Viking prepares thousands ofpurchase orders which are sen

to the shippers of the goods With regard to the 55 purchase order

18 F M C
VIKING IMPORTRADE INC 9

involved in the seven shipments Viking s employees instructed the

shipper as follows

As to 17 such purchase orders declare and classify novelties

As to 17 such purchase orders declare and classify cheapest applicable

As to 3 such purchase orders declare and classify toys

As to 10 of such purchase orders declare and classify earthware

As to 7 such purchase orders declare and classify

As to one of such purchase orders declare and classify stoneware

28 Each ofthe seven bills oflading involved wasprepared inJapan

either by the shipper orViking s buying agent Similarly the rating of

the cargo was done in Japan by employees of Sea Land the carrier

Each bill oflading made reference to an attached sheet which con

tained a description ofthe items being shipped

DISCUSSION AND CONCLUSION

Lang contends that its sole responsibility with regard to the seven

shipments involved was to clear the shipment through customs in

accordance with the Customs laws and regulations Lang further

asserts that it wasnot authorized orempowered to obtain transporta

tion by water for the shipments herein involved could not do so and

indeed did notdo so The first knowledge Land had as to the shipments

was the receipt of documents for customs clearance The method of

transportation and the carrier had previously been selected The bills

of lading had been prepared including the commodity descriptions

appearing thereon and the freight rates assessed prior to Lang even

being aware that these shipments existed According to Lang the facts

prove beyond a doubt thatLang wasin nomannerinvolved inobtain

ing or attempting to obtain transportation by water for the property

subject to these proceedings Lang therefore could not knowingly and

willfully have been a party to obtaining such transportation at less than

the rates orcharges which would otherwise be applicable and hence

could nothave violatedsection 16 oftheAct and did notdo so

This jurisdictional argument and a related argument byViking may

be dealt with quickly in view ofthe Commission s very recentholding

in Equality Plastics Inc and Leading Forwarders Inc Docket No

71 94 served November 29 1973 The facts in thatcase wereinmany

respects identical or closely similar to those here involved There as

here Leading the customs broker freight forwarder had no contact

with the shipment except through the documents in preparation of

the Consumption Entry etc in each instance paying the freight ap

pearing on the bills oflading in other instances the shipments were

prepared The Commission said Report p

8

18 FM C
10 FEDERAL MARITIME COMMISSION

We think it clear that the second paragraph of section 22 empowers the Commissio

to concern itself with all violations of the Shipping Act 1916 we have jurisdiction t

investigate violations of section 16 by personsor entities named inthat section whethe

or not they are other persons subject to the Act

The argument also made by Lang in this case that because Leading

had merely performed paper work to get the shipment through cus

toms it could not be charged with obtaining transportation by water

within the meaning of section 16 was rejected The Commission sai

p

13

the legislative purpose behind the 1936 Amendment section 16 First was 

extend coverage of the Act beyond carriers and to any party who participates in th

transaction The virtually all inclusive language of the section makes this abundant

clear it provides

That it shall be unlawful for any shipper consignor consignee forwarder broker 

otherperson orany officer agent oremployee thereof knowingly and wilfully direct

or indirectly by means of false billing false classification false weighing false repo

ofweight orby any otherunjust orunfair device ormeans to obtain orattempt to obta

transportation by water of property at less than the rates orcharges which wou

otherwise be applicable Emphasis added

Inview ofthis language therecan no longer be doubt if indeed an

such doubt previously existed that section 16 First was intended t

and does cover transactions such as those involved in this case by an

person who participates in the transaction and even though suc

participation merely has to do with necessary paper work ofthe kin

here involved

The proper standard to determine whether in the circumstances 

this case a party has knowingly and wilfully violated section 16 

found primarily in Misclassification of Tissue Paper as Newspri

Paper 4 F M B 483 486 1954 wherein it was stated

T he phrase knowingly and willfully means purposely orobstinately or is designe

to describe a carrier who intentionally disregards the statute or is plainly indifferent 

its requirements We agree that a persistent failure to inform or even to attempt 

inform himself by means of normal business resources might mean that a shipper 

forwarder was acting knowingly and willfully in violation of the Act

In Equality Plastics the Commission elaborated p

14

We think the term plainly indifferent as used by ourpredecessors in Misclasslficatio

of Tissue Paper supra means something more than casual indifference and equat

with a wantnn disregard from which an inference can be drawn that the conduct w

in fact purposeful a standard somewhat analogous to the tort concept of gross neg

gence

The key is whether respondents were in possession of sufficie

facts to raise a doubt as to the accuracy of the bills oflading descri

tions Equality Plastics and Leading Forwarders supra

18 FM 
VIKING IMPORTRADE INC 11

Under the test laid down by the Commission in its most recent

pronouncement on the subject it does not appear that Lang can be

found to have violated section 16 ofthe Act in the transactions here

involved Lang can only be charged with failure to make diligent

inquiry into the correctness ofthe freight rates which it says it had no

reason to make and indeed could not properly make underthe regula

tions ofthe Customs Bureau However that may be the evidence in

any event falls short ofestablishing gross negligence on Lang spart

Taking into account the instructions given by Viking to its agent in

Japan and the circumstances surrounding these shipments it appears

possible thatViking could reasonably have supposed that the marks

and numbers placed on the bills oflading and attachments thereto

were a sufficient augmentation ofthe descriptions Toy Novelties

etc as to have informed the carrier Sea Land ofthe actual nature of

the specific commodities and that as a result the commodities had

been ratedand the freight gauged accordingly Also the many differ

ent inexpensive novelty items imported by Viking and the wide vari

ety ofpossible descriptions involved make some latitude ofdescription

by general class convenient and perhaps justifiable on the face ofthe

bill oflading

It may be readily conceded that Viking s handling of these ship

ments was somewhat lax casual and negligent However if we are to

apply the same standard ofaccountability to Viking as we do to Lang

and it seems equitable that we should in all the circumstances of

this case including the fact that some ofthe misclassifications carried

a higher rate to be charged and paid than a more accurate classifica

tion would have required it appears that inadvertent error loose

procedures and other types of ordinary negligence as opposed to

gross negligence may account for the classification errors in

volved This may be particularly true as it has not been shown that

such misclassification was persistent or was involved in more than

a minimal number ofthe large amount ofcommodity shipments han

dled by Viking Nor does payment by Viking of a small amount of

additional freight with regard to threeofthe seven misclassified ship

ments alter the result There is no dispute that some of the items

involved were misclassified In some instances the freight charged for

a particular item was too high in some too low The fact that when

the deficiencies were brought to its attention Viking paid additional

freight in those cases where it acknowledged that additional freight

was due does not establish that itwilfully and knowingly violated the

Act

Accordingly it is found that the record does not establish the degree

of negligence and culpability on the part of either respondent to

18 FM C
12 FEDERAL MARITIME COMMISSION

establish violation of section 16 First of the Act Respondent Lang

continues to qualify to be licensed as a freight forwarder pursuant to

section 44 of the Act

The proceeding should be discontinued

5 ASHBROOK P BRYANT

Administrative LawJudge

WASHINGTON D C

December 13 1973

18 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 73 24

AGREEMENT No T 2635 2 PACIFIC MARITIME

ASSOCIATION FINAL PAY GUARANTEE PLAN

ADOPTION OF INITIAL DECISION

August 12 1974

This proceeding is before us on exceptions filed by Wolfsburger

Transport Gesellschaft m b H to the Initial Decision of Administra

tiveLawJudge Ashbrook P Bryant served February 6 1974 inwhich

he found that

Agreement No T 2635 2 does not give any undue or unreasonable preference or

advantage to any other cargo over automobiles in violation of section 16 of the Act

nor is the assessment being charged automobiles an unreasonable practice related

to receiving handling storing or delivering property in violation of section 17 of

the Act

Agreement No T 2635 2 is notunjustly discriminatory or unfair as regards the car

riage ofautomobiles and accordingly may be approved pursuant to section 15 of the said

Act

As they relate to Judge Bryant s conclusions oflaw the exceptions

merely constitute areargument ofcontentions already advanced be

fore the Administrative Law Judge and properly considered and dis

posed ofby him in his Initial Decision

Exceptions were also taken to certain findings of fact made by the

Administrative Law Judge Without addressing ourselves to the cor

rectness ofthese findings we do find them to be of minimal impor

tance to the ultimatedisposition ofthe issues inthis proceeding Many

ofthe discrepancies alluded to by Complainant are so small as to defy

significance and others are simply not material or relevant to the

ultimate conclusions reached

Thus upon careful consideration of the record exceptions briefs

and argument ofcounsel we find that the ultimate conclusions ofthe

Administrative Law Judge are proper and well founded and we ac

cordingly adopt the Initial Decision as our own

13

18 F M C
14 FEDERAL MARITIME COMMISSION

Therefore it is ordered That Agreement T 2635 2 is approved pur

suant to Section 15 of the Shipping Act 1916

It is further ordered That this proceeding be discontinued

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

Commissioner Clarence Morse not participating
FEDERAL MARITIME COMMISSION

No 73 24

AGREEMENT No T 2635 2 PACIFIC MARITIME

ASSOCIATION FINAL PAY GUARANTEE PLAN

Agreement No T 2635 2 for assessment of PMA members to fund PMA ILWU Pay

Guarantee Plan found not to subject automobiles to any undue or unreasonable

disadvantage nor to involve any unreasonable practice related to receiving han

dling storing or delivering property in violation of sections 16 and 17 of the Act

Said agreement is found not to be unjustly unfair or discriminatory and may be

approved pursuant to section 15 of the Act

Edward D Ransom and Robert Fremlin for Pacific Maritime Associ

ation and its members

Herbert Rubin Cecelia H Goetz and Alan A D Ambrosio for

Wolfsburger Transport Gesellschaft m b h

Donald J Brunner Paul J KaUer and David Fisher as Hearing

Counsel

INITIAL DECISION OF ASHBROOK P BRYANT

ADMINISTRATIVE LAW JUDGE 1

Background

1 On May 4 1973 the Commission by order instituted this proceed

ing pursuant to sections 15 and 22 of the Shipping Act 1916 the Act

to determine whether because of the assessment formula contained

therein and its application to automobiles Agreement No T 2635 2

Pacific Maritime Association PMA Final Pay Guarantee Plan the

agreement filed December 15 1972 for approval pursuant to section

15 should be approved disapproved or modified The agreement if

approved would finalize the assessment formula used in the Interim

Pay Guarantee Plan which was first approved by the Commission on

May 23 1972 and then later extended The Interim Plan has allowed

This decision became the decision of the Commission 8 12 74

l

Agreement No T 2635 was orjginall due to expjre on September 30 1972 By order of the Commission served

September 29 1972 the agreement was extended until December 28 1972 by order served Decemher 27 1972

the agreement was extended until June 29 1973 by further order on May 3 1973 it was extended to December

31 1973 and by order of December 27 1973 the agreement was extended until such time as the Commission

approves disapproves or modifies the agreement

11






jjj
j








jj

jjjj
jjjjj
j




FEDERAL MARITIME COMMISSION

18 FMC

41

SPECIAL DOCKET No 463

MAFATLAL LTD

v

SCINDlA STEAM NAVIGATION CO LTD

NOTICE OF ADOPTION OF INITIAL DECISION AND ORDER

PERMITTING REFUND OF CHARGES

August 13 1974

Noexceptions having been taken to the initial decision in thispro

ceeding and the Commission having determined not to review same

notice is hereby given that the initialdecision became the decision of

the Commission on August 13 1974

Itis ordered That applicant is authorized to refund 69 26 ofthe

charges previously assessed Mafatlal Ltd

It is further ordered That applicant shall publish promptly in its

appropriate tariff the following notice

Notice is hereby given as required by the decision inSpecial Docket463 that effective

April 27 1974 for purposes of refund or waiver of freight charges on shipments which

may have been shipped from India during the period from April 27 1974 throughMay

10 1974 the rate on Jute Bagging for Cotton Bale Covering is 35 25 CBM subject

to all applicable rules regulations terms and conditions of said rate and this tariff

Itisfurther ordered That refund ofthe charges will be effectuated

within 30 days ofservice of this notice and applicant shall within five

days thereafter notify the Commission of the date and manner of

effectuating the refund

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
43

FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 463

MAFATLAL LTD

v

SCINDIA STEAM NAVIGATION CO LTD

ScindiaSteam Navigation Co Ltd permitted to refund a portion of the freight charges

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE 1

ScindiaSteam Navigation Company Ltd has requested permission

to refund a portion ofthe freight charges on a shipment ofjute bag

ging for cotton bale covering under a bill oflading dated April 27

1974 Scindia booked a shipment of92 3523 CBM ofjute bagging for

cotton bale covering from Calcutta India to SanFrancisco California

Through error Scindia charged a rate of 36 00 per cubic bale meter

Effective March 15 1974 there was a general increase in rates of

12 5percent The rate in effect prior to the increase was 3125 per

cubic bale meter As increased it would be 35 25 per cubic bale

meter Due to clerical error a rate of 36 00 per cubic bale meter was

instead published in the tariff Therefore the rate applicable at the

time ofthe shipment under The ScindiaSteam Navigation Co Ltd

Tariff F M G No 13 East Coast of India Bangladesh to U S

Canadian Pacific Coast Ports page 21 effective March 15 1974 was

36 00 per cubic bale meter This rate yielded a total freight for the

shipment of 3 324 68 The proper rate of 35 25 would have yielded

a total freight of 3 255 42

Authority is sought to refund the difference between the applicable

rate and the rate charged or 69 26 Scindiaalleges therewasno other

shipments of the same or similar commodity moved during approxi

mately the same period oftime at the rate applicable at the time of

the shipment here involved

Section 18 b3 of the Shipping Act 46 USC 817 as amended by

lThis decision became the decision of the Commission 8l3 74

18 FM C
44 FEDERAL MARITIME COMMISSION

Public Law 90298 and as further implemented by Rule 

Special Docket Applications Rules of Practice and Proced

46 CFR 502 92 is the applicable law Briefly it provides that 

Federal Maritime Commission may in its discretion and for g

cause permit a common carrier by water in the foreign commerc

the United States to refund a portion of the freight charges colle

from a shipper or waive the collection of a portion of the cha

from a shipper where there is an error in a tariff of a clerica

administrative nature and such refund or waiver will not result 

discrimination among shippers Furthermore prior to applying 

such authority the carrier must have filed a new tariffwhich sets fo

the rate onwhich such refund orwaiver would be based The app

tion for refund or waiver must be filed with the Commission wi

one hundred and eighty days from the date of shipment All th

requirements have been met

Finally the carrier must agree that if permission is granted 

appropriate notice will be published in its tariff or such other s

taken as may be required to give notice of the rate on which s

refund or waiver would be based

Applied to the instant situation it is found that refund of the dif

ence between the applicable rate and the rate charged may be 

lowed 2

Accordingly respondent Scindia Steam Navigation Co L

is hereby permitted to refund the sum of 69 26 which represents 

difference between the rate of 35 25 per cubic bale meter and 

rate of 36 00 per cubic bale meter The notice of refund shal

published in Scindia s tariff

WASHINGTON D c

July 18 1974

S JOHN E COGRAVE

Administrative Law Judge

IHowailanAgrlcidtJ FerUlizer Co Ltd Q Micronesia Interocean Line Inc Special Docket No 404 12 F 

322 1969 U S Dspartmtmt ofAgriculture v Trvpwood Linea Special Docket No 449 10 SRR 1080 1972 

u S Department 0Agriculture v Waterman Stumahlp CorporaHon Special Docket o 451 13 SaR 1540 1

18 FM 
FEDERAL MARITIME COMMISSION

DOCKET No 73 74

MODIFICATION OF ARTICLE 4 AGREEMENT No 3302

THE ASSOCIATION OF WEST COAST STEAMSHIP COMPANIES

18 FM C

45

Evidence adduced is insufficient to renderjudgment that would modify the unanimity

voting provision in Agreement 3302 of the Association of West Coast Steamship

Companies ASSWESTCO as itrelates to decisions affecting rates

Proceeding isreferred to the Office of Administrative Law Judges for hearing and the

development of a record adequate to the formulation of a reasoned decision

DonaldJ

Brunner and Stephen T Rudman Hearing Counsel

REPORT

BY THE COMMISSION Commissioners Barrett Hearn and Morse

Chairman Bentley and Vice Chairman Day concurring

Decided 9 2374

By Order served November 15 1973 the Commission pursuant to

sections 15 and 22 of theShipping Act 1916 directed the Association

of West Coast Steamship Companies ASSWESTCO to show cause

why Article 4 of ASSWESTCO Agreement No 3302 should not be

modified to reduce the voting requirements in any decision affecting

rate changes from unanimity to something less than unanimity such

as two thirds or three fourths This action was based upon informa

tion on file with the Commission indicating that member lines of

ASSWESTCO have attempted in the past to reduce such voting re

quirements in the conference agreement from unanimity to two

thirds majority vote However because the institution of such a

change itselfrequires unanimous approval ofthe member linesunder

Article 4 of the ASSWESTCO agreement now in effect such efforts

have apparently been thwarted by the lone dissenting vote of one

member line Flota Mercante Grancolombiana S A Grancolom

biana

The only response filed pursuant to the Commission s Order to

Show Cause was a Memorandum of Law submitted by Hearing
46 FEDERAL MARITIME COMMISSION

Counsel Noneofthe respondents submitted affidavits memoranda 

requests for hearing as permitted under the Order to Show Cau

BACKGROUND

The unanimous voting procedure at issue was introduced at 

time ASSWESTCO was organized in 1934 and has been retai

through the years It is clearfrom information before the Commiss

however that nine of the l0 ASSWESTCO member lines may n

wish to amend the Article 4 unanimity provision and adopt amajo

vote provision but are being effectively blocked in such efforts 

Grancolombiana

The memberlines positions were lastpresented to the Commiss

on November 19 1973 when ASSWESTCO submitted to the C

mission a

copy ofa letter mailed to its memberlines on that same 

which addressed itself specifically to the Commission Order It r

in part

i

1

Since the Conferences position has been clearly stated to the FMC it Is the Chairm

position that further clarification from his office Is unnecessary Should any membe

have changed their position since the last voting on this matter we ask that the C

man be notified at once Should any memberline desire that the Chairman subm

affidavit please so Inform and a special meeting will be held to discuss this matte

This informal letter was the only correspondence received by 

Commission followingissuance ofits Order to Show Cause from eit

ASSWESTCO or its member lines prior to the December 17 19

deadline for the filing of responses thereto

Hearing Counsel in their Memorandum of Law submitted in 

sponse to the Order argued that the ability of one member line 

utilize the unanimity rule ofArticle 4 to frustrate the wishes ofalm

all of the other member lines of ASSWESTCO is clearly cond

detrimental to the commerce of the United States They theref

urged the Commission to modify Agreement No 3302 to prov

for a two thirds majority for any decision taken by members 

ASSWESTCO with regard to rate changes

Not until January 17 1974 did Grancolombiana submit a lette

the Commission in which it suggested surprise at the recommen

tion of Hearing Counsel and reiterated its opposition to any ame

ment of Article 4

1i

DISCUSSION AND CONCLUSIONS

The Commission considers it most inappropriate that ASSWEST

and its member lines failed to respond in this proceeding under 

18 FM 
MODIFICATION OF ARTICLE 4 47

procedures set forth in the Order to Show Cause While we presume

that all Respondents felt that their positions on the matter at issue had

previously been adequately presented albeit informally to the Com

mission with no need for restatement the fact remains that there was

a breakdown in complying with a properly issued Commission Order

in a proceeding undertaken primarily to investigate and protect Re

spondents individual and collective interests While the Commission

might attempt to render a judgment in this case based solely on the

documentary evidence now available to it we believe that due pro

cess considerations require that this proceeding be assigned to the

Office of Administrative Law Judges for hearing Only through the

development of a complete record with full opportunity for parties to

be heard will the best interests ofthe Association the individual mem

ber lines and the public be served

Therefore pursuant to its authority under section 15 ofthe Shipping

Act 1916 the Commission here by refers this proceeding to the Office

ofAdministrative Law Judges for hearing to determine whether Arti

cle 4 of ASSWESTCO Agreement No 3302 should be modified to

provide for less than unanimous voting in any decision affecting rates

An appropriate order will be entered

SEAL S FRANCIS C HURNEY

Secretary

Chairman Helen Delich Bentley and Vice Chairman James V Day

concurring

Although we are of the opinion that the documentary evidence

available to the Commission in this case could be determined as suffi

cient to render judgment we defer to our colleagues in the referring

of this matter to the Office of Administrative Law Judges

18 FM C
FEDERAL MARITIME COMMISSION

DOCKET No 7374

MODIFICATION OF ARTICLE 4 AGREEMENT No 3302

THE ASSOCIATION OF WEST COAST STEAMSHIP COMPANIES

ORDER

I

This proceeding wasinitiated by the Federal Maritime Commissio

determine inter ilia whether Article 4 of Agreement No 330

Association of West Coast Steamship Companies ASSWEST

should be amended to providefor a less than unanimous vote for 

decision effecting rate changes The Commission has fully conside

the matter and has this date made and entered of record a Re

containing its findings and conclusion thereon which Report is her

referred to and made a part hereof The Commission found that 

record in this proceeding was inadequate to formulate a fair 

reasoned decision

Therefore For the reasons enunciated in said Report

Itis ordered That Docket 7374 is hereby referred to the Offic

Administrative Law Judges for hearing and the development 

recordadequate to determine whether modificationis necessary of

unanimity provision of Article 4 ASSWESTCO Agreement No 33

as it relates to decisions effecting rates

Itis further ordered That the presiding Administrative Law Ju

shall based on his findings of fact and conclusions of law issue 

Initial Decision that determines what modification ifany is neces

regarding the unanimity provision at issue

Itis further ordered That all member lines of ASSWESTCO s

be named respondents in this proceeding

By the Commission

S FRANCIS C HURNEY

Secretary

48

18 F 
FEDERAL MARITIME COMMISSION

No 7230

COMMODITY CREDIT CORPORATION AND UNITED

STATES AGENCY FOR INTERNATIONAL DEVELOPMENT

18 F M C

49

v

LYKES BROTHERS STEAMSHIP CO INC ET AL

NOTICE OF ADOPTION OF INITIAL DECISION

October 31 1974

No exceptions having been filed to the initial decision ofthe Admin

istrative Law Judge in this proceeding and the Commission having

determined not to review same notice is hereby given that the initial

decision became the decision ofthe Commission onOctober 31 1974

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 7230

COMMODITY CREDIT CORPORATION AND UNITED

STATES AGENCY FOR INTERNATIONAL DEVELOPMENT

v

LYKES BROTHERS STEAMSHIP CO INC ET AL

A warrisk surcharge on relief shipments to Lebanese ports was notviolative of sect

15 16 and 17 because transportation factors such as risk and port congestion w

present

Barry D Hersh for complainants

Edward S Bagley for respondents Gulf Mediterranean Ports C

ference Lykes Bros Steamship Co Inc and Hellenic Lines Ltd

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE 1

This complaint proceeding is before me on a motion for summ

judgment filed by respondents Lykes Bros Steamship Co Inc H

lenic Lines Ltd and the Gulf Mediterranean Ports Conference T

case arose from a complaint filed by the Commodity Credit Corpo

tion CCC and the Agency for International Development AID 

against the North Atlantic Mediterranean Freight Conference 

its member lines the respondents already noted above and the in

pendent lines D B Turkish Cargo Lines and Jan C Uiterwyk C

The complaint as amended charges respondents with violations 

sections 15 16 17 and 18 b 5 ofthe Shipping Act 1916 46 U S 

814 815 816 and 817 because of their imposition of a war 

surcharge on shipments to Lebanese ports The period involved 

from November 22 1969 through February 1973 Reparation in 

amount of 91 080 14 was sought by complainants

CCC and AID are charged with the responsibility for shipping re

IThis decision the decision of the Commission 10 31 74

llAID and CCC are sometimes collectively referred to herein as the Government

50

18 F M 
COMMODITY CREDIT v LYKES BROTHERS S S COMPANY 51

cargoes as part of programs under Title IIof Public Law 480 83rd

Congress 68 Stat 457 7 U S C 1721 et seq and the provisions of

the Foreign Assistance Act of 1961 as amended 75 Stat 424 22

U S c 2151 2407 In discharging that responsibility complainants

use the services of the respondents

Respondent North Atlantic Mediterranean Freight Conference

serves ports in the North Atlantic Hampton Roads Eastport Range

and ports in the Mediterranean the Sea of Marmara the Black Sea

and theAtlantic Coast ofMorocco Itdoes not serve portsin Spain and

Israel Respondent Gulf Mediterranean Ports Conference serves

ports in the South Atlantic Gulf ofMexico Range Cape Hatteras to

Brownsville and ports in the Mediterranean including the Gulf of

Taranto the Adriatic Sea the Black Sea and the Atlantic Coast of

Morocco to Port Said inclusive It does not serve ports in Spain

Before proceeding to the facts such as they are some clarification

ofthe current status of the respondents and the issues in the case is

necessary

The NorthAtlantic Mediterranean Freight Conference is no longer

a party to the proceeding their motion to be dismissed as a

party

having been previously granted At the hearing complainants moved

the dismissal of D B Turkish Cargo on the ground that they had

examined the material furnished on discovery and had concluded that

the surchargeofD B Turkish wasreasonable and further proceedings

against D B Turkish were unwarranted Action on the motion was

withheld pending decision on the motion for summaryjudgment and

the motion is hereby granted

Complainants remaining allegations under 18 b 5 have now be

come moot Upon an earlier motion that part ofthe complaint which

sought reparation under section 18 b5 wasdismissed on the ground

thatuntil a rate has been declared unlawful by the Commission under

section 18b 5 no reparation can be awarded on the basis ofthatrate

Insofar as the respondents not dismissed the ruling left complainants

free however to seek disapproval ofthe surcharge under 18b 5 As

noted this course has also become moot as the challenged surcharges

were at the time of the hearing and are no longer in effect and any

determination of their validity under section 18 b 5 would be aca

demic See Rates Hong Kong United States Trade 11 F M C 168

1967 Accordingly so much of the complaint as alleges violations of

section 18 b 5 is hereby dismissed There remain then the asserted

violations of sections 15 16 and 17 of the Act

Finally complainants assert thatUiterwyk is in default for failure to

answer the amended complaint and should be directed to pay the

reparation requested In view of the history of the attempted settle

18 FMC
52 FEDERAL MARITIME COMMISSION

ment of the complaint by the Government and Uiterwyk the p

longed and confused history of the case and the disposition of 

proceeding herein it would be unfair to require Uiterwyk to p

reparation

As best as they can be reconstructed from the case put in by 

Government the undisputed facts are as follows

During the period in question respondents imposed on Lebane

ports awar risk surcharge which ranged from 3 percent to 15 perce

According to complainants the revenue generated by the surcha

greatly exceeded the respondents costs While a surcharge was 

posed on shipments to Lebanese ports none was imposed on sh

ments from Lebanese ports to U S ports

During the period here in issue respondents Lykes and the Gu

Mediterranean Ports Conference did not impose any war risk s

charges on shipments to Israel despite the fact according to comp

nants that the cost of war risk insurance was higher to Israeli po

than to Lebanese ports The only surcharges imposed by Lykes 

shipments to Israeli ports were those assessed when Lykes vess

experienced prolonged delays in those ports

No war risk surcharges were imposed by other carriers or conf

ences on shipments from the Great Lakes and Pacific Coast ports 

Lebanon despite the alleged fact that voyages from those ports 

origin experienced no less hazards and risks than vessels moving i

Lebanese and Israeli waters from United States Gulf ports

Complainants dispute the surcharge on some forty five voyages 

respondents Uiterwyk Lykes and Hellenic from U S Gulf to Beir

Lebanon

DISCUSSION AND CONCLUSIONS

Agood part of the Government s argument centers around wha

conceives to be the paramount issue in this case ie whether a s

charge must reflect the actual cost of the added expenses incurr

by carriers as a result of war or warlike conditions This argume

unfortunately is directed to the question of whether the surcharg

are or were so high or so low as to be detrimental to the commer

of the United States within the meaning ofsection 18b 5 This iss

has already been dismissed as moot and the Government s argume

that some level ofsurcharge still exists albeit not necessarily the sa

level as before will not resurrect it Complainants would invalida

any war risk surcharge which did not exactly match the cost of t

premiums for the war risk insurance Obviously then an entirely n

set of facts is necessary before any decision can be made as to t

18 F M 
COMMODITY CREDIT v LYKES BROTHERS S S COMPANY 53

Governments

theory as it applies to the current surcharges if any

and whatever their level may be

The Government would declare the surcharge unlawful under sec

tion 16 because

The collection of Lebanese warrisk surcharges against complainants and other persons

unreasonably prejudiced these persons through the payment of money for this item

since persons located in Beirut Lebanon moving cargo to the United States persons in

Canada moving cargo to Beirut persons in the United States Great Lakes moving cargo

to Beirut and persons in the United States WestCoast moving cargo to Beirut werenot

burdened with the payment of monies for a Lebanese war risk surcharge

Conversely shippers from the Great Lakes Canada and the West

Coast are unduly preferred by the Gulf to Beirut surcharge At the

same time and for much the same reason the Government argues that

the surcharge violates section 17

To some extent complainants misunderstand the law ofpreference

prejudice and discrimination as it exists under the Shipping Act To

take first preference and prejudice under section 16 a

competitive

relationship is necessary in most cases North Atlantic Mediterranean

Freight Conference Rates on Household Goods 11 F MG 202

1967 In that case the Commission said

This prohibition against undue orunreasonable preference orprejudice is designed to

deal with two or more competing shippers receiving different treatment which is

notjusti6 ed by differences in competitive ortransportation conditions The classic case

wouldbewhere shippers at A and B arecompetitive in a common market at C the line

hauls from A to Band C arethe same and the same competitive influences applyto both

The section 16 is aimed at that favoritism by carriers which enables a

shipper to

reach a market and sell his goods therein at a lower rate than his competitors

Citations omitted 11 FM G at 209 210

By the admission ofcomplainants own witness the shipment here

in question did not move in competition for markets with any other

shipments from any other areas Thus the seemingly essential compet

itive relationship is missing

The Government however challenges the need for competition

citing the case of Valley Evaporating Co v Grace Line Inc 14

F M C 16 1970 in which the conference in revising its tariff inad

vertently eliminated a commodity which under the conference s

own criteria should have been retained The inadvertence resulted

in a higher rate to complainant In finding a violation of section 16

the Commission found no competitive relationship was necessary

The retention of commodity rates was based upon a tonnage crite

ria aIl commodities moving in excess of a stated number of tons

were entitled to the retention of a commodity rate Once the crite

ria was established a simple mechanical or mathematical exercise

18 FM C
54 FEDERAL MARITIME COMMISSION

was all that was necessary to compile the list of commodity rat

and as the Commission said

At this point the single question involved was whether a given commodity moved 

sufficient volume or not Questions as to the characteristics inherent in the partic

commodity involved were irrelevant as well as questions of whether the partic

commodity competed with any other commodity Thus as we stated inInvestigatio

Free Time PracticesPort of San Diego 9 FM C 525 547 1966 the equality 

treatment required insituations of this kind is absolute and not conditioned on s

things as competition 14 FM C at 22

Thus as the Supreme Court said in Volkswagenwerk v FM C 3

U S 261 at 279 the Commission has often found violations ofsect

16 without a competitive relationship in cases not involving freig

rates and the particularized economics that result from avessel s fin

cargo capacity But is this such a case In Violations ofSectio

14 16 17ofthe ShippingAct NonassessmentofFuel Surcharges 

F M C 92 1972 a case not cited by complainants the Commiss

said at page 98 a surcharge is not geared to either transportati

factors or the differing characteristics of commodities since it is i

posed on each and every ton ofcargo regardless of the commodity 

length of voyage As will be noted later that case and this one 

distinguishable on the nature of the surcharges involved There 

moreover a second factor which renders the case inapplicable

In the Fuel Surcharge case supra it was found that the Americ

Hag carriers who transported U S military cargo had been assess

fuel surcharges on commercial cargo but not on their military car

ings Thus while no competitive relationship was necessary anoth

element essential to a

finding ofpreference orprejudice was prese

the preference and prejudice stemmed from a common sour

That is the same carriers moving the commercialcargoes wererespo

sible for the alleged preference offailing to assess the fuel surcharg

onmilitary cargoes This is yet another essential ingredient in findi

unlawful preference orprejudice As the Supreme Court said in Tex

Pacific Railroad Co v U S 269 U S 627

preference orprejudice can be found only by comparison of two rates If th

are the rates of one carrierto point A and that of another to point B while a relations

of one to the other may be determined neither the first northe second carrier alo

can be held to have created the relationship Assuming neither rate is unreasonable 

one carrier cannot be compelled to alter its rate because the other s is higher or low

for the same service A carrier or group of carriers mustbe the common source of 

discrimination must effectively participate in both rates if an order for correction 

the disparity is to run against both of them

Complainants assert that on shipments made by them from U 

Great Lakes and Pacific Coast ports to Beirut on conference and ind

18 FM 
COMMODITY CREDIT v LYKES BROTHERS S S COMPANY 55

pendent carriers no war risk surcharges were imposed Respondents

point out that none ofthem are members ofeither the Great Lakes

or Pacific Coast Conferences in question and thus they could not be

the common source ofsuch alleged preference or prejudice

As for shipment from Beirut to U S ports on which no surcharge

was imposed a somewhat different problem is posed In the Fuel

Surcharge case supra the Commission was dealing with an across

the board uniform surcharge necessitated by the increased cost in

bunker fuel Insuch a case the Commission found no transportation

factors or differingcargo characteristics wereinherent in the appli

cation ofthe surcharge Thus having found unequal application there

was under the prevailing precedent no need for anything more to

establish the violation A different situation exists here

Although denominated a war risk surcharge and indeed the ele

mentofriskplayed a part in the decision to impose the surcharge port

congestion was a large factor in the surcharge at Beirut Sometimes

respondents had to make double calls at Beirut to effectuate delivery

For example a vessel would call as regularly scheduled at Beirut but

due to congestion the vessel would be given a number the vessel

would then call at other Mediterranean ports returning at its newly

appointed time for discharge No comparable situation existed on the

inbound leg ofthe voyage An additional transportation factor was the

need to maintain separate fleets for service to Arab ports and for

service to Israeli ports Both these factors involved additional expense

My reading ofthe FuelSurcharge case supra would not extend its

rationale and holding on section 16 to the situation involved here

Transportation factors are indeed present here and because they are

it seems to methat the Government must show something more than

the absence of a

surcharge on shipments from Beirut to U S ports

they must show a competitive relationship from which the failure to

impose the surcharge has harmed them

Finally complainants assert onbrief that nowar risk surcharge was

assessed on cargoes shipped from U S Gulf ports to Israeli ports

However the record clearly demonstrates complainants were aware

that there was a surcharge to Israeli ports denominated simply as

Israeli surcharge Apparently complainants point is that the sur

charge was primarily for congestion and therefore could not have

been a war risk surcharge As already noted one ofthe products of

the hostilities was port congestion as indeed respondents argue In

this case the validity of the surcharge cannot depend on so slender a

reed as its appellation Moreover by simply denominating it as a

surcharge without any qualifier the surcharge could be war risk as

well as congestion neither orboth That such transportation factors

18 FM C
56 FEDERAL MARITIME COMMISSION

as would take it out from under the Fuel Surcharge case supra are

present here is obvious and complainants have not demonstrated the

requisite relationship to establish a violation of section 16

For the foregoing reasons complainants allegation that respond

ents have violated section 16 is dismissed

The Government based on the same facts as they considered appli

cable to a violation of section 16 also charge respondents with a

violation of section 17 of the Act Complainants charge that because

respondents did not impose a surcharge 1 from the Great Lakes and

Canada to Beirut 2 from the Pacific Coast to Beirut 3 from Beirut

to U S Gulf ports and 4 from U S ports to Israeli ports they have

unjustlydiscriminated against complainants in violation of section 17

In the Household Goods case supra the Commission held that in

order for discrimination to exist under section 17 there must be

two shippers oflike traffic overthe same line between the same points

under the same circumstances and conditions but who are paying

different rates 11 F MC 202 at 312 Patently in none ofthe asserted

instances of discrimination can this situation be found Accordingly

the alleged violation of section 17 is dismissed

Finally complainants charge a violation of section 15 of the Act

However complainants sole argument on this issue consists of the

final statement in their brief that

In addition complainants request thatpursuant to section 15 the FMCcancel ormodify

the agreement filed by the Gulf Mediterranean Ports Conference onthe basis that it

is contrary to the public interest and in violation of the Shipping Act

If the agreement violates section 15 it is because of the surcharge

imposed under it Yet the surcharge in question has not been found

to violate any provisions of the Shipping Act and complainants give

not the slightest hint as to how the surcharge is contrary to the public

interest Accordingly the charge is dismissed

For the foregoing reasons the motion for summary judgment is

hereby granted and the complaint is dismissed

S JOHN E COGRAVE

Administrative Law Judge

WASHINGTON D c

October 1 1974

18 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 462

COMMODITY CREDIT CORP

v

DELTA STEAMSHIP LINES INC

Authority to waive collection of a portion of freight charges denied

REPORT

Nov 6 1974

BY THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman Ashton C Barrett George H Hearn and

Clarence Morse Commissioners

By application received June 4 1974 Delta Steamship Lines Inc

requested authority to waive collection of a portion offreight charges

applicable to a shipment of Soyabean Oil shipped by Commodity

Credit Corporation via Delta vessel from New Orleans to Puerto

Cortes Honduras By letter of the same date the Commission in

formed Delta that its filing was improper in that Delta had not as

required by law prior thereto filed a tariff containing the appropriate

new rate Delta resubmitted its application after appropriately

amending its tariff Thereafter Chief Administrative Law Judge John

E Cograve issued his Initial Decision Pursuant to Rule 13 g

of the

Commission s Rules of Practice and Procedure we determined to

review that Initial Decision

FACTS

Under Bill of Lading dated January 15 1974 Delta transported

128 817 short tons of Soyabean Oil from New Orleans to Puerto

Cortes Honduras For this transportation Delta had apparently

quoted a rate of 32 00 per short ton while the properrate was 36 00

per short ton When the previously quoted 32 00 figure wasbrought

IDeltaSteamship Lines Inc Tariff FMC 36 1st revised page94 effective November 27 1973
58 FEDERAL MARITIME COMMISSION

to Delta s attention it agreed to change its tariff to conform to that

quotation

In an attempt to make its tariff rate conform to the quoted rate

Delta on June 10 1974 filed its correction No 6 2nd revised page

94 ofTariff FMC 38 effectiyeJune 7 1974 That correction quotes

a rate on Soyabean Oil of 42 00 W1M with a note which provides

Rate of 32 00 W1M on Soyabean Salad Oil will apply from June 7

1974 thruJuly 7 1974

In his Initial Decision the Administrative LawJudge granted Delta

authority to waive collection of the difference between 32 00 per

short ton and 36 00 per short ton or 463 74 3This decision was

premised on the conclusion that all the statutory and regulatory re

quirements prerequisite to such a grant had been met by Delta

DISCUSSION

The applicable statutory and regulatory requirements are set forth

in section 18b 3 Shipping Act 1916 as implemented by the Com

mission s Rules contained in 46 CFR 502 92 a

Section 18b 3 allows for refund or waiver of collection

I

I

1

where it appears that there is lI11 error in a tariff of a clerical or administrative

nature or lI11 errordue to inadvertence in failing to Ille a new tarifflI11d that such refund

orwaiver will not result in discrimination among shippers Providedfurther That the

carrier has prior to applying for authority to make refund llIed a new tariff

which sets forth the rate on which such refund or waiver would be based

Section 502 92 a of the Commission s Rules parallels the language

precisely

In the case at hand while it appears there were no other shipments

of Soyabean Oil during the period which might otherwise have re

sulted in discrimination among shippers it is not at all clear from the

record orapplicable tariffs that the remaining requirements ofsection

18b 3 have been met In shott it does not appear from the record

that there exists here any tariff error of a clerical or administrative

nature or an errOr due to inadvertence in failing to file a new tariff

which would warrant the relief requested

Delta has explained thatwhen the 36 00 rate actually charged was

brought to Delta s attention it agreed to modify its tariff to conform

to the quoted rate We do not believe this to be an error in a tariff

ofa clericaloradministrative nature or an errordue to inadvertence

in failing to file a new tariff Rather it appears that what is involved

Effeotive April 4 1974 rates from US Gulf Ports to East Coast Potts of Honduras and British Honduras and

inland paints were transferred from Group II ports in Deltas FMC 36 tarifft anw FMCI38 tariff

3The mathematics resulting in this figure appear tobe in error Due to ourdenJal of this claim we only notesuch

errorbut need not correct it

18 FM C
SEAL 5 FRANCIS C HURNEY

Secretary

COMMODITY CREDIT CORP v DELTA S S LINES 59

here is an erroneous quotation of a rate not an error in the tariff of

a clerical or administrative nature or inadvertent failure to 61e an

anticipated tariff

On the basis of these determinations we conclude that the re

quested waiver ofcollection of the charges here is neither warranted

nor statutorily within the authority of this Commission to grant

The application for authority to waive collection ofthe charges here

involved is hereby denied

18 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 746

HUGO ZANELLI d b a HUGO ZANELLI Co

ADOPTION OF INITIAL DECISION

Dee 12 1974

BY THE COMMISSION James V Day Vice Chairman George 

Hearn and Clarence Morse Commissioners

This proceeding is before us on exceptions to the Initial Decision 

Administrative Law Judge Norman D Kline in which he conclud

that Hugo Zanelli d b a Hugo Zanelli and Company Zanelli 1 w

not independent within the meaning of sections 1 and 44 of the Sh

ping Act 1916 the Act and 2 had violated specific sections ofGe

eral Order 4

1

by acting either as a purchaser or seller of certa

shipments on behalf of a

foreign consignee or as the agent of t

consignee in so purchasing and obtaining a beneficial interest in su

shipments However because Zanelli has cooperated fully w

Hearing Counsel and the record does not indicate that responde

engaged in the aforementioned activities in willful violation of t

law the Judge recommended that Zanelli be allowed to retain 

freight forwarding license on the condition that he cease and des

from the aforementioned unlawful act ivities and submit to the Co

mission a report of compliance

In its exceptions to the Initial Decision to which Hearing Coun

have responded Zanelli challenges

1 the legal conclusion that his having obtained a technicalbeneficial interest in

shipments discussed isin violation of Sections 1 and 4 of the Shipping Act 1916 a

regulations of the Commission thereunder because Rspondentrefrained from colle

ing compensation from any ocean carrier incident to such shipments

2 the consequent order to ceaseand desist from such activities contending t

his operations conform to the requirements of law

Sections 51O 2 a 510 9 d and 510 21 1

60

18 FM
HUGO ZANELLI d b aHUGO ZANELLI CO 61

These exceptions as Zanelli itself concedes generally constitute a

reargument ofcontentionsalready briefed by it and considered by the

Administrative LawJudge Upon thorough consideration ofthe entire

record in this proceeding we are of the opinion that Judge Kline s

findings and conclusions with respect thereto were proper and well

founded and we adopt them as our own However and without dis

turbing any ofthese findings and conclusions there are certain mat

ters raised by Zanelli in its exceptions which we believe warrant

some additional discussion

Zanelli on exceptions argues that the Court ofAppeals decision in

Norman GJensen Inc v FM C F 2d GA 8 1974 seems

to lend more support to Respondents contention that his interest in

shipments is permissible than was accorded to it in the Initial Deci

sionWe do not agree On the contrary we believe that the Initial

Decision more than adequately points out the significant differences

between Zanellis activities here and those ofITC found permissible

by the court inJensen

InJensen the court determined that the so called prohibited benefi

cial interest was something more than thatwhich ITC has because

lTCs relationship to the goods could not give rise to an indirect re

bate Seizing upon this language Respondent contends thathis inter

est inshipments is no less permissiblesince it collects nocompensation

from carriers Respondents interest in the shipments which it for

wards differs materially from that of ITC considered by the court in

Jensen As Judge Kline found in his decision

unlike Zanelli ITC did not make purchases in its own name advance its own

funds on the purchases oract as purchasing agent for consignees ITC s

functions

according to the Court were those of a service enterprise which made transportation

arrangements prepared export declarations received purchase orders and pay

ments etc

Actually even if Zanellihad not obtained a beneficial interest the mere fact that he

purchased the goods shipped or acted as agent of consignees inso purchasing wouldbe

enough to violate section 1 of the Act

Thus while lTC s activities failed to give ITC what the court charac

terized as the right to the use and enjoyment in the property

Zanellis interest here may be properly described as a real ownership

interest On the basis ofthe foregoing we can only conclude as Hear

ing Counsel argued and Judge Kline found that when one compares

the services offered by Zanelli with those offered by ITC inJensen it

becomes evident that the courts holding and rationale in the Jensen

case has no application to this proceeding

Another matter properly disposed ofinthe Initial Decision to which

Respondent takes exception involvesJudge Kline s reliance upon cer

18 F M C
62 FEDERAL MARITIME COMMISSION

tain legislative history to show that Congress in enacting the f

warder legislation intendedlicensees to be totally independent ofa

shipper connections On the theory that the legislative history 

prior unadopted bills is not germane to the bill ultimately adopted 

Congress Zanelli argues that Judge Kline in expressing his opini

that the definition ofindependent ocean freight forwarder in sect

1 of the Act does not allow for any shipper connection imprope

relied onthe actions ofthe 85th Congress to slpport his interpretati

oflegislation enacted by the 87th Congress Le P L87 254 In su

port of this position Respondent relies on Interstate Natural Gas C

v FPG 156 F 2d 949 5th Cir 1952 and specillcally that portion 

the courts opinion where it is noted albeit as dicta that the legislati

history ofan unadopted version of the Natural Gas Act the Lea B

offered as evidence of Congressional intent in enacting the final v

sion wasirrelevantbecause from the time the LeaBillwasintroduc

until the Natural Gas Act was passed the ideas of the proponents 

the legislation underwent considerable change 2

156 F 2d 952 E

plaining that the Lea Bill waslocal in character in that itpertained 

the production and individual sale ofgas at the wells while the Na

ral Gas Act related to the wholesale sales of gas in interstate co

merce the court concluded that Legislative history cannot 

referred to for the purpose of construing a statute contrary to t

natural import of its terms adding that if the language be cle

it is conclusive Ibid

While the case cited by Respondent appears to have little if a

relevance to this proceeding and to be easily distinguishable on t

facts the argument which itallegedly supports may be more quick

disposed of on other grounds For whatever be the merits of Zane

contentions with regards to the use of certain legislative history t

fact remains as the Presiding Officer found that

if the earlier history is excluded from consideration and consequently ther

nothing to indicate Congressional intent we are left with clear and unambiguous l

guage in the statute which appears to require absolute independence

There is one final exception raised by Respondent which 

believe warrants specific rejection Taking issue with the Initial De

sion s

finding that its contended statutory construction will emas

late the Freight Forwarder law Respondent argues that the A

ministrative Law Judge has failed to find any evil in its challeng

forwarder activities Contrasted is Judge Kline s construction of t

Even assuming that this language is applicable to the present situation wefind considerable meritin Hea

Counsel sargument that thefreJght forwarder legislation can be used to illustrate the change in the thin

of the legislators reflectedby the progression from General Order 72 whJch permitted forwarders tocarryon 

business regardless of shipper control or connection to P L 87 254 which required total independence

18 F M 
HUGO ZANELLI d b a HUGO ZANELLI CO 63

law which Zanelli suggests will result in oppression hardship or in

convenience This argument ignores the clear and specific findings

ofthe Administrative Law Judge and constitutes an obvious clutch

ing at straws

Judge Kline on pages 20 21 ofhis Initial Decision makes special

effort to detail the ills ofallowing Zanelli to operate under its pro

posed alternative standard The undesirable consequences which the

Presiding Officer views as resulting from Zanelli s activities could not

be more clearly spelled out We therefore see no merit whatever in

Respondents assertion that N owhere has the Administrative

Law Judge shown any evil in the activities ofZanelli

Respondents indictment ofthe consequences which allegedly Row

from Judge Kline s construction ofthe freight forwarder legislation

is equally without foundation Zanellis allegations of injustice

hardship oppression and inconvenience are not only grossly

exaggerated and completely unsupported but more importantly are

totally immaterial to the matter at issue In this regard we would

remind Respondent that the requirements ofthe law may often im

pose certain hardships and inconvenience which are justified by

the purpose to be served by the statute Thus accepting Zanellis basic

contention that its activities will somehow be adversely affected by

our affirmance ofJudge Kline s holding thatit must be totally indepen

dent of shipper connection we are nonetheless constrained to reject

Respondents argument as irrelevant The law clearly requires that

Respondent as a licensed ocean freight forwarder maintain as Judge

Kline correctly stated certain standards offitness That compliance

with these standards may inconvenience Respondent or cause it to

alter its operations may be regrettable but is not controlling

On the basis of all of the foregoing we are adopting the Initial

Decision in this proceeding as our own Thus consistent with Judge

Kline s findings and conclusions we are allowing Zanelli to retain its

license in spite ofcertain found violations ofthe Act and Commission

regulations promulgated thereunder on the condition that Respon

dent cease and desist from the unlawful activities and promptly

submit a report of the manner in which it has complied with this

requirement

Helen Delich Bentley Chairman and Ashton C Barrett

Commissioner dissenting

Our only complaint with the majority s opinion is that it does not go

far enough While the majority found Zanelli guilty ofvarious viola

tions of the Act and Commission regulations promulgated pursuant

18 FM C
64 FEDERAL MARITIME COMMISSION

thereto theynevertheless refused to revoke Zanelli s

freight forward

ing license While this decision by the majority allowing Respondent

to retain its license may be nobly motivated it is nonetheless wholly

inconsistent with the facts of record Further we believe that the

majority s failure to take the action clearly dictated by those facts of

record Le revocation ofZanellis license compromises the Commis

sion s regulatory responsibilities under the Act and frustrates the ob

jectives of its own regulations

Since the facts here are not in issue we can only presume that the

majority s failure to revoke Zanellis license is occasioned by its inabil

ity to find the requisite wilfullness on the part of Zanelli 3

In fact

however Zanelli neverdisputed that he possesses a beneficial interest

in goods financed by him On the contrary Zanelli openly admits his

beneficial interest defending his conduct on the grounds that the

statute can be interpreted to allow a forwarder under certain circum

stances to have such an interest in shipments Thus that Zanelli

clearly intended the results of its actions cannot be seriously ques

tioned 4

Moreover it is basic to the Commission s authority that a thorough

examinationof the circumstances surrounding violations must be con

ducted to determine if a licensee is still fit willing and able to be

a licensed ocean freight forwarder In view of Zanelli s activities

which the majority themselves found were unlawful we question

seriously whether ZaneUi still maintains the presumed fitness re

quired of a licensed ocean freightfor arder in view of its unlawful

activities Weighing Zanelli s activities against the Commission s obli

gation to preserve the high degree of integrity incumbent upon a

freight forwarder so that he may properly carry out his financial reo

sponsibilities for his shipper clients we believe that Zanelli has at least

failed to exhibit the necessary business propriety required of a freight

forwarder

Finally webelieve thatZanelli s action draws into question its abil

ity to continue in the forwarding business A licensed forwarder is

presumed to know and understand the law so that he does not run

afoul of it The record clearly demonstrates that Zanelli had knowl

edge ofthe law relevant to his prohibited activities but instead chose

30D this point wewould remind the Illi lority that it 15 firmly established that if one acts in contravention of a

statute even ifdone ingood faith he does 10 at a substantial risk andmust face theconsequences ifproven wrong

Co lo v FMC 383 US 807 1986

The situation here caneven be distingUished from theone under consideration in Bolton Mitchell 15 F M C

248 1972 another case where the nuijority allowedaforwarder to retain its license in spite of found violations of

the Actand CommJssionrules There therespondent at least not only proceeded on theassumption that his activities

divested him ofany bene6cJal interests in thefinanced goods butmoreover acted upon advise of counsel Here

Zanelli actively and blatantly pursues his financing well aware that it confers abeneficial interest in the goods

forwarded

18 F M C
HUGO ZANELLI d b aHUGO ZANELLI CO 65

to disregard it for his own purposes We cannot excusethose unlawful

activities where as here they represent a direct challenge to the

Commission s established authority to regulate freight forwarders

On the basis of the foregoing we are ofthe opinion that the facts

ofrecord in this proceeding clearly dictate the revocation ofRespon

dents license

SEAL 8 FRANCIS C HURNEY

Secretary

18 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 74 6

HUGO ZANELLI d b a HUGO ZANELLI Co

ORDER

This proceeding wasinitiated by the Federal Maritime Commission 

determine inter alia whether Hugo Zanelli d b a Hugo Zanelli a

Co Zanelli continues to qualify as an independent ocean freig

forwarder and whether its license No 397 should be continued 

effect suspended or revoked The Commission has fully consider

the matter and has this date made and entered ofrecord anAdopti

of Initial Decision containing its findings and conclusions thereo

which Adoption is hereby referred to and made a part hereof T

Commission found that Zanelli did not possess the required indepe

dence from shipper connections necessary to be an ocean freig

forwarder but because of mitigating circumstances declined to 

voke Zanellis license as an independent ocean freight forward

subjecting the retention of said license however to certain spec

conditions

Now therefore it is ordered That Zanelli be allowed to retain 

license as an independent ocean freight forwarder subject to the f

lowing conditions

1 Zanelli shall immediately cease and desist from all activities fou

to be violative of the Shipping Act 1916 and certain specified Co

mission regulations or orders and

2 Zanalli shall submit in the form ofan affidavit a full report to t

Commission on the mannerin which it has complied with the requi

ments to cease and desist as heretofore set out within 90 days 

service of this Order If Zanelli should fail to submit the requir

report its license as an independent ocean freight forwarder will 

revoked without further proceedings

Itis further ordered That to insure compliance with this Order 

complete examination of Zanelli s activities will be made within o

66

18 F M 
HUGO ZANELLI d b aHUGO ZANELLI CO 67

year from the date of service of this Order to determine whether

Respondent is acting in keeping with our decision herein By the

Commission

SEAL 8 FRANCIS C HURNEY

Secretary

18 F M C
FEDERAL MARITIME COMMISSION

No 74 6

HUGO ZANELLI d b a HUGO ZANELLI Co

i

I

I

Respondent a licensed oceanfreight forwarder found to have acted as a purchaser a

seller of certain shipments on behalf of Mexican consignees and to have obtain

a beneficial interest in such shipments in violation of sections 1 and 44 of 

Shipping Act 1916 and regulations of the Commission issued thereunder

Respondent ordered to cease and desist from such activities and to conform his ope

tions to the requirements of law in lieu of revocation of his license

Charles E Orr for respondent

Donald JBrunner and MarilynnJ Goldsmith Hearing Couns

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE 1

This proceeding was instituted by the Commission on February 

1974 in order to determine whether certain practices ofresponde

Hugo Zanelli d b a Hugo Zanelli and Company Zanelli an oce

freight forwarqer holding FMC license No 397 disqualify Zanelli 

an independent ocean freightforwarder constitute violations of s

tions 1 and 44 ofthe Shipping Act 1916 the Act and sections 510 2

and 51O 9 d ofthe Commission s General Order 4 and thereby just

suspension or revocation of Zanelli s license

The Commission s Order recites that information has been dev

oped showing that Zanelli acts as a purchaser of material for exp

in the foreign commerce of the United States on behalf of certa

Mexican consignees advances its own funds and credit for such p

chases enjoys a profit by marking up its invoices as a fee for its pu

chasing services all of which activities appear to violate the laws a

regulations cited above

Since the parties were not at issue over facts the factual record 

this proceeding was developed on the basis ofa stipulated set of fa

based in turn on analysis of numerous shipping documents whi

ITh S decision became the decision of the Commission 12 1274

68

18 FM 
HUGO ZANELLI d b aHUGO ZANELLI CO 69

illustrate Zanellis method of operation ie purchase orders supplier

invoices Zanelli invoices deposit slips checks forwarding invoices

bills oflading export declarations insurance forms and port authority

invoices These stipulated facts are set forth below

FINDINGS OF FACT

1 Hugo Zanelli d b a Hugo Zanelli Co Zanelli was issued inde

pendent ocean freight forwarder license FMC No 397 on October 15

1963

2 In excess offifty percent ofthe activities of Zanelli and his staff

oftwo are devoted to freight forwarding

3 Since May 1972 Zanelli has made purchases ofmaterial for export

in the foreign commerce of the United States on behalf of Mexican

principals consignees under the factual circumstances set forth

below

a The principals request price quotations from Zanelli on needed

merchandise usually by telephone or telex from points in Mexico

b Zanelli ascertains the price of the merchandise from domestic

suppliers and adds to it a mark up fee for his time and expenses

spent locating the merchandise ascertaining the prices and effect

ing the purchases The amount of mark up fee is determined by

Zanelli

c Zanelli transmits to his principals by telephone or telex the

purchase price he has ascertained plus mark up fee The purchase

price plus mark up fee is expressed as one sum

d Upon receipt ofZanellis price quotations plus mark up fee the

principals transmitpurchase orders to Zanelli made out in his name

e Zanelli purchases the merchandise designated therein on credit

in his own name

f In some instances Zanelli informs the suppliers that he is making

the purchases for Mexican principals

g Upon notification that the purchased material is ready for ship

ment Zanelli forwards same to his principals He also transmits an

invoice for the purchase price plus mark up fee

h In some instances Zanelli s principals forward payment for the

merchandise prior to the time Zanelli makes payment to the supplier

In other instances Zanelli advances his own funds inpayment to the

supplier Zanelli charges neither interest nor financefee for advancing

his own funds

iWhether Zanelli is prepaid by his principals or advances his own

funds he pays the supplier with his own check drawn on an account

set aside for this purpose

18 FM C
70 FEDERAL MARITIME COMMISSION

j

Zanelli prepares a separate invoice for forwarding services per

formed in connection with each shipment

4 Prior to commencing purchasingactivities Zanelli had for some

time rendered freight forwarding services to the aforementioned

principals

5 No written memorandum of agreement has been executed by

Zanelli and his principals

6 Zanelli has collectedno compensation from ocean carriers on any

shipment where he has effected the purchases in the manner de

scribed in Item 3

DISCUSSION AND CONCLUSIONS

The controversy in this proceeding centers on a difference ofopin

ion between Hearing Counsel and respondent as to the degree of

independence which a licensed freight forwarder must observe with

respect to the shipments he dispatches Zanelli contends that neither

sections 1 and 44 ofthe Act nor the Commission s

regulations promul

gated in connection therewith are designed to prevent a licensed

forwarder from forwarding shipments in which he has a beneficial

interest so long as the forwarder abstains from receiving any compen

sation ie brokerage from an ocean carrier Hearing Counsel on the

other hand contend that the cited statutes and legislative history

thereto and Commission decisions require the absolute independence

of a licensed forwarder forbidding him from forwarding any ship

ments in which he has a beneficial interest or from maintaining any

relationship in which he is placed under the control of a shipper

Hearing Counsel contend furthermore that the record demonstrates

that Zanelli has acted as a purchasing agent seller and financier of

shipments he forwards and has obtained a beneficial interest in such

shipments that consequently Zanelli does not qualify as an indepen

dent ocean freightforwarder and that he should be required to disen

gage himself from these activities

Since Zanelli does not dispute in his briefs that he has acted in the

manner described by Hearing Counsel the issue for decision is one of

law only namely whether a person may bebothanindependent ocean

freight forwarder with respect to shipments inwhich he does not have

a beneficial interest and a person dispatching shipments in which he

has a beneficial interest acts as purchasing agent seller financier

provided that he collects no brokerage on the latter shipments

The pertinent statutes governing the matter of freight forwarder

independence are sections 1 and 44 of the Shipping Act 1916 46

U S C 801 841b

18 F M C
HUGO ZANELLI d b a HUGO ZANELLI CO 71

Section 1 of the Act defines an independent ocean freight for

warder as

A person carrying on the business of forwarding for a consideration who is nota shipper

orconsignee or a seller or purchaser of shipments to foreign countries nor has any

beneficial interest therein nor directly orindirectly controls oris controlled by such

shipper or consignee orby any person having such abeneficial interest 46 US G 80l

Emphasis added

Section 44 b of the Act provides in pertinent part

A forwarder s license shall be issued to any qualified applicant therefor if itis found by

the Commission that the applicant is orwill be an independentoceanfreightforwarder

as defined in this Act and is fit willing and able properly to carryon the business of

forwardingand to conform to the provisions of this Act and the requirements rules and

regulations ofthe Commission issued thereunder 46 U S G 841b Emphasis added

Section 44 d of the Act authorizes the Commission to suspend or

revoke a forwarder s license for willful failure to comply with any

provision ofthis Act or with any lawful order rule or regulation of

the Commission promulgated thereunder

The corresponding regulations promulgated by the Commission are

contained in General Order 4 46 CFR 510 Part 51O 2 a

repeats the

statutory definition of an independent ocean freight forwarder set

forth in section 1 of the Act Part 510 d provides for revocation or

suspension ofa forwarder s license in the event of change of circum

stances whereby the licensee no longer qualifies as an independent

ocean freight forwarder Finally Part 510 21 1 defines the term

beneficial interest which Zanelli does not dispute as applying to

Zanellis activities in connection with shipments forwarded to certain

Mexican consignees

Zanelli acknowledges that previous Commission decisions have in

sisted upon the absolute independence oflicensed freight forwarders

In these cases furthermore the Commission has made clear that the

mere existence ofshipper connection or control even if such control

2

46 CFR 510 21 1 provides in pertinent part

The term Beneficial interest for the purpose of these rules includes but is not limited to any lien interest in

right to use enjoy profit benefit or receiveany advantage either proprietary orfinancial from the whole orany

part of ashipment orcargo arisingby financing of the shipment orby operationof law orby agreement express

or implied

In view of Zancllis activities in which he makes purchases in his own name uses his own funds addsamarkup to

the supplier s price etc there is little doubt that he enjoys a beneficial interest in the shipments concerned

In the recent decision of the Court of Appeals 8th Cir in Norman G Jensen Inc v

FMC No

73 1514 June 5 1974 the Courtheld that an exporters consulting firm known as ITC did not obtain a

beneficial

interest in goods shipped but unlike Zanelli ITC did not makepurchases in its own name advance its own funds

on the purchases or act as purchasing agent for consignees lTC s

functions according tothe Court were thoseof

a service enterprise which made transportation arrangements prepared export declarations received purchase

orders and payments etc Slip opinion pp 2 3 See also Norman G Jensen Inc 16 F M C 365 1973 reversed by

the Court for afuller factual description of the activities of ITC

Actually even ifZanellihad not obtained abeneficial interest the merefact that he purchased the goods shipped

or acted as agent of consignees in so purchasing would be enough to violate section 1 of the Act

18 F MC
72 FEDERAL MARITIME COMMISSION

is never exercised is enough to disqualify the licensee In License N

79GNorthAmerican Van Lines 14 F M C 215 1971 the Comm

sion revoked the license of a forwarder merely because a holdin

company PepsiCo Inc owning companies engaged in exporting h

purchased the stock ofthe forwarder Even though the licensee nev

forwarded or agreed never to forward shipments for its parent 

affiliated corporations the Commission held that the forwarder d

not possess the requisite independence since the mere possibility 

control evenif never exercised was forbidden by the statute In th

regard the Commission stated 14 F M C at page 221

I

Allof the legislative history points outclearly that exceptions to the clear and unambi

ous language of the statute were to be excluded and that the inherent prohibit

vis a vis control isabsolute and we have so held innumerousproceedings See Appli

tionfor FreightForwarding License Louis Applebaum 8 FMC 306 1964 Applicati

for Freight Forwarding Llcense Wm V CadV 8 FMC 352 1964 Application 

Freight Forwarding License Del Mar Shipping Corp 8 FMC 493 1965 Applicat

for Freight Forwarding License York Shipping Corp 9 FMC 72 1965

Although Zanelli does not disputethat the Commission has requir

absolute independence in previous cases he urges the Commission 

reconsider these decisions in the light of the legislative history 

section 44 ofthe Act and contends that the services whichhe is prov

ing benefit and promote the commerce of the United States Zane

contends also that the Commission s insistence upon absolute ind

pendence exceeds the congressional purposes in enacting section 4

which he contends was enacted firstly in order to prevent indire

freight rebates to shippers and secondly to regulate the forwardi

industry to prevent sharp practices As Zanelli views the situation 

a licensee abstains from collecting brokerage from ocean carriers 

those shipments in which he has obtained a beneficial interest 

presumably acts as purchasing agent or financier the congressio

purposes are thereby subserved The Commission ofcourse has sp

Cifically rejected such a contention See Cady cited above at pa

360 and neither the language of the applicable statutes nor th

legislative history lend it support

At the very outset Zanelli is faced with the fact that the applicab

statutes are unambiguous in their language Section 44b of the A

quotedabove unequivocally requires that a licensee be an indepe

dent ocean freight forwarder as defined in this Act Section 1 of t

Act unequivocally defines independent ocean freight forwarder 

3SigniflcantIy the NorthAmerican Van Linsa case involved ashipper and forwarder who were separate corpo

entities although affiliated In thepresent case Zanelli s olaims to compUance with thestatutory requirements 

made more difficult to susuun by the fact that he is one person operating as licensee and as purchasing a

financier etc with respect to certaln shipments

18 F M 
HUGO ZANELLI d b aHUGO ZANELLI CO 73

a person who is not a shipper or consignee or a seller or purchaser

ofshipments nor has any beneficial interest therein nor directly

or indirectly controls or is controlled by such shipper consignee etc

It is undisputed that Zanelli acts as a purchasing agent for certain

Mexican consignees purchases shipments has obtained a beneficial

interest etc Therefore it would appear that no further inquiry as to

the legislative history underlying the clear language ofthe statute is

necessary It is a familiar doctrine in law that resort to legislative

history is unnecessary if a statute is clear and unambiguous Sea Land

Service Inc v F MC 404 F 2d 824 D C 1968 NorthAmerican Van

Lines cited above at page 220 Caminetti v United States 242 U S

470 485 1916 4 Nevertheless since Zanelli contends that the Com

mission s previous decisions exceeded congressional intentions an ex

amination of legislative history is warranted

The immediate stimulus to the enactment oftheFreight Forwarder

Law Public Law 87 254 was the decision of the Federal Maritime

Board in Investigation ofPractices Operations Actions and Agree

ments of Ocean Freight Forwarders 6 F MB 327 1961 In that

decision the Board found that a variety of malpractices had become

widespread in the freight forwarding industry including indirect

rebating to shippers inconnection with brokerage payments by ocean

carriers improprieties inbilling methods discrimination preference

and prejudice in the assessment offorwarder charges etc For several

years congressional committees had also been probing into freight

forwarding practices and there had been numerous prior agency and

court cases involving forwarder practices and compensation Dixie

Forwarding Co Inc Application for License 8 F M C 109 117

1964 New York Foreign Freight Forwarders Brokers Association

v Federal Maritime Commission 337 F 2d 289 293 2d Cir 1964

As aresult ofits investigation the Board revisedits earlierforwarder

regulations dating from 1950 and promulgated new regulations as

General Order 72 Revised which among other things would have

absolutely prohibited the payment of brokerage The rules were to

become effective 120 days after publication in the Federal Register

6 F M B at page 327 Faced with what the forwarding industry de

scribed as a substantial loss ofrevenue because ofthe proposed ban on

brokerage the forwarders appealed to Congress for the enactment of

legislation which would permit such payments under appropriate

safeguards The ultimate result was Public Law 87 254 Instead of a

total ban on brokerage as the Board has proposed Congress decided

4Asthe Courtstated in Sea Land Service Inc v

RM C cited ahove

Ordinarily wherethe language of a statute isclear and unambiguous on its face the thrust of that language should

not be controverted by seeking toshow an inconsistent legislative intent

18 F M C
74 FEDERAL MARITIME COMMISSION

to permit compensation from carriers ie brokerage but only wh

the forwarder rendered specified services ofvalue and remained in

pendent Le free of any affiliation with a shipper consignee se

purchaser of the shipment or with any person having a benef

interest in the goods shipped in order to eliminate indirect rebate

shippers New YorkForeign Freight Forwarders 8rokers Associa

v Federal Maritime Commission cited above at p

293 Addition

forwarders would be licensed and other safeguards provided to ena

the Commission to cure the abuses and undesirable practices unc

ered in its extensive investigations Id at p

293 Dixiq Forward

Co Inc Applicationfor Lice1se cited above at pp 117 118

Itis important to bear in mind that Public Law 87 254 was 

enacted solely to eliminate indirect rebating but other malpractice

well and that Congress was also concerned over the need to estab

and maintain standards offitness consistent with the fiduciary nat

of the forwarder s business In this regardthe Commission has sta

As the House Committee on Merchant Marine and Fisheries pointed out The in

tionof the licensing provision section 44 is to have everyperson firm orcorper

who holds himself out as a forwarder to be fully competent and qualified to act in 

fiduciary relationship which such business necessitates Dixie Forwarding Co 

cited above at page U8

An important matter to beconsidered in determining an applicant s fitness is the 

that the prospective licensee will be a fiduciary for clients and in addition will oc

a unique position of trust in dealing with the carriers and the public Hence it 

appear that as licensee applicant will maintain a standard of professional con

reflecting the highest degree of business responsibility and integrity not only 

clients but also with carriers and with the public License Application Guy G So

tino 15 F M C 127 134 1972

The above discussion provides a general framework within w

one can evaluate Zanelli s contentions

Zanelli disputes the Commission s holding in North American 

Lines cited above that a U of thE legislative history points 

clearly that exceptions to the clear and unambiguous language of 

statute were to beexcluded and that the inherent prohibition vis 

control is absolute Furthermore Zanelli disagrees that the C

in New York Freight Forwarders etc cited above intended to h

that licensed forwarders may never advance funds have a benef

interest in goods shipped orbe shipper connected when in this reg

the Court stated

5See House Report No 1096 87th Cong 1st Sess p

3 In Norman G JBn88T1 Inc tlP MC cited abo

Court appears to disagree with theabove discussion concerning the fact that the purposes of Public Law 

were not limited merely to theprevention of indirect rebating In a footnote to Its deQJsiQn the Court sta

Congress didnot intend to establi Jh afiduciary relationship footnote 3 p 5 TheCourt appears tohave disre

the remarks ohhe Hause Committee to the contrary

18 F
HUGO ZANELLI d b a HUGO ZANELLI CO 75

Ucensedforwarders must be truly independent of shippers and nothave any beneficial

interst in shipments in order to prevent the illegal rebatingthat occurswhen brokerage

is received by forwarders who are also shippers shipper owned orshipper connected

or have a beneficial interest in shipments Congress by its legislation showed a

clear intention to separate forwarders from all shipper interests 337 F 2d at page

296

In affirming the Commission s regulation defining beneficial inter

est so as to prohibit licensed forwarders from acquiring an interest

through financing or by the right to use enjoy profit benefit or

receive any advantage etc 46 CFR 510 21 1 furthermore the

Court stated

Although the challenged rule may limit some benign financing activities by forwarders

itprovides a means to curb an evil Congress sought to correct the collection of com

pensation from carriers by persons who have any interestin the goods being shipped

We hold that the rule is reasonable and necessary to prevent forwarders from selling

goods under the guise of financing and then using this subterfuge to receive a dis

counted freight rate 337 F 2d at p 297

The Commission of course has applied the law and regulations so

as to prohibit licensed forwarders from financing See eg Bolton

and Mitchell Inc Independent Ocean Freight Forwarder License

No 516 15 F M C 248 1972 16 F MC 284 1973 Supplemental

Report November 8 1973 Second Supplemental Report May 23

1974 New York Foreign Freight Forwarders Brokers Association v

FM C cited above at p 297 Zanelli contends however that the

Court only intended to carry out the congressional purpose in ter

minating illegal rebating when shipper connected forwarders re

ceived brokerage from carriers not to abolish all beneficial interests

or financing activities of forwarders who abstain from collecting bro

kerage on the shipments involved Similarly Zanelli contends that the

Commission has misread the legislative history and that its decisions

requiring absolute independence which Zanelli points out were not

appealed to the Courts are consequently erroneous

As shown above Public Law 87 254 abolished a

remedy proposed

by the Commission s predecessor in General Order 72 Revised

namely a total ban on brokerage and permitted instead the payment

of brokerage but required independent forwarders Le forwarders

free ofshipper control having no beneficial interest engaging in no

purchasing activities etc General Order 72 Revised had permitted

forwarders to carryon their businesses regardless ofshipper connec

tion or control Indeed the regulation specifically permitted forward

After respondent s

briefs were filed one Commission decision was reversed by theCourtsin Norman G Jensen

Inc v F M C cited above The Courtheld that an exporting consultant firm with which the forwarder concerned

was connected had not obtained a beneficial interest in thegoods shipped As noted above however the consulting

firms method of operatingdiffered in several key respects from Zanelli s

18 F M C
76 FEDERAL MARITIME COMMISSION

ersto be such persons as common carriers manufacturers exporte

export traders manufacturers agents resident buyers brok

co

mission merchants 46 CFR 244 1 6 F MB at page 368 Inste

of this permissive system Congress established a standard of to

independence Zanelli contends however that something less th

total independence wasalso intended to be permitted a status wh

one could characterize as qualified independence wherein forwa

erscould operate under shipper control provided that they abstai

from receiving brokerage from carriers

As shown above the language of Public Law 87 254 nowhere s

gests that the forwarders independence could be so qualified Bu

resort to legislative history is necessary as Zanelli would have it 

order to support a finding that the clear language ofthe statute me

something else that the Commission s decisions requiring abso

independence are erroneous and that the Courts statements in 

New York Freight Forwarders and BrokersAssociation case regard

Congress s clear intention to separate forwarders from all ship

interests must likewise be qualified there should be some clear 

convincing evidence that Congress meant to permit such a quali

independence The legislative history however provides no such 

dence and if anything confirms the Commission s and the Co

views

In the North American Van Lines case cited above the Com

sioncited pertinent legislative history regarding the standard ofin

pendence mandated by Congress The Commission cited for ex

ple H R Report No 2333 85th Cong 2d Sess respecting a previ

Bill H R 8382 in which independent ocean freight forwarder 

first defined in terms virtually identical to the definition containe

Public Law 87 254The report stated

This would make it clear that all shippers consignees sellers purchasers and ca

of ocean export cargoes are to be prohibited from obtaining a license regardles

whether these groups forward only theirown cargoes or the cargoes of others Em

sis supplied 14 FM C at page 221

The earlier definition as Hearing Counsel point out was chan

slightly but in a way which made it even more clear that Cong

desired total independence Thus the earlier definition contained 

phrase in connection with shipments dispatched by such 

warder which implied that forwarders need be free ofshipper 

This definition stated as fallows

An independent foreilio freight forwarder is aforeign freight forwarder who in connection with ship

dispatched by such forwarder is not a shipper orconsignor orseller orpurchaser or common carrier by w

such shipments nor has any beneficial interest therein nor directly or indirectly controls or is controlled 

shipper or consignor common carrier by waterorby any person having abeneficial interest in such ship

14 F M C at p 220

18 F
HUGO ZANELLI d b a HUGO ZANELLI CO 77

trol only on shipments dispatched by such forwarder Theoretically

therefore a forwarder could remain a shipper ormaintain a beneficial

interestinshipments so long as hedid not himselfperform the forward

ingservices on suchshipments ie theforwarder couldcarryon amixed

business sometimes acting as shipper sometimes as forwarder How

ever deletion ofthe phrase in question from Public Law 87 254 can

only indicate an intention to eliminate such a hybrid situation Zanelli

contends however that the above deletion was made by an earlier

Congress the 86th not the Congress which actually enacted Public

Law 87 254 Zanelli states that tJhere isnothing to show that the87th

Congress gave the matter any consideration one way or the other

Zanelli cites no authority for the proposition that the work of Con

gresses immediately preceding the Congress which enacts legislation

involving thesame orrelated matters must be disregarded inascertain

ing congressional intent as to the legislation ultimately enacted But

even if this is a proper doctrine it lends Zanelli s contentions no

support for if the earlier history is excluded from consideration and

consequently there is nothing to indicate congressional intent we are

left with clear and unambiguous language in the statute which appears

to require absolute independence As the Court stated in Alaska

Steamship Co v FMG 399 F 2d623 626 footnote 2 9th Cir 1968 in

connection with theinterpretation ofclear statutorylanguage

The legislative history of the provisions inquestion on which all parties to this dispute

rely isinconclusive In the absence of a definitive explanation ofcongressional intent

in dealing with this problem this court will not assume that Congress intended to use

the terms through routes and joint rates other than in accord with their settled

meaning of more than 50 years duration 8

Even if we ignore the actions of previous Congresses and accept

Zanelli s basic contention that Congress was focussing on the indirect

rebating problem when it enacted Public Law 87 454 this still

does not mean that Congress intended to authorize the type offor

warder operation that Zanelli is proposing in which a forwarder is

sometimes independent sometimes not with abstention from

brokerage in the latter cases Zanelli seems to be inferring that be

cause the legislative history contains no indication that Congress

considered such a hybrid operation there was no intent to prohibit it

despite the clear language of the law ultimately enacted which

granted no exceptions Without a positive indication ofcongressional

intent to grant such an exception however the statute cannot be so

interpreted Alaska Steamship Co v FMC Sea Land Service Inc v

F MC cited above 9

8See also Sea Land Service Inc v FMC cited above for a

similar holding

IIThese cited casesare especially illustrative They involved acontroversy betweenthe FederalMaritime Commis

18 F M C
78 FEDERAL MARITIME COMMISSION

Finally regarding the language ofthe statute Zanelli makes 

arguments to support his contention that a person carrying on 

business offorwarding may sometimes be allowed to have a ben

cial interest in shipments Firstly Zanelli contends that section 44 

which states that a person whose primary business is the sale 

merchandise may dispatch shipments ofsuch merchandise witho

license implies that an occasional seller may hold a forwarder 

cense As Hearing Counsel point out however the purpose of 

quoted language was not to allow a licensee to be a shipper bu

permit a shipper whose business is not forwarding to dispatch 

own shipments without having to obtain a license lo Secon

Zanelli contends that section 44 e of the Act can be read to per

a forwarder to dispatch shipments in which he has a beneficial in

est so long as he abstains from collecting brokerage This is 

argues Zanelli because that statute provides that a common car

by water may compensate a forwarder in connection with any s

ment dispatched on behalf ofothers 11 Therefore Zanelli infers 

his own shipments ie those in which the forwarder has a benef

interest the forwarder need only abstain from such compensatio

he wishes to dispatch the shipments Such a reading as Hea

Counsel point out would emasculate the Freight Forwarder L

which as shown above defined independent ocean freight 

warder in section 1 of the Act as a person devoid of any benef

interest in the shipments he forwards without qualification Un

recognized principles of statutory construction section 44 e sho

not be read so as to repeal section 1 by implication or to re

plainly inconsistent results United States v Borden Co 308 

188 198 1939

It should beevident from the above discussion that Zanelli is prop

ing an alternative remedy which was not the one selected by C

gress namely qualified independence based upon abstention f

brokerage in shipper connected instances Although neither the le

sian and two carriers as to themeaning of Public Law 87 595 which provided that all through route and joi

arrangements between F M C regulated water carriers and IcC regulated motor carriers would fall un

jurisdiction of the Lce TheF M Chad held despite clear statutory language that certain arrangements 

involved water carrier service withincidental motor carrier pickup and delivery did not fall under that law 

the legislative history indicated that the genesis of the law related to a problem involving long line ha

incidental motor carriage Sea Land Service Inc Cancellation of Rates 11 F M C 137 142 143 1967 

Steamship Co Cancellation of Rates 11 F M C314 1968 The Courts however reversed the Commissi

refused tocarve out an exception tothe clear statutory language so as torestrict its application tothetype of p

which had precipitated the legislation

OHearing Beforethe MerchantMarine and Fisheries Subcommittee of the Committeeon Interstate and F

Commerce 86thCong 2d Sess February 29 1960 p 49

liThe textof section 44 estates in pertinent part

A common carrier by watermay compensate a person carrying on the business of forwarding to the exten

value rendered such carrier in connection withany shipment dispatched on behalf of others

18 F 
HUGO ZANELLI d b aHUGO ZANELLI CO 79

lative history nor the clear language ofthe law shows any intention on

the part ofCongress to permit such a standard for forwarders Zanelli

contends that no harm results if a forwarder operates under such a

standard and that on the contrary the commerce of the United

States is benefited because Zanelli assists in promoting exports by

acting as purchasing agent for foreign consignees advancing funds

financing exports etc The contention ignores several considerations

however

As a matter of law if an activity is prohibited good intentions or

beneficial results are irrelevant Thus if a group ofcompanies agree

to fix prices with good motives e gin order to stabilize an industry

or help revive a depressed economy the activity is still unlawful

United States v Socony Vacuum Oil Co 310 U S 150 1940 Simi

larly as the Court recognized in New York Freight Forwarders and

Brokers Association cited above at p297 Public Law 87 254 and the

Commission s regulation prohibiting licensed forwarders from having

a beneficial interestin shipments admittedly resulted in the termina

tion ofsome benign financing yet such activities were found to be

prohibited nonetheless Ifthe statute is the product ofunwise legisla

tion because ofthe failure to consider the desires of some forwarders

to engage in benign financing or act as helpful purchasing agents

however the proper avenue of relief is to seek amendment of the

legislation which can only be accomplished by the Congress not by

this Commission I

A second consideration which Zanelli s argument ignores is the fact

as discussed previously that Congress was interested not only in pre

venting indirect rebating to dummy forwarders but in establishing

standards offitness to insure that forwarders would act in a manner

consistent with their fiduciary relationship to shippers By establishing

total independence from shippers Congress not only stamped out

indirect rebating but assured that forwarders would serve their ship

per clients as disinterested fiduciaries not as competitors IfZanellis

proposed alternative standard is permitted a forwarder would be

allowed to dispatch not only the goods of outside shippers but of

shipments in which he is either the shipper or shipper s agent and

consequently may be in a position of actually competing with his

shipper clients Can an outside shipper client be assured that such a

11IThe legislative history to Public Law 87 254 indicates that some spokesmen for the law recognized that its

enactment was somewhat hasty because of the forwarding industry s

entreaties for prompt relieffrom the Board s

proposaltoban brokerage See statements of Senator Yarborough and Keating Congr Record 87th Cong Ist sess

pp 17999 18000 18240241 Upon signing the Bill into law PresidentKennedy also remarked in pertinent part

If experience should show however that this legislation is inadequate either todeal with the abusesortoprovide

necessary assistance to the shippers and carriers I intend to recommend furtherremedial legislation Statement

of the President on S 1368 signed into law as Public Law 87 254 September 19 1961

18 F M C
80 FEDERAL MARITIME COMMISSION

forwarder would accord the shipper the same care in arranging for 

exportation of that shipper s goods as the forwarder would be do

with respect to the forwarder s own shipments In all fairness 

Zanelli the record in this proceeding contains no indication that 

has shown any preference to those shipments which he purchased 

in which he enjoyed a beneficial interest However by permittin

forwarder to act in a dual capacity ie as a shipper as well as 

warder the potential for abuse is established Furthermore if 

forwarder happens to be exporting the same type of merchandise 

one of his outside shipper clients the forwarder could conceiva

have an advantage if he has access as a forwarder to confiden

information relating to his competitor s business Is it not more p

dent to establish total independence for the forwarder instead ofp

mitting a system whereby he may be called upon to choose betwe

his own interests and those of his client 13

Finally as the Court in Norman G Jensen Inc v FM C c

above indicated it is possible for a forwarder to assist exporters 

promote the foreign commerce ofthe United Stateswithout acquir

a beneficial interest in goods shipped and thereby losing indep

dence In that case the forwarder s connection with a firm enga

in counselling and assisting exporters was found to be lawful but 

nificantly the firm in question was not a purchaser or seller of 

goods exported

ULTIMATE CONCLUSIONS

The plain language of the Freight Forwarder Law Public L

87 254 its legislative history and all previous Commission cases 

the subject indicate that the standard of independence imposed 

persons wishing to hold freightforwarder licenses in absolute and t

a freight forwarder cannot hold such a license if he at any time 

as shipper agent for a consignee seller financier or has obtaine

beneficial interest in the goods shipped The proposal suggested 

Zanelli namely that qualified independence is permitted wher

the forwarder may act in the foregoing manner so long as he abst

from the collection ofbrokerage is an alternative notpermittedby 

law nor does such a proposal derive support from the legislative 

tory

If as Zanelli argues the commerce of the United States wo

ultimately benefit if forwarders could sometimes act like shipper

J3Without commenting on thetruth of thealleaations the presiding judge officially notices that acompla

been flied in Docket No 73 70 Inter Equip Inc Q Hugo Zanelll Company in which complainant alleg

Zanell1has acted asacompeting sellerwhile forwarding complainant sgoods and further allegingharm resultin

such activity

18 F 
HUGO ZANELLI d b a HUGO ZANELLI CO 81

obtain beneficial interests in goods exported the proper avenue of

relief is to ask Congress to amend the law However the present

requirement that forwarders maintain absolute independence is fully

consistent with the congressional intent not only to stamp out indirect

rebating but to insure that forwarders would serve their shipper cli

ents in a manner consistent with their fiduciary relationships without

preference or discrimination A standard ofabsolute independence is

more consistent with such a purpose than one ofqualified indepen

dence wherein a forwarder engaging in buying and selling may be

placed in the position of competing with his own shipper clients

Finally as a recent court decision indicates under certain condi

tions forwarders may engage in counselling and assisting exporters

without becoming purchasers sellers or otherwise obtaining benefi

cial interests in the goods shipped thereby promoting the commerce

of the United States without simultaneously losing independence

Accordingly it is found and concluded that the activities ofrespon

dent Zanelli as a purchaser and seller ofcertain shipments on behalf

of Mexican consignees in which he also obtained a beneficial interest

disqualified Zanelli as an independent ocean freight forwarder and

constituted violations of sections 1 and 44 of the Shipping Act 1916

aswell as sections 51O 2a 510 9 d and 510 21 1 ofthe Commission s

General Order 4

Since respondent has cooperated fully with Hearing Counsel and

the record does not indicate thatrespondent engaged inthe aforesaid

activities in willful violation oflaw an opportunity for voluntary com

pliance should be afforded as an alternative to suspension or revoca

tion ofrespondents license Del Mar Shipping Corp cited above at

p

497 Bolton and Mitchell Inc cited above In this regard the

recent decision of the Court ofAppeals in Norman G Jensen Inc v

FMC cited above may provideguidance as to the means by which

respondent can modify hismethod ofoperating so as to conform to the

requirements of law Therefore if respondent wishes to retain his

forwarder s license he shall cease and desist from the aforesaid activi

ties found to be unlawful and shall submit a fullreportpromptly to the

Commission on the manner in which he has complied with this re

quirement

S NORMAN D KLINE

Administrative Law Judge

WASHINGTON D C

June 12 1974

18 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 7053

LEVATINO SONS INC

v

PRUDENTIAL GRACE LINES INC

PARTIAL ADOPTION OF INITIAL DECISION AND ORDER 

REMAND

Dec 16 1974

This proceeding wasinitiatedby the filing ofa complaint onDece

ber 29 1970 in which Complainant Levatino Sons Inc Levati

alleged that Respondent Prudential Grace Lines Inc Grace dur

the years 1966 1967 and 1968 violated sections 14 Fourth 16 F

and 17 of the Shipping Act 1916 the Act by failing to prov

Levatino with space accommodation for cargoes which Grace 

previously contracted to carry byunfairly and unjustly discriminat

against Levatino and unduly and unreasonably preferring competit

ofLevatino with regardto the furnishing ofwarehousing and fum

tion facilities and by entering into settlements with competitors 

Levatino in satisfaction of complaints filed with the Federal Mariti

Commission by such competitors

On September 12 1969 Levatino had commenced an ac

against Grace in the United States District Court for the South

District of New York seeking compensatory damages in the sum 

3 765 000 alleging substantially the same violations of the Act 

well as violations of the common law of the State of New Y

Levatino Sons Inc v Grace Line Inc 69 Civ 3983 S D N 

1969 In response to a motion to dismiss filed by Grace the Court 

order dated August 25 1970 stayed the action

subject to further order of the Court pending referral by plaintiff LEVAT

SONS INC to the Federal Maritime Commission of the claims alleged in the c

plaint hereinwhich are ormay be within the said Commission s jurisdiction and the 

disposition of any proceeding initiated by said plaintiff before said Commission

82
IThat Initial Decision isappended hereto and made apart hereof

LEVATINO SONS vPRUDENTIAL GRACE LINES 83

Inaccordance with the Courts directive Levatino filed its complaint

with the Commission Upon motion of Respondent however that

portion of the complaint relating to the issue ofreparation was dis

missed by the Commission it appearing that the complaint was filed

more than two years subsequent to accrual of the cause of action

Administrative Law Judge Norman D Kline issued his Initial Deci

sion IIn that Initial Decision Judge Kline found specifically that Re

spondent had not violated the Act with regard to the furnishing of

warehouse and fumigation facilities to Complainant orwith respect to

entering into settlement agreements with competitors ofComplain

ant in satisfaction of complaints before this Commission As to the

alleged violations of sections 14 Fourth and 16 First regarding the

shutting out ofComplainants cargoes Judge Kline found that while

there was no showing of unjust discrimination or undue preference

against Complainant by Respondent Respondent had not conducted

itself in the manner in which it was obligated to act as a common

carrier by water and by a general course of conduct had treated all

similarly situated shippers in an unfair manner Judge Kline therefore

concluded that Respondent had violated sections 14 and 16 of the Act

by generally failing to meet the standards of conduct imposed upon

a common carrier under the Act Following issuance ofthis decision

both Complainant and Respondent filed exceptions to Judge Kline s

Initial Decision

Complainant Levatino excepted to Judge Kline s

findings that

1 The violations of sections 14 Fourth and 16 First by Respondent

do not center on discrimination against Levatino but were random

and affected numerous shippers other than Levatino

2 Unfair treatment ofLevatino inthe matter of space accommoda

tions was limited to the periodJanuary March 1967

3 Levatino received terminal services and facilities which did not

differ significantly from those enjoyed by other importers who used

Grace s sheds in Port Newark

4 Grace did not subject Levatino to undue or unreasonable preju

dice or disadvantage or unjust discrimination in the furnishing of

terminal and fumigation facilities in 1966 and 1967

5 Grace did notenter into any agreements with warehouse compa

nies during the 19661967season which wererequired to be filedwith

the Commission pursuant to section 15 of the Act and

6 Grace s settlement in the All Chilean case did not constitute

rebating or the use of an unjust or unfair device or means to allow

shippers to obtain transportation at lower than regular rates in viola

tion of sections 16 or 17 of the Act
84 FEDERAL MARITIME COMMISSION

Levatino lodged six further exceptions which are alleged failures 

make certain findingsthe converse ofthe six exceptions cited abo

With the exception of the issue raised as to shutout cargoes 1 

above wewill discuss each of these exceptions hereinafter and o

conclusions as to each seriatim 2

Exceptions 1 and 2 dealing with 

issue of shutouts will be discussed separately thereafter

Levatino Exceptions 3 4 It is alleged that Judge Kline er

in finding that Grace had not discriminated against Levatino w

respect to the terminal and fumigation facilities provided by Gra

to Levatino and others In support of its position Levatino argu

that Judge Kline ignored the weight of the evidence before him 

reaching his conclusion citing transcript references and various 

hibits We have reviewed Judge Kline s numerous findings of f

in regard to these alleged errors and the transcripts and exhib

on which they were based We are unable to conclude from t

scrutiny that Judge Kline could not come to the conclusions t

he did based on that record While Levatino may disagree w

these findings we have been shown nothing which would indic

that Judge Kline erred with respect to these findings T

thoroughness of Judge Kline s consideration may be seen in 

lengthy findings of fact on pages 6through 15 and his discuss

on pages 25 through 28 of the InUial Decision We conclude t

Judge Kline s findings in this regard are fully supportable on 

record and we therefore adopt them as our own

Levatino Exception 5 It is alleged Judge Kline erred in finding t

certain warehouse agreements entered into by Grace werenot subj

to section 15 of the Act and that therefore Grace s failure to me s

agreements with the Commission was not a violation of the A

Levatino has little to say in support of this claim In sum Levat

merely states that such an agreement between Levatino and Gra

was not flIed and that through Grace s inducement cajoling a

misrepresentation Levatino signed awritten agreement which did 

reflect the actual oral agreement between the parties

n

We do 

view this argument as support in any way of Levatino s claim rega

ing whether or not such an agreement may be subject to section 

Nonetheless in order to afford Levatino s claim in this exception 

appropriate attention we have carefully reviewed the record and 

Initial Decision We are not persuaded that Judge Kline erred 

finding the alleged agreement not to be subject to section 15 and 

filing requirements We are ofthe opinion that Judge Kline s

leng

discussion of this issue pages 29 through 34 in the Initial Decisio

Conclusions of Complainantin support ofits exceptions and specific Bllegations of these exceptionsnot exp

discussed herein have been scrutinized and found to be of insufBcient meritto warrant treatment here

18 F M 
LEVATINO SONS vPRUDENTIAL GRACE LINES 85

satisfactory as a matter oflaw as to the situation presented in this case

We have not been persuaded differently by the conclusory but unsup

ported statements of Complainants exceptions

Levatino Exception 6 It is here alleged that Judge Kline erred in

finding that Grace s settlement in the All Chilean case did not consti

tute rebating or the use ofunjust or unfair devices to allow shippers

to obtain transportation at rates below regular rates To support its

contention Levatino again urges that Judge Kline ignores the weight

ofthe credible evidence Again we turn to the reasoning ofthe Initial

Decision and the record onwhich it is based to review the sufficiency

ofJudge Kline s conclusions Again we are unswayed by Levatino s

unsupported factual arguments in supportofits exception The record

substantiates Judge Kline s determination and whether or not some

evidence is credible and some notis a determinationwithinthe discre

tion ofthe Judge We do not see fit to overturn this decision as we find

it adequately supported by the record and discussed adequately inthe

Initial Decision Judge Kline s determination is far from unsupported

by credible evidence and we are not impressed by the argumentative

conclusions by which Levatino seeks to overturn this finding

With respect to all issues discussed above we have painstakingly

reviewed the record ofthis proceeding in light ofexceptions taken to

the Initial Decision As noted above we do not find persuasive reason

in any ofthose issues to warrant overturning the conclusions ofJudge

Kline We therefore have adopted the findings offact determined by

Judge Kline with the exception ofone factual issue raised on exception

by Grace regarding Judge Kline s finding No 40 regarding testimony

as to certain percentages of cargo given by Stephen Levatino 3

With the exception of that single factual determination and insofar

as the allegations relating to issues otherthan shutouts are concerned

we concur with the determinations made by Judge Kline and hereby

adopt those findings as our own Specifically we adopt his conclusions

that

1 Grace is found not to have discriminated against complainant unjustly or to have

subjected complainant to undue or unreasonable prejudice ordisadvantage infurnish

ing terminal and fumigation facilities during the 1966 and 1967 Chilean fruit and

produce season

2 Grace is found notto have entered into agreements with warehouse companies

in 1966 and 1967 which constituted the type of agreement required to be filed for

approval by section 15 of the Act and

3 Grace is found not to have given rebates orto have discriminated against com

plainant in violation of sections 16 First and 17 oftheAct insettling two proceedings

brought hefore this Commission by importers of Chilean fruit and produce

3See discussion of this issue below

18 F M C
86 FEDERAL MARITIME COMMISSION

As noted above Complainant takes exception to Judge Kline s tre

ment of the issue ofshutout cargo Likewise Respondent filed exc

tions as to this issue In fact Respondents exceptions are entir

directed to this issue Because ofthe issues raised onexception rega

ing shutout cargo that problem will bedealt with in its entirety at 

time

Complainant Levatino objected to Judge Kline s conclusions 

garding the shutting out by Grace of Levatino s cargo Additiona

Respondent Grace filed a protest alleging error by the Judge as to 

conclusions regarding sections 14 Fourth and 16 First violations 

Grace and the various underlying findings which wereused to supp

those conclusions

In resolving the issue regarding shutouts in his Initial Decis

Judge Kline made no specific findings as to any unjust discriminat

or unreasonable prejudice or disadvantage imposed by Grace up

Levatino Rather he found that the general prohibition of sections 

Fourth and 16 First against any carrier unfairly treating any ship

had been breached by Grace with respect to both Levatino and ot

shippers in this trade stating

In the instant case the violations of Section 14 Fourth and 16 First do notcente

discrimination against Levatino since the record clearly shows that numerous ship

suffered shutouts in addition to Levatino

We do not necessarily agree with this conclusion or the principle 

law upon which it is based We are of the opinion that further disc

sion of that issue is warranted here

As to shutouts at issue in this proceeding wasonly Levatino s cha

that Grace had violated sections 14 Fourth 16 First and 17 of the 

by failing to provide Levatino with space accommodations 

Levatino s cargoes which Grace had contracted to carry While we 

not insist upon overnice limitation of issues to those framed in 

various pleadings we are ofthe opinion that the extension ofthis cla

to a general investigation of a course of conduct pursued by Gr

with respect to many other shippers was unwarranted

In essence Grace claims in its exceptions that the issue defined 

Judge Greer who initially heard the case was unequivocally limit

to the question of discrimination by Grace against Levatino and t

the reframing ofthis issue by Judge Kline in his Initial Decision w

an unwarranted and surprising extension of the case against wh

Grace had no chance to defend itself Insupport ofthis position Gr

cited the record in which Judge Greer stated

It is my understanding that the complainant s cargo was left behind as we

the cargo of other shippers We have established that We aretalking about dlscrm

18 F M 
LEVATINO SONS vPRUDENTIAL GRACE LINES 87

tion Idon t know how you intend to show that there was discrimination infavor of

someone ifeverybody s cargo was left behind Emphasis Grace s

Grace further claims that had it known that it was to be forced to

defend itself against the broader issue ofgeneral unfairness against all

shippers through a course of conduct it could well have adduced

evidence by which it could have so defended itself It claims that it

could readily be shown that Grace used procedures for loading cargo

in Valparaiso for many years which worked quite to the satisfaction of

all concerned shippers Further it claims thatit could show that these

procedures in fact worked well even into 1967 but that only at the

height ofthe season and because of unusual circumstances did these

procedures break down Because of Grace s alleged ability to explain

and to justify any general unfairness as found by Judge Kline Grace

maintains that fundamental fairness demands that it be given the

opportunity to present such evidence and to be accorded the fair

hearing provided by the APA various court decisions and the Consti

tution itself

While we express no opinion here as to the merits ofany evidence

which Grace might proffer in this regard we find that Grace is entitled

to present whatever evidence it may wish to rebut this broader

charge The broader issue framed by Judge Kline with respect to a

course of conduct constituting such violations as to all shippers in a

given trade warrants further consideration both with regard to this

proceeding and as a general principle In addition to Respondent s

exceptions in this regard Complainant also alleged in its exceptions

that Judge Kline erred in his treatment of the issue of shutouts

Levatino urges that

Judge Kline did not find GRACE discriminated against LEVATINO by shutting out

LEVATINO cargo LEVATINO submits that the failure to find discrimination against

LEVATINa ignores the weight of the credible testimony

In light of this discussion we reserve judgment as to subjection by

Grace ofComplainant to unfair treatment unjust discrimination or

undue orunreasonable prejudice ordisadvantage withrespect to shut

out cargo Additionally we hereby give notice of our intention to

remand this proceeding for evidentiary hearing with respect to the

practices described regarding cargo loading practices by Grace in the

Chilean fruit and produce trade

One further issue raised by Grace on exception merits our consider

ation here Grace alleges thatJudge Kline erred in accepting certain

percentages cited on the stand by Stephen Levatino regarding

amounts ofhis cargo shut out six years prior to his testimony Grace

maintains on exception that this testimony which conflicts with its

18 F M C
88 FEDERAL MARITIME COMMISSION

own contemporaneous charts and figures is inherently open to dou

because of the time elapsed between the events and the testimo

Whether or not this testimony is accurate Grace further states t

figures provided are unnecessary to any determination made by Jud

Kline We agree that the figures provided without corroboration 

the stand by a witness six years after the events are of somew

dubious reliability However we also agree that acceptance or reje

tion by us ofthese figures is irrelevant to Judge Kline s treatment 

shutouts We therefore express no opinion as to their validity a

refrain from adopting these figures as facts The validity of the

figures will be assessed more thoroughly upon the further hear

regarding this issue

Therefore it is ordered That to the extent specified herein t

Initial Decision is hereby adopted

Itis further ordered That there be remanded for full evidentia

hearing before an Administrative Law Judge the following matte

with respect to the issue of shutout cargo

1Specific findings shill be made as to whether or not Responde

subjected Complainant to unjust discrimination orundue orunreas

able prejudice ordisadvantage in violation of sections 14 Fourth a

16 First oftheShipping Act 1916 all as alleged in the complaintfi

herein

2 Specific findings shallbe made as to the amounts ofcargo book

by Respondent which the actions ofRespondent caused to be left 

the pier and not transported including therein a definition of w

constitutes booked cargo

3 Specific findings shall be made as to why Respondents loadi

and booking procedures were 1 inadequate and 2 of sufficie

extent to amount to a failure to have observed reasonable procedu

and practices in violation of sections 14 Fourth and 16 First

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

18 F M 
89

FEDERAL MARITIME COMMISSION

No 7053

LEVATINO SONS INC

v

PRUDENTIAL GRACE LINES INC

Respondents failure to observe reasonable loading and booking procedures for a lim

ited period of time in 1967 subjected complainant and other shippers to unfair

treatment and undue and unreasonable prejudice and disadvantage in violation

of sections 14 Fourth and 16 First of the Shipping Act 1916

Respondent found not to have discriminated against complainant unjustly orto have

subjected complainant to undue or unreasonable prejudice or disadvantage in

furnishing terminal and fumigation facilities during the 1966 and 1967 Chilean

fruit and produce season

Respondent found not to have entered into agreements withwarehouse companies in

1966 and 1967 which constituted the type of agreement required to be Hed for

approval by section 15 of the Act

Respondent found notto have givenrebates or to have discriminated against complain

ant in violation of sections 16 First and 17 ofthe Act insettling two proceedings

brought before the Federal Maritime Commission by importers of Chilean fruit

and produce

J Joseph Noble and James A Gallagher Jr for complainant

H Richard Schumacher and Michael R Royster for respondent

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE 1

This proceeding wasinitiated by the filing ofa complaint onDecem

ber 29 1970 in which complainant Levatino Sons Inc Levatino

alle ges thatrespondent Prudential Grace Lines Inc Grace during

the years 1966 1967 and 1968 violated sections 14 Fourth 16 First

and 17 of the Shipping Act 1916 the Act by failing to provide

Levatino with space accommodation for cargoes which Grace had

previously contracted to carry by unfairly and unjustly discriminating

lThis decision became the decision of the Commission 12116 74

18 F M C
90 FEDERAL MARITIME COMMISSION

against Levatino and unduly and unreasonably preferring competit

ofLevatino with regard to the furnishing ofwarehousing and fumi

tion facilities and by entering into settlements with competitors 

Levatino in satisfaction ofcomplaints filed with the Federal Mariti

Commission by such competitors

On September 12 1969 Levatino had commenced an act

against Grace in the United States District Court for the South

District of New York seeking compensatory damages in the sum 

3 765 000 alleging substantially the same violations of the Act 

well as violations of the common law of the State of New Yo

Levatino Sons Inc v Grace Line Inc 69 Civ 3983 In response 

amotion to dismiss filed by Grace the Court by order dated Aug

25 1970 stayed the action

subject to further order of the Court pending referral by plaintiff LEVAT

SONS INC to the Federal Maritime Commission of the claims alleged in the c

plaintherein which areormay be within the said Commission sjurisdiction and the 

disposition of any proceedings initiated by said plaintiff before said Commission

Inaccordance with the Courts directive Levatino filed its compla

with the Commission Upon motion ofrespondent however that p

tion ofthe complaint relating to the issue ofreparation was dismiss

it appearing that the complaint was filed more than two years sub

quent to accrual ofthe cause of action See Order on Motion to D

miss May 20 1971

Hearings were held before Administrative Law Judge Herbert 

Greer in Washington D C onApril 23 24 May 3and 4 1973 Up

the retirement ofJudge Greer in June 1973 the case was reassign

to Administrative Law Judge Norman D Kline 2

FACTS

The Parties

1 Complainant is one of a number of corporate entities throu

which members ofthe Levatino family have engaged in the impo

tion and distribution offood products from Chile Argentina Italy a

other countries since shortly after the Second World War Compla

ant was formed on December 24 1963 by three brothers Steph

Anthony and Joseph Levatino and three sons of Stephen and A

thony Levatino Subsequently a fourth son was admitted to part ow

ership Apart from the interest ofAnthony which presumably pas

to his estate at his death these ownership interests have continued 

the present

iPrior to the reassignment Judge Kline attended the hearings as an observer and therefore was afforde

opportunity to assess the credibility of the witnesses through personal observation of their demeanor
LEVATINO SONS Y PRUDENTIAL GRACE LINES 91

2 Complainant actively engaged in the importation of food pro

ducts until late September or early October 1967 when the Levatino

family reorganized their business each of the three elder brothers

forming separate importing corporations Although complainant

ceased to engage in active business it remained in existence as a

corporate shell whose only function seems to be the prosecution ofthis

proceeding and other claims against Grace

3 Respondent Grace is a Delaware corporation with headquarters

in New York City For many years including the period relevant to

this complaint late 1965through early 1968 Grace has operated ships

of American registry in a scheduled common carrier liner service

between the PortofNew York and the West Coast ofSouth America

including Valparaiso and other ports in Chile Prior to January 1970

respondent was owned by W R Grace Co and was known as Grace

Line Inc In late 1969 interests associated with the late Spyros Skou

ras and his family acquired Grace Line Inc and changed its name to

Prudential Grace Lines Inc This acquisition was approved by the

Federal Maritime Commission Agreement No 9810 13 F M C 156

1969 Both before and after the acquisition Grace carried substantial

quantities ofChilean fruit and produce

The Structure ofthe Chilean Fruit and Produce Trade

4 The annual carriage offruit and produce from Valparaiso Chile

to the Port of New York is seasonal occurring during the period

beginning in late December until Mayor early June ofthe following

year

3

Importation ofsuch foodstuffs depends on the temporal reversal

of seasons between the Northern and Southern Hemispheres and in

volves the exportation to North America and Europe during the

Northern Hemisphere s winter and spring ofcommodities grown dur

ing the Chilean spring and summer

5 The commodities in question may be divided into two categories

a fruit which includes grapes nectarines plums pears and other

so called soft fruit and b produce known in the trade as hard

ware which includes melons onions and garlic The fruit is carried

aboard ship in refrigerated stowage the produce in ventilated stow

age and are also handled differently upon discharge in the United

States

6 In the two decades between the end of the Second World War

and the period in issue here a large number of Chilean firms par

ticipated in the export offruitand produce The farms providing these

crops generally are located in the Aconcagua Valley and other areas

3Aparticular season unless otherwise noted wiD be referred toas the yearin which the season ended i e

1966

season refers to the seasonwhich began in the closing months of 1965 and concluded in late spring of 1966
92 FEDERAL MARITIME COMMISSION

i

I

of central Chile in and about Santiago The port of shipment is V

paraiso

7 During the years in question 1965 through 1968 the rec

ers of Chilean fruit and produce in New York were a dozen o

importers including complainant and its predecessors These 

ceivers competed vigorously among themselves for the availa

Chilean fruit and produce business regularly sending represen

tives to Chile before the season to line up suppliers who wo

ship to them Stephen Levatino performed this crucial function 

complainant

8 Prior to 1965 the exporters usually shipped their goods to 

United States on consignment Under this system the importer 

in substance a

receiving market broker He sold the goods 

ducted from the proceeds of sale the costs of shipment handl

and sale plus a commission for himself and then made the rem

ing proceeds available to the supplier Beginning with the 1

season or perhaps earlier other methods of sale came into 

Some importers sent advances to their suppliers before the pla

ing season and deducted these advances before remitting any p

ceeds of sale Some receivers began to purchase fruit outright 

Chile Others including Levatino instituted joint account sa

whereby supplier and receiver divided the proceeds in agreed p

centages

The Handling ofFruit and Produce in Manhattan

9 During the 1960 s including the years ofprimary relevance he

1966 and 1967 Grace operated six vessels in a scheduled wee

service between Valparaisoand the Port6fNewYork usually arriv

in New York on Monday These vessels had both refrigerated 

ventilated space which was used to carry Chilean fruit and prod

respectively The vessels also carried substantial quantities of cof

During this period Grace also operated another scheduled wee

service between the Port of New York and the West Coast of So

America chiefly carrying bananas loaded at Guayaquil Ecuador 

coffee loaded in Colombia

10 Until after the end of the 1965 season Grace s vessels arriv

from Chile dischargedtheir cargo at the terminal which Grace m

tained at North River Piers 57 and 58 in Manhattan The terminal 

heated Each pier had two covered floors and the piers were c

nected through a structure at their heads The terminal served 

only vessels operating in the Chilean trade hut vessels serving vari

routes to the Caribbean including two passenger cruise vessels

18 F
LEVATINO SONS Y PRUDENTIAL GRACE LINES 93

11Upon arrival ofa vessel carrying Chilean fruit and produce at the

North River terminal the fruit consigned to all receivers was dis

charged onto the pier and moved as quickly as possible into heated

lighters supplied by the receivers This movement wasusually accom

plished within 12 to 14 hours ofthe vessels arrival Delivery into the

lighters terminated Grace s responsibilities toward the fruit Because

ofthis rapid movement no free storage time wasgranted to receivers

12 Afterdelivery into the lighters the fruit was carried down river

to the Fruit Auction Pier also called the Pennsylvania Railroad Pier

at Pier 29 This pier contained the sales rooms ofthe New York Fruit

Auction Company a sales agency which handled various imported

fruits as well as domestic products The cost ofligl terage was borne

by the receivers

13 At the Fruit Auction Pier stevedores removed the fruit from the

lighters and placed it on the pier for inspection by the Plan Quaren

tine Division of the United States Department ofAgriculture The

receivers paid for these stevedoring services After inspection the

fruit was fumigated by an independent contractor pursuant to re

quirements instituted by the Department ofAgriculture several years

prior to 1965 The fumigating contractor waspaid solely by the receiv

ers

14 During the nightfollowing fumigation the fruit wasagain sorted

by label and placed on the pier for inspection by prospective buyers

Afterinspection it wassold at auction the auction company receiving

a commission for its services All services were paid for by the receiv

ers When fruit wasimported on consignment the costs oflighterage

sorting fumigation etc were a charge against the proceeds otherwise

due the exporter

15 The receivers in the Chilean trade did not consider this method

of distribution to be entirely satisfactory because the movement by

lighter from the Grace terminal down river to the Auction Pier was

expensive and exposed the fruit to the hazards ofwinter weather and

pilferage Grace had at one time expended over 100 000 in renovat

ing and equipping a portion ofPier 58 with the objective ofestablish

ing a facility for handling fumigating sampling and auctioning

Chilean fruit Although this plan had the support of most receivers

including complainant or its predecessors it was aborted because of

labor problems

16 Produce was handled in a different manner from fruit after its

arrival at the Grace terminalThe produce consigned to all receivers

was first discharged from the ship onto the pier It was then put on

pallets and moved by stevedores supplied by Grace to a heated area

ofthe terminal where it was sorted by bill oflading mark and crate

18 FM C
94 FEDERAL MARITIME COMMISSION

j

size and was stored If any crates needed recoopering this was a

done at Grace s expense When a receiver wished to take delivery 

his produce hemade an appointment and sent a truck to the termi

The produce was then taken from the heated storage area to 

tailgate of the truck by Grace s stevedores where delivery w

effected A certain period offree time was granted during which 

produce could be left in the terminal without incurring demurra

charges All of these services were included in the freight rate 

produce

17 Grace encountered some operational problems in hand

Chilean produce at its North River Terminal experiencing congest

caused by the regular weekly influx ofcoffee and other cargo requir

large amounts of pier space the seasonal arrival of Chilean produ

storage ofmelons during periods when the market was poor limi

space for trucks to gain access and pilferage

The Shift to Port Newark in Late 1965

lB In the early 1960 s Grace leased facilities at the Port New

terminal on the west shore of Newark Bay This terminal affor

upland space useful in the operation ofcontainer ships which was 

available at Manhattan s North River piers By 1963 Grace had shif

to Port Newark its terminal operations for its service between Cal

Peru and New York In the latter part of 1965 Grace also moved 

terminal operations for its Chilean service The latter move 

prompted by the impending delivery overthe next few years of 

new container ships ofthe SANTA LUCIAclass which Grace intend

to use in its Chilean service Itwas also felt that consolidation ofb

of its services to the West Coast of South America at one term

would be more convenient for shippers of southbound cargo

19 Grace s terminal at Port NeWark consisted of tWo buildin

Sheds 13B and 140 on the north side of the ports north channel 

adjacent berthing facilities Only a part ofone ofthe two buildings 

heated

20 Grace anticipatedthat during the annual seasonal movemen

Chilean fruit and produce it would encounter congestion proble

such as it had experienced at its North River Terminal and would 

have sufficient facilities to handle the total volume of produce ca

because of the limited availability of heated space required for h

dling and storing both Chilean produce and coffee carried in the 

services from the West Coast ofSouth America Grace dealt with 

problem in 1966 and subsequent seasons by providingfor the imm

ate removal of some of the incoming cargoes which would oth

18 F
18 FMC

LEVATINO SONS v PRUDENTIAL GRACE LINES 95

wise require heated storage in Shed 140 either produce or coffee

21 Prior to the start ofthe 1966 season executives ofGrace entered

into discussions with two of complainant s principals Stephen

Levatino and his son Pat regarding the problem ofGrace s

inability

to handle the large volume of cargoes at its terminal in Newark Grace

proposed to Levatino who received the largest volume of Chilean

produce moved aboard Grace s vessels that separate warehouse space

apart from Grace s terminal be arranged for Levatino as a substitute

for the terminal facilitieswhich Grace wasobligated to provide Grace

encouraged Levatino to utilize a warehouse established by a third

party in order to avoid any questions ofimpropriety under the Ship

ping Act As a result of negotiations which were conducted on

complainant s side by Stephen Levatino with the aid of counsel in

November 1965 members of the Levatino family formed Newark

Dockside Warehouse Company which inturn rented threecontiguous

sheds numbered 105 106 and 109 near the Grace terminal

22 On November 23 1965 Newark Dockside entered into a writ

ten contract with Grace by which Newark Dockside undertook for

receivers who agreed to such handling to remove produce by truck

from Grace s pier immediately upon its arrival carry it to Sheds 105

106 and 109 and thereprovide the sorting storage and other services

normally supplied by Grace in its terminal Grace in turn agreed to

pay Dockside 26 cents per box for such services an amount which

studies had indicated was the cost Grace would incur for similar han

dling in Sheds 138 and 140 Simultaneously Levatino agreed in writing

with Grace that its incoming produce cargoes could be handled in this

mannerduring the 1966 season This alternative method ofhandling

was advertised to other receivers by Dockside which published a

tariff but only Levatino and one otherimporter Yeckes Eichenbaum

Inc chose to avail themselves ofit

23 As a result of the foregoing events the following methods of

handling produce obtained during the 1966 season Produce con

signed to receivers other than Levatino and Yeckes Eichenbaum was

delivered upon arrival into Grace Line s sheds and handled as it had

always been at Pier 58 namely placed in a heated area segregated

by bill oflading and held for ultimate delivery to the consignee upon

presentation of his delivery order and arrangements for trucking

Produce consigned to Levatino and Yeckes Eichenbaum about one

halfofthe total carried by Grace wasremoved by Dockside s trucks

immediately upon arrival and carried to Sheds 105 106 and 109

where it received similar handling Grace paid more then 74 000 to

Dockside for the furnishing ofthese services during the 1966 season

24 In 1967 Newark Dockside and Levatino concluded written
96 FEDERAL MARITIME COMMISSION

agreements with Grace similar to those of the year before Gr

entered into similar agreements withPortEntry Expeditors the o

ator ofanother warehouse in the Port Newark complex and with 

other warehouse companies located in Manhattan who agreed to 

move the produce consigned to other receivers During the 1

season 85 to 90 percent of Grace s

incoming Chilean produce 

removed by truck immediately upon arrival by various warehou

men while the remainder consigned to receivers who did not e

this form ofhandling went into Sheds 138 and 140 and was proces

there Payments by Graceto Dockside during the 1967 season amo

to 33 340

25 In 1968 Grace abandoned these alternative methods of h

dling Chilean produce and took it all including that consigned to 

various companies with which members of the Levatino family w

then associated into Sheds 138 and 140 To make room for the 

duce during the period of the Chilean movement Grace electe

provide for the removal and storage of incoming Colombia coffe

a separate warehouse maintained by the Held Company in the 

Newark complex This procedure was followed during the Chi

fruit and produce seasons of 1969 and 1970 By 1971 Grace had 

back its Chilean service to a fortnightly schedule which eliminated 

congestion problem and the need to farm out coffee

The Handling ofFruit at Port Newark

26 During the 1966 season all receivers of Chilean fruit ca

aboard Grace s vessels except Levatino and an affiliated comp

elected to receive their fruit into lighters at Port Newark an

transport it to the Fruit Auction Pier in Manhattan for sale Thepr

dure was similar to that followed in earlier years for fruit delive

through Grace s North River piers

27 For several weeks at the beginning ofthe 1966 season Leva

and an affiliated company elected to meet Grace s vessels with flat 

trucks in order to receive their fruit in these trucks rather than l

ers They then trucked it to the nearby sheds of Newark Dock

where they provided orobtained whatever processing was requ

including fumigation and sold the fruit at auction or by private 

in competition with the fruit auction in Manhattan Early in M

1966 however Levatino and its affiliate abandoned this procedu

favor of receiving fruit in lighters which were moved to the F

Auction Pier in Manhattan in the same manner as the cargo of o

receivers The costs of handling and processing fruit by the truc

method appears to have been about 7 or8 cents a box less than t

18 F
LEVATINO SONS vPRUDENTIAL GRACE LINES 97

incurred in delivery to the lighters The Levatinos however were

unable to attract buyers to Port Newark according to Stephen

Levatino because of union opposition

28 Grace had no agreement with Dockside or anyone else in con

nection with fruit shipments received during the 1966 and 1967 sea

sons Allreceivers offruit took delivery either by lighter or in the case

of a few shipments to Levatino and an affiliate by truck Prior to the

1966 season the tariffofthe West Coast South American Northbound

Conference applicable to Grace s Chilean service was amended to

provide for the immediate delivery in New York of smallfruit to either

lighters or trucks provided by the receiver

The Matter ofFumigation

29 Several years prior to 1965 the Department of Agriculture

imposed a

requirement that all incoming Chilean fruit as distin

guished from produce be subjected to fumigation That requirement

has been continued There is no dispute that with respect to fruit

carried to the Port of New York by Grace this procedure has been

accomplished without exception by the receiver at his expense after

the removal ofthe fruit from Grace s premises

30 The requirement that Chilean melons be fumigated was im

posed during the 1965 season the last season in which Grace berthed

its vessels on the North River The reason for the requirement was the

discovery of insects in the excelsior packing of a few shipments of

melons received at Grace s terminal The receivers ofthese melons

requested that Grace permit them to arrange for fumigation on Pier

58 but were refused permission with the result that they were re

quired to truck the melons to a fumigation facility elsewhere in Man

hattan at their own expense before making them available for sale

31 The infestation of occasional melon shipments and the corre

sponding requirement of selective fumigation continued during the

1966 season the first in which Grace vessels berthed at Port Newark

Melons consigned to Levatino were fumigated at the sheds ofNewark

Dockside to which the latter as Grace s contractor had removed

them on arrival Dockside supplied without charge to Levatino the

use of floor space and pallets but Levatino was required to pay an

outside fumigation contractor for the furnishing of equipment and

service and for other labor costs involved as well as the costs ofinstall

ing electrical wiring piping and exhaust fans

32 When confronted with this same requirement ofoccasional fu

migation some ofthe receivers ofthe melons which werebeing taken

into Grace s sheds upon arrival requested as in 1965 that they be

18 F M C
98 FEDERAL MARITIME COMMISSION

permitted to accomplish the necessary fumigation on Grace s pre

ises Grace at first denied the request because ofthe interference w

normal pier activities and the hazards posed by the methyl brom

gas used in the fumigation process When the receivers persisted 

their requests however Grace agreed to permit fumigation onits p

during the weekend follOwing the shipments arrival which arr

usually occurred on a Monday This arrangement was not entir

satisfactory to receivers because they would have to wait more th

aweek for delivery oftheir melons Ifreceivers wished earlier fumi

tion they wererequired to take delivery from the terminal and tra

port their melons elsewhere for fumigation

33 Two receivers onone occasion each elected to fumigate mel

on Grace s premises On these occasions the receivers contrac

with an independent fumigation company which broughtin the n

essary facilities ie tarpaulins blowers and Hexihoses The receiv

paid for all these services and for the service of Grace s stevedor

contractor whose personnel moved and stacked the melons prepa

tory to fumigation Grace contributed the use of its Hoor space a

pallets on which the melons were stacked Levatino was informed 

these particular occasions which it believed to have occurred o

Wednesday evening and protested to Grace that it wanted all o

melons and fruit fumigated at the Grace terminal prior to delivery 

Newark Dockside

34 The need for melon fumigation substantially disappeared 

subsequent seasons owing to changes in packing from excelsior to ca

board and other reforms in packing procedures instituted in Ch

35 The fumigation operation at Newark Dockside involved frui

amuch greater extent than melons in a ratio of two or perhaps e

three to one After Levatino chose to abandon its efforts to mar

fruit atPort Newark and resumed the familiarprocedure oflighter

its fruitto Manhattan for fumigation and sale at the FruitAuction P

Dockside s

fumigation income and expense dropped substantially M

terial circulated to the trade by Dockside in late 1965 furthermo

emphasizes fumigation facilities for fruit but does not even ment

facilities for melons

The Matter ofShutouts

36 A shutout occurswhen cargo intended to be loaded on a shi

not loaded and is left behind when the ship sails Shutouts are de

mental to the carrier as well as the shipper since cargo leftbehind d

notgenerate freightrevenue and may provide business for compet

carriers

18 F M 
LEVATINO SONS v PRUDENTIAL GRACE LINES 99

37 During the 1967 season one ofcomplainant s principals Ste

phen Levatino complained to Admiral McNeil President of Grace

about shutouts affecting complainants cargoes in Valparaiso At or

about the same time other shippers and receivers ofChilean fruit and

produce were making similar complaints about shutouts affecting

their cargoes As a result of these complaints Grace dispatched Mr

Charles Nation one ofits executives and the late T D Baker then

the head of a firm of cargo surveyors retained by Grace to Chile in

March 1967 with directions to investigate the problem and solve it

Mr Nation arrived in Chile on March 6 1967 and remained until

April 7 1967 Mr Baker remained about 10 or 12 days

38 Upon his arrival in Chile Mr Nation proceeded directly to

Valparaiso He was approached by a Mr Pesut of Cia Frutera Sud

Americana amajor shipper offruit and produce doing business with

receivers other than complainant Mr Pesut and several shipping

brokers complained bitterly to Mr Nation about the shutouts On the

same day Mr Nation personally observed the loading ofGrace s vessel

SANTA CLARAwhich wasthen on berthin Valparaiso and which left

fruit and produce behind on the dock when she sailed Mr Nation

informed Grace s executives in New York that the carrier had a prob

lem and was directed by Admiral McNeil to take charge ofthe situa

tion anp to remain until the problem was solved

39 According to a chart prepared at Mr Nation s direction by

Grace s staff in Valparaiso fruit and produce cargoes were shutout

from the first seven voyages of the 1967 Chilean fruit season The

chart shows furthermore that cargo offered by exporters who dealt

with Levatino was shut out and that cargo offered by exporters who

dealt with other receivers in New York was also shut out The shutouts

appear to have affected cargoes offered by a large number ofshippers

intended for a large number ofreceivers without consistent pattern

40 Although cargoes consigned to receivers other than Levatino

were also shut out the volume ofshutouts alfec ing Levatino were

significant and on at least one occasion the voyage of the SANTA

ELISA sailing onJanuary 27 1967 only cargo consigned to Levatino

consisting of 2 000 boxes of melons appears to have been shut out 5

For example 30 percent of Levatino s cargo was shut out on the

aforementioned voyage ofthe SANTA ELISA 20 to 30 percent on the

voyage ofthe SANTA ISABEL sailing on February 2or 3 1967 40 to

00 brief complainant contends that it also experienced shutouts during the 1966 season At the hearing

however complainant switness Stephen Levatino denied that this had occurred If shutouts did in fact occur in

1966 however the record fails to explain the circumstances unlike the situation in 1967

Levatino contends that it was the only receiver suffering a

shut Qut on the voyageoftheSANTA OLIVIAsailing

on March 4 or 5 1967 The chartprepared by Crace s staff however indicates that numerous cargoes were shut

out not justthose of shippers doing business with Levatino

18 FM C
100 FEDERAL MARITIME COMMISSION

50 percent on the voyage ofthe SANTA CATALINA sailing on Fe

ary 10 or 12 1967 On the February 17 voyage ofthe SANTA CR

15 000 boxes of melons consigned to Levatino were left behind 

number ofinstances shutout cargoes were loaded aboard vessel

carriers competing with Grace ie Flota Mercante Grancolombi

or the Chilean Line In other instances they were loaded on Gra

vessels sailing at a later date

41 Mr Nation ascertained that the shutout problem had two m

causes First Grace s booking procedure as Mr Nation describe

was very sloppy It consisted of a call to shippers each Thurs

asking them what they had to offer for the following week s sail

This procedure led to unreliable and inflated bookings and mad

impossible for Grace to obtain in advance an accurate estimate of

amount of cargo which would actually be delivered to the pier 

loading Second inadequate advance planning for loading often 

sulted in the Grace ships being forced to sail before loading operati

were completed

42 While in Chile Mr Nation devised and instituted new book

and load planning procedures A practice was instituted by wh

Grace s staff would call shippers and offer them definite bookings 

example 7 000 cases of grapes in an effort to obtain an accurate 

firm commitment from the shipper The shipper might suggest 

need for more or less space and adjustments would be made wh

possible but in any event Grace would obtain a more or less fi

commitment Load planningprocedures wereimproved by laying 

the loading planfor the vessel on the Tuesday of the week prior to 

vessels arrival in consideration ofa number offactors such as capac

anticipated port time etc and relaying the proposedplan to the sh

Master for his approval or alteration Mter these reforms were 

stituted no further shutouts occurred

TheAll Chilean Settlement

43 On November 22 1966 a proceeding entitledAllChilean F

Corp et al v Grace Line Inc Docket No 664 was commen

by the filing of a complaint with the Federal Maritime Commiss

The complainants wereten companies and individuals who wereco

petitors of Levatino On December 19 1966 a similar complaint 

flied by another receiver ofChilean fruit and produce in a proceed

entitled Arthur Schwartz and justamere Farms Inc v Grace Li

Inc Docket No 669 The two proceedings were consolidated 

will be referred to hereinafter as the All Chilean case

18 F M 
18 F M C

LEVATINO SONS v PRUDENTIAL GRACE LINES 101

44 The complainants alleged various violations ofthe Shipping Act

1916 consisting of several instances of purported discrimination by

Grace in favor ofLevatino The crux ofthe complaints however was

a contention that Grace had paid to Levatino a rebate of 26 cents

per box on all fruit and produce received by Levatino during the

1966 season The complainants in Docket No 66 64 sought repara

tion in the amount of 1 400 000 and those in Docket No 669

100 000

45 A prehearing conference was held in April 1967 before Presid

ing Examiner Benjamin A Theeman Informational material was ex

changed among the parties and filed with the Examiner in October

1967 followed by motions addressed to the alleged inadequacy ofthe

complainants submissions

46 Grace signed a settlement agreement with the complainants in

Docket 664 on December 14 1967 and with the complainants in

Docket 66 69 on January 22 1968 The agreements provided that the

attorneys ofthe respective parties would present the proposed settle

ment to Examiner Theeman pursuant to Commission Rule 6 c and

would request dismissal ofthe complaints Ifsuch dismissal wereforth

coming Grace would then forthwith deliver against releases a single

check for 80 000 to the order ofcomplainants attorneys in Docket

No 664 anda single checkfor 1 000drawn to the orderofcomplain

ants attorneys in Docket No 6669 The settlements were presented

to Examiner Theeman who entered an order dismissing both com

plaints on January 23 1968 On January 26 1968 counsel exchanged

the prescribed checks and releases

47 In the current proceeding Levatino took the depositions of

seven officers or former officers ofcomplainants inDocket No 6664

Each of these individuals indicated that he and his company had

participated in the suit in good faith

48 The settlement was negotiated solely by the parties attorneys

and was fixed by them as a lump sum The complainants did not know

the figure until they were informed ofitby their attorneys Several of

them thought it was inadequate

49 Grace made a single 80 000 payment to the complainants

attorneys who after deducting their fee sent each complainant a

check for its share of the balance This balance appears to have been

allocated among the complainants in accordance with the relative

volumes oftheir business by means of a formula devised by the com

plainants and their attorneys

50 Representatives of the complainants in the All Chilean case

testified that they had never discussed the allocation ofthe settlement

payment with Grace s attorneys or any other representative ofGrace
102 FEDERAL MARITIME COMMISSION

Apparently Grace had no knowledge ofthat allocation until after 

commencement of the present proceeding

51 Inpresenting the proposed settlement to ExaminerTheeman 

January 1968 Grace s counsel expressed the view that a full s

defense of the two complaints however successful would cost Gr

more in legal fees than the projected settlement According to 

testimony ofJerome Doyle Esq a senior member ofthe law firm 

Cahill Gordon and Reindel which had represented Grace inthe 

Chilean case an attorney with over 25 years of experience in 

conduct and settlement oflitigation the settlement in theAll Chile

case was prudent According to Mr Doyle costs oflitigation acce

ate substantially as the case proceeds from the early stages ofdiscov

to trial and appeal costs accruing during the latter two stages usu

being double and triple respectively the costs of the early stage Wh

the All Chilean case wassettled costs incurred by Grace had come 

approximately 70 000 Had the case gone to trial Mr Doyle wa

the opinion that Grace would have incurred additional legal expen

of 120 000 to 130 000 for its counsel s conduct ofthe trial and p

trialbriefing Mr Doyle testified that recommendations for settlem

take into consideration future costs of litigation aside from the me

ofthe case and that settlements are prudent if a defendent can obt

a settlement for less money than it would have to expend to defe

a case successfully

DISCUSSION AND CONCLUSIONS

Levatino contends that the issues in this case simply involve 

criminationpracticed by Grace against Levatino and rebating in fa

ofcompetitors of Levatino More specifically Levatino categories 

contentions as follows

1 Grace shut out quantities of Levatino s cargoes from its sh

loading at Valparaiso on certain occasions in 1966 and 1967 there

discriminating against Levatino in violation of sections 14 and 16 

the Act

2 Grade did not provide terminal and fumigation facilities 

Levatino but did so for other receivers offruit and produce at Grac

terminal in Port Newark during 1966 and 1967 thereby forc

Levatino to bear the expense of providing its own facilities in vio

tion of sections 16 and 17 of the Act

3 Grace entered into agreements with Levatino and a warehou

company established by Levatino which provided space for the st

age of fruit and produce without filing these agreements with 

Federal Maritime Commission as required by section 15 of the A

18 F M
LEVATlNO SONS v PRUDENTIAL GRACE LINES 103

4 Grace effected a settlement with importers offruit and produce

other than Levatino who had Bled formal complaints with the Federal

Maritime Commission in two docketed proceedings whereby Grace

paid such importers a total of 81 000 which constituted a rebate in

violation of section 16 and 17 of the Act

Except for the first contention regarding shutouts the record fails

to demonstrate that any of these contentions has merit Levatino

furthermore cites few authorities for its various contentions and in

one instance alleges a violation of section 15 on brief although no

mention ofsuch violation had been made in its complaint or in any of

its previous pleadings

The Issue ofthe Shutouts

Levatino contends that the shutouts which it suffered on the first

seven voyages ofthe 1967 season were the product ofdiscrimination

against it as well as other shippers who were likewise affected Grace

admits that these shutouts occurred but argues that they merely rep

resent commercial inefficiency rather than violation oflaw and that

in any event the situation affected a wide range ofshippers indiscrimi

nately

SectiDn 14 Fourth of the Act provides in pertinent part that no

common carrier by water shall directly or indirectly

unfairly treat or unjustly discriminate against any shipper in the matter of a

cargo

space accommodations or other facilities due regard being had for the proper loading

of the vessel and the available tonnage b the loading and landing of freight in proper

condition

Section 16 First of the Act makes it unlawful for a common carrier

by water

To make orgive any undueor unreasonable preference oradvantage to any particular

person locality Or description of traffic in any respect whatsoever or to subject any

particular person locality ordescription of traffic to any undue Or unreasonable preju

dice or disadvantage in any respect whatsoever

Although Levatino concentrates on the issue ofdiscrimination in

contending that sections 14 and 16 have been violated it is not the

question ofdiscrimination that is determinative on the present record

but rather the question whether Grace complied with its statutory

obligation to treat shippers fairly in the matter of space accommoda

tion and to avoid subjecting any person to undue or unreasonable

prejudice or disadvantage in any respect whatsoever Considering

evidence adduced by Grace itself that Grace failed to observe reason

able oooking and preplanning procedures for a brief period in 1967

18 F M C
104 FEDERAL MARITIME COMMISSION

it is clear that Levatino and other shippers whose cargoes were 

out werenot treated fairly and weresubjected to undue and unrea

able prejudice and disadvantage

Itis ofcourse the basic duty of a common carrier to take the go

of all who offer unless his complement for the trip be full Ban

Distributors Inc v Grace Line Inc 5 F M B 615 620 19

affirmed sub nom Grace Line Inc v Federal Maritime Board 

F 2d 790 2d Cir 1960 cert denied 364 U S 933 1961 Ithas 

long been recognized that where the demand for space exceeds 

supply a common carrier must equitably prorate its available s

among shippers Banana Distributors Inc v Grace Line Inc c

above at page 625 Penna R R Co v Puritan Coal Co 237 U S 

1915 Boston Wool Trade Asso v Merchants Miners Trans 

1 U S S B 32 34 35 1921

A carrier must establish a reasonable plan in order to cope w

periods ofcongestion and must fill its capacity in a reasonable and 

mannerwhen such periods occur Archibald v Pan American W

Airways Inc 460 F 2d 14 9th Cir 1972 A carrier should furt

more exercise some care in avoiding continual overselling which 

sults in refusals to honor commitments Wills v Trans WorldAirlin

Inc 200 F Supp 360 368 S D Calif 1961

A failure to apportion available space in proportion to cargo o

ings may result in undue prejudice to shippers Patrick Lumber C

Calmar 2 U S M C 494 498 499 1941 R Hernandez v A Berns

Schiffahrtsgesellschaft 1 U S M C686 691 1937 In short the b

ing of cargo imposes on the carrier certain obligations of fairness 

impartiality in dealing with shippers Hellenic Lines Ltd Sectio

First and 17 Violations 7 F M C 673 675 1964

In the instant case the violations of section 14 Fourth and 16 F

do not center on discrimination against Levatino since the rec

clearly shows that numerous shippers suffered shutouts in additio

Levatino It is this indiscriminate pattern however which pointe

demonstrates that Grace had for a time exercised no care in book

cargo or in preplanning the loading of the vessel The result w

random pattern ofshutouts affecting shippers in varying degrees f

voyage to voyage There is no dispute as to the cause ofthis probl

Grace admitting that its booking procedure had been very slop

and its preplanning for loading vessels inadequate and that o

reforms were instituted no further shutouts occurred

The admittedly inadequate procedures followed by Grace can

be reconciled with the standard ofconduct expected ofcarriers un

sections 14 Fourth and 16 First of the Act which provide tha

common carrier shall unfairly treat any shipper in the matte

18 F
5As was stated in Intercoastal Investigation 1935 1 V SS B B 400 454 455

it isthe right of shippers to ship in any quantity theychoose and the obligation of carriers tocarrythequantity

tendered to them due regard being had for the proper loading of the vessel and the available tonnage

LEVATINO SONS v PRUDENTIAL CRACE LINES 105

space accommodations or subject any particular person locality or

description oftraffic to any undue orunreasonable prejudice or disad

vantage in any respect whatsoever This is not a case ofan occasional

shutout which might be considered to be an unfortunate but unavoid

able fact oflifein the shipping business rather than an unlawful prac

tice Investigation of Practices ofStockton Elevators 8 F M C 181

200 201 1964 Instead this was a continuous practice which con

tinued unabated throughout seven voyages with the result that hard

ships were visited upon shippers who tendered their cargoes to Grace

in the expectation that the carrier had taken care either to have space

available or had established a plan to apportion space insome fair and

reasonable mannerif demand for space exceeded supply 5

During this

period oftime however Grace had exercised no care and had estab

lished no discernible plan The fact that Grace subsequently took steps

to institute reforms and quite commendably so does not alter the fact

that its previous practices did not comport with the conduct which the

law expects of a common carrier The failure of a common carrier to

treat shippers fairly and impartially in the absence of standards or to

apply its standards fairly constitutes a violation of section 16 First

General Mills Inc v State ofHawaii Department ofAgriculture 13

SRR 991 994 1973 Valley Evaporating Co v Grace Line Inc 14

F M C 16 22 1970

Accordingly it is found and concluded that during a limited period

oftime between January and March 1967 in connectionwith the first

sevenvoyages ofthe Chilean fruit and produce season Grace unfairly

treated Levatino and other shippers in the matter ofspace accommo

dations and subjected Levatino and other shippers to undue and un

reasonable prejudice and disadvantage in violation of sections 14

Fourth and 16 First of the Act

The Providing of Terminal and Fumigation Facilities

Levatino contends that Grace did not provide it with terminal and

fumigation facilities but did so for otherreceivers offruit and produce

at Grace s terminal in Port Newark during 1966 and 1967 and that

as a

consequence Levatino was forced to provide its own facilities

Such conduct on the part ofGrace is alleged to have resulted in undue

or unreasonable prejudice or disadvantage and unjust discrimination

as against Levatino in violation of sections 16 and 17 of the Act

Grace contends that Levatino suffered no prejudice or discrimina

18 F MC
106 FEDERAL MARITIMJ COMMISSION

Hon since Levatino wasprovided with substantially similar term

and fumigation facilities by means of Grace s arrangement with N

ark Dockside Warehouse which facilities ifanything were sup

t

those provided at Grace s terminal at Port Newark

Section 16 First of the Act as seen a ove rnakes itunlawful 

conunon carrierby water to give any undue orunreasonable pr

ence or advantage to any particular person or to subject any 

person to any undue or unreasonable prejudice or disadvanta

any reSpect whatsoever

Section 17 ofthe Act provides that a common carrier by water

not

demand charge Of collect any rate fare Ot charge whichiB wijustlydlsQriml

between shippers or ports

Section 17 furthat provides that ll common carrierby wate ror 

person stlbject to the Act shall

est bli h observe and enforce just and reasonable regulations and pra

relating to or celjIltlcted with the receiving handling storing ordeliveryof pro

Violations ofsection 16Or 17 are not shown by tbe mere exis

ofprefurence prejudice ordis6tiii linatien In order to constitute 

lations such preference prejudice or discrimination mus

undue tlIijust or unreasonable which are factualquesti0

he determined by the Federal Mtlritime Comm ission in its d

tion AP St Philip Inc v Atlantic Ltu ltt Impf OvementVo 

13FM C 166 174 1969 Agtwment Nos T 2108s ild T2108 

12 F M C HO 122 19MInve8tigaUon of Practices of 

Elevators dted abuve at PI199 200

The recordfails to nehlol1stratethilt L atinosidFeted frOmt

or unreasonable Ir ce Or tlisaovantage 01 litijust discrimin

or that its competitors eI ioyed undue or unreasonable preft3r

What hel ilcord does Show is that Grace with the OOopelati

Levlitino took steps to cope With art attl ieipated problemconce

COngestion at its tetntitlal in Port wa tkbefol etlnt start o

1966 Chileanfrait andptodutle seaSdn the tr4l nsfer of terroit1a

erations to Port Newlnk andtlte cm6Olidationof Gface s 

AmI

ican setvices lit that location tlohvinced Giaee that its 

Newark facilities touidnol hanall Chilean fruit anQ ipi1iluc

gether with lar gequil1ltiti 6f Coffee and other oatgoes lilQVi

the various services The solunon ttttheprQblern was to provk

tel flatige ltorage space to thOse Qbileaft proouce ixJqfbrtets 

desired it Crace of course as a common batrier was obl edto 

vid e a 9afe and convenient tetnimlll space for the eteipt at1dd 

18 
Levatino also contends that it suffered financial losses in theoperationof Newark Dockside aseparate corpora

tion The record however indicates thatDockside almostbroke evenin 1966and ifanything enjoyed amodest profit

in 1967

LEVATINO SONS v PRUDENTIAL GRACE LINES 107

ery of cargo Truck Loading and Unloading Rates at New York Har

bor 13 F M C 51 62 1969 In order to relieve the problem of con

gestion and to fulfill its common carrier obligations Grace arranged

to provide alternative storage space to Levatino and later to other

importers who desired it by means of arrangements with separate

warehouse companies It is in the public interest to relieve conges

tion indeed the public interest requires that congestion be mini

mized in the interest ofefficient water transportation Free Time and

Demurrage Charges on Export Cargo 13 F MC 207 215 1970

Free Time and Demurrage Charges New York 3 U S M C 89 103

1948 Itis also not unlawful for a common carrier to contract out

part of its obligations with outside companies Free Time and Demur

rage Charges onExport Cargo cited above at pp 213 214 Banana

Distributors Inc v Grace Line Inc cited above at p

622

The record fails to demonstrate that Levatino in using the facilities

ofNewark Dockside Warehouse ratherthan Grace s terminal at Sheds

138 and 140 was deprived of terminal services and facilities which

differed significantly from those enjoyed by other importers who did

not avail themselves ofthe option to engage the services of outside

warehouse companies such as Newark Dockside On the contrary

produce consigned to Levatino wascarried by truck to Newark Dock

side at Grace s expense and as far as can be seen from the evidence

of record received handling services similar to those provided other

importers in Grace s Sheds 138 and 140 In fact evidence ofrecord

indicates that this alternative storage and handling ifanything were

superior to similar operations at Sheds 138 and 140 One cannot con

clude from these facts that Levatino was subjected to undue or unrea

sonable prejudice or disadvantage or unjust discrimination 6

Indeed

as the record shows Levatino renewed its arrangements with Newark

Dockside and Grace for the 1967 season and apparently the idea of

such alternative storage and terminal service appealed to numerous

other importers who entered into similar arrangements utilizing the

services of other warehouse companies at Grace s expense

There is similarly no factual basis to the contention that Levatino

suffered undue or unreasonable prejudice orunjust discrimination on

the grounds that it was forced to fumigate at Newark Dockside be

cause Grace would not permit it to fumigate at Sheds 138 or 140

Although Grace didincertain instances permit fumigation at its sheds

its policy was to confine fumigation to weekends because of the dan

gers associated with the process Evenin the two instances where this

18 F M C
108 FEDERAL MARITIME COMMISSION

was permitted it waslimited to certain shipments of melons and 

costs of the fumigation were borne by the importers concerned 

by Grace 7

In any event the mlior costs of fumigation borne 

Levatino at Newark Dockside involved fruit rather than melons 

the record nowhere suggests that Grace at any time permitted f

gation of fruit at Sheds 138 or 140 orbore any costs associated th

with Therefore at worst Grace provided space and pallets to 

importers who paid for the costs of fumigating certain melons in 

isolated instances whereas Levatino utilized the space and pa

provided by Newark Dockside when fumigating There is no show

that Levatino suffered any disadvantage in using space provided 

Newark Dockside much less undue or unreasonable disadvanta

1

j

1

The Alleged Unfiled Section 15Agreement

Although not alleged in its complaint or in any of its plead

Levatino on brief contends that the various arrangements w

Grace entered into with Levatino and Newark Dockside Wareh

were the type required to be flied with the Commission pursua

section 15 ofthe Act and thatby failing to flIe Grace violated that 

This is a curious contention considering that if valid Levatino an

warehouse company would likewise be in violation oflaw and th

the time the agreements were executed Levatino s previous cou

did not believe that they were required to be filed

Grace replies that these agreements did not fix or regulate r

give special rates accommodations or other special privileges o

vantages or provide for an exclusive preferential or coopera

working arrangement or in any other mannerfall within any o

seven categories enumerated in section 15 Although this partic

issue is outside the scope of the pleadings Grace has addressed i

to it and has not claimed that it has been deprived of an opportu

to make a proper defense Under these circumstances and cons

ing that the facts have been developed and argued by the partie

is proper to render a decision on the issue City ofPortland v Pa

Westbound Conference 5 F M B U8 129 130 1956 Stockton 

District v Pacific Westbound Conference 9 F M C 12 33 19

Kuhn v Civil Aeronautics Board 183 F 2d 839 D C Cir 195

Levatino cites Volkswagenwerk v FMC 390 U S 261 1968 

authority for its proposition that the Act was meant to apply t

agreements orarrangements which steamship lines may have ent

into with other steamship lines with shippers or with other car

1Even ifinthese two instances the melons were fumigated on aWednesday evenJng as Levatino conten

fact does not show that Levatino suffered as a result

18 F
LEVATINO SONS v PRUDENTIAL GRACE LINES 109

and transportation agencies Ifsuch were the law one wonders why

Congress was so careful to set forth the requirement that the agree

ments must fit into one ofseven specified categories Thus section 15

states that agreements subject to the Act are those

fixing or regulating transportation rates orfares giving orreceiving special rates

accommodations or other special privileges oradvantages controlling regulating pre

venting or destroying competition pooling or apportioning earnings losses or traffic

allotting ports or restricting orotherwise regulating the number and character of

sailings between ports limiting or regulating in any way the volume orcharacter of

freight or passenger traffic to be carried or inany manner providing for an exclusive

preferential or cooperative working arrangement

Volkswagenwerk does not stand for the proposition that the seven

categories have been eliminated from section 15 The Supreme Court

merely held that section 15 was broad enough to cover an agreement

among carriers and other persons subject to the Act assessing them

selves for the payment ofobligations under a labor contract without

a showing that the agreement had affected competition The Court

stated that the statute uses expansive language 390 U S at p273

but never held that section 15 wasdesigned to apply to all agreements

between carriers and other persons subject to the Act of whatever

type Even when referring to the legislative history ofthe Act which

the Court held to evidence a Congressional intent to have the Com

mission scrutinize the myriad of agreements found in the maritime

industry the Court limited these to restrictive agreements 390 U S

at p 276 and certainly never held that an agreement between a

carrier and a shipper was subject to the Act contrary to Levatino s

contention

The Commission and the Supreme Court itself in a later case have

made itperfectly clear that section 15 does not embrace every agree

ment between carriers and persons subject to the Act regardless of

type In Hong Kong Tonnage CeilingAgreement 10 F MG 134 140

1966 the Commission stated

In order for the Commission to have jurisdiction there are three necessary elements

There mustbe 1 an agreement among 2 common carriers by water or other persons

subject to the Act 3 to engage in anticompetitive orcooperative activity of the types

specified in section 15 Where there is an agreement between persons subject to

the Act but the cooperative conduct is not of the type specified in section 15 the

agreement is also beyond the reach of ourjurisdiction D J

Roach Inc v Albany Port

District et aI 5 F M B 333 1957 8

In Federal Maritime Commission v Seatrain Lines Inc et al 8SRR

20 908 1973 the Supreme Court held that none ofthe seven catego

8See also Boston Shipping Assn v Port of BostotJ Marine Terminal 11 F M C 1 5 1967 Section 15 Inquiry

1 VS S B 121 125 1927

18 FMG
110 FEDERAL MARITIME COMMISSION

ries enumerated in section 15 applied to agreements which prov

for acquisition ofassets or mergers without continuing responsibi

among the parties

In view of the foregoing it becomes necessary to determ

whether the arrangement between Grace and Newark Dock

Warehouse Inc falls into one of the aforementioned seven catego

Grace admits that Newark Dockside which appears to have 

carrying on the business offurnishing awarehouse in connection 

a common carrier by water is an otherperson subject to the A

Grace contends however that the only categories specified by 

tion 15 which have any relevancy to the subject agreement are t

which fix or regulate transportation rates give special rates 

commodations or other special privileges or advantages or pro

for an exclusive preferential or cooperative working arrangem

Grace contends that none ofthese applies since the agreements 

simply means by which Grace Line procured some of the ser

which it provided every produce shipper and receiver as part 

freight tariff

As noted above the arrangement which Grace had with Ne

Docksidein 1966 and 1967provided Levatino and oneother impo

of produce with alternative storage and handling not signific

different from the storage and related services provided to impo

who utilized Grace s regular terminal at Sheds 138 and 140 

alternative was open to any importer who elected to utilize the 

vices of Newark Dockside and in 1967 a number of similar elec

were made by importers in connection with other warehouses 

cost of transferring produce from shipside to Newark Dockside 

borned by Grace which paid to Newark Dockside and other w

houses in 1967 the amount of 26 cents per box Grace prov

alternative storage space to any importer who desired to avoid 

congestion at Sheds 138 and 140 at Grace s expense in recogn

ofits obligations to provide adequate terminal facilities to all ship

using its services

An arrangement such as the above does not fix rates give sp

rates accommodations or other special privileges oradvantages 

constitute an exclusive preferential or cooperative working 

rangement within the meaning of section 15 First the electio

an importer ofalternative warehousing had no effect on the pay

9Df course ifNewark Dockside weremerely the alter ego of the shipper Levatino and was created 

regulation the corporate veil couldbe piertled in which case section 15 would not apply for want of 

jurisdiction overoueof theparties to theagreement HongKong 1bnnageCeiling Agreement citedabove 

959 1BetwtNln Flota Mercante G c et0 12 F M C 83 101 102 1968 However the record shows that 

Dockside was aseparate corporation formed by theLevatino interests which published its owntariff whlch 

filed withtheCommission as required ny GeneralOrder15 46 CFR 533 and to some eXtent advertisedfor b

18 F
LEVATlNO SONS v PRUDENTIAL GRACE LINES III

ofthe line haul rate published in Grace s tariff since the movement

froin shipside to the off dock warehouse was at Grace s expense Sec

ond although storage accommodations at Newark Dockside might

have been physically different from the facilities at Sheds 138 and 140

there was nothing special about them since they were open to any

importer who wished to use them and notified Grace and Dockside of

that election Similarly the off dock accommodations conferred no

special privileges or advantages for the same reason

IO

Third Grace s willingness to pay for the cost ofmoving plQduce to

an off dock warehouse in fulfillment ofits common carrier obligations

did not constitute an exclusive preferential or cooperative working

arrangement within the meaning of section 15 again for the reason

that any importer ofproduce was free to elect this alternative ware

housing Indeed in the 1967 season so many importers chose alterna

tive warehousing that Grace s Sheds 138 and 140 were left to handle

only 10 to 15 percent ofthe total volume of incoming produce An

exclusive preferential or cooperative working arrangement ac

cording to theSupreme Court in the Seatrain case cited above is one

which is similar to one of the six types of agreements previously

enumerated in section 15 8 SRR at p

20 913 u In this instance the

relevant type is that pertaining to special rates accommodations or

other privileges or advantages as discussed above

In short these arrangements merely gave importers ofproduce the

option ofchoosing substitute warehousing inlieu ofGrace s Sheds 138

and 140 at Grace s expense with no special privileges preferences

or advantages provided by Grace pursuant thereto

Levatino cites no authority for the proposition that a carrier in

contracting out part of its obligations must fileits agreement with the

Commission pursuant to section 15 in the absence of special privi

leges preferences advantages exclusions or anything else which

would bring it within one of the seven categories enumerated in

section 15 Inaddition to Volkswagenwerk the only cases cited which

bear on section 15 are City ofLos Angeles v Federal Maritime Com

mission 385 F 2d 678 D C Cir 1967 and Carnation Co v Pacific

Westbound Conference 336 F 2d 650 9th Cir 1964 City of Los

Angeles involved a terminal agreement which among other things

provided for a preferential berthing assignment with a special max

imum minimum payment provision Such an arrangement is there

fore preferential and special similar to a number of terminal

lOA special rate or accommodation furthermore isonly atype of special privilege oradvantage as section

15 is worded since the statute specifically refers to special rates acconunodations or other special privileges or

advantages Emphasis added

liThe Court also held that this last category in section 15 was meant as a

catchall provision intended to

summarize the type of agreements covered B SRR at p

20 913

18 F M C
112 FEDERAL MARITIME COMMISSION

leasing agreements approved on the West Coast See eg Agreem

Nos T 2108 and T 2108 A 12 F M C 110 1968 Agreement No 

Term Lease Agree Long Beach Calif 8 F M C 521 1965 

Carnation case cited by Levatino wasreversed by the Supreme Co

Carnation Co v Pacific Westbound 383 U S 213 1966 and in 

event involved the interrelationship between section 15 and the 

trust laws rather than any issue relevant to the present proceed

Accordingly it is found and concluded that the arrangement

which Grace providedalternative storage to importers desiring to 

space other than Grace s Sheds 138 and 140 were neither spe

exclusive nor preferential conferred no special privileges or ad

tages and did not fall under any of the seven categories enumer

in section 15

TheAll Chilean Settlement

Levatino s final contention is that Grace entered into an unla

settlement with importers of fruit and produce other than Leva

in satisfaction offormal complaints with which had been filed with 

Federal Maritime Commission By the terms of this settlement G

paid over to these importers the sum of 81 000 an act w

Levatino contends was discriminatory and a rebate in viola

of sections 16 and 17 of the Act l2

Grace replies that the settlement represented a prudent expe

ture which saved Grace considerable amounts of money by term

ing litigation Grace furthermore contends that no rebating 

involved since the lump sum settlement was negotiated by 

parties attorneys and was subsequently distributed to the var

complainants in a manner decided upon by complainants and t

counsel without the knowledge or participation of Grace

Section 16 Second ofthe Act makes it unlawful for a common ca

by water

j

i

I

To allow any person to obtain transportation for property at less than the regular 

or charges then established and enforced on the line of such carrier by means of 

billing false classification false weighing false report of weight orby any other 

or unfair device or means

The law of course encourages settlements and every presump

is indulged in which favors their fairness correctness and val

generally General Discount Corp v Schram 47 F Supp 845 D 

IilAlthough Levatinoalleges a violation of section 17 the gravamen of it complaint centers on rebatin

on allegations relating toan uqjust device orunfairdevice Of means which pertain to section 16 Second not 

17 Levatino also alleges that the settlement resulted In the destruction of its business because its reputatio

Chileansuppliers was iqfured Evidence ofrecord refutes this contention but in any event it is only relevan

issue of reparation which is not present in this proceeding as noted earlier

18 F
In PrinceLine Ltd v American Paper Exports Inc 55 F 2d 1053

1055 2d Cir 1932 Judge Learned Hand stated

LEVATINO SONS v PRUDENTIAL GRACE LINES 113

ED Mich 1942 Florida Trailer Equipment Company v Deal 284

F 2d 567 571 5th Cir 1960 Settlements furthermore are not ordi

narily open to collateral attack by third parties United States v Blue

Chip Stamp Co 272 F Supp 432 D Ct CD Calif 1967 affirmed

sub nom Thrifty Shoppers Scrip Co v United States 389 U S 580

1968 Levatino cites one authority for the proposition that the settle

ment wasin reality a rebate and an unjust orunfair device or means

to obtain transportation at less than the regular rates or charges

namely Hohenberg Brothers Co v Federal Maritime Commission

316 F 2d 381 D C Cir 1963 That case however hardly provides

support for Levatino s contention since it involved a shipper who

demanded a rebate on the basis ofa claim which the shipper knew to

be false and both the carrier and the shipper had engaged in false

billing in such a way that competitors were unaware of what had

transpired In the All Chilean case the record cleary indicates that

complainants had filed their claims in good faith and had openly pur

sued the matter ina public forum ie the Federal Maritime Commis

sion with no intention to conceal these activities from competitors 13

The essence of an unjust orunfair device or means prohibited by

section 16 Second is an element of deception or concealment In

Pacific Far East Lines Alleged Rebates 11 F M C 357 364 1968 the

Commission stated

f

he unjust orunfair device or means must partake of some element of falsifica

tion deception fraud or concealment

The law did notforbid all concessions to a shipper apparently it assumed that if these

were above board and known or ascertainable by competitors the resulting jealousies

and pressures upon the carrier wouldbe corrective enough But itdid forbid the carrier

to grant such favors when accompanied by a concealment and its command in that

event was as absolute as though it had been unconditional

Even a rebate is not held to be in violation of section 16 Second

unless it is founded on a false claim etc Hohenberg Brothers Co v

Federal Maritime Commission cited above at p 385 note 11

The record is abundantly clear that the settlement which Grace

entered into inthe AllChilean case wasfree ofany elementoffalsifica

tion deception fraud or concealment Unrefuted testimony ofrecord

demonstrates that Grace s decision to make a lump sum payment to

complainants counsel wasa prudent decision designed to save Grace

considerable amounts ofmoney by terminating costly litigation There

I3lndeed among the things that Levatino complains about is the fact that news of the All Chileanlitigation was

published in the New York Times and circulated in Chile

18 F M C
114 FEDE1AL MARITIME COMMISSION

is furthermore no evidence that Grace s decision was based up

desire to discriminate against Levatino nor is there any evidence 

the lump sum payment which Grace made to complainants co

in satisfaction ofthe complaints was designed by Grace to have 

relationship to particular rates paid by complainants On the cont

the record shows that ultimate distribution ofthe lump sum to 

plainants was accomplished by complainants counsel in a mann

to which Grace had no knowledge or control

Accordingly it is found and concluded that the settlement ofth

Chilean case was an exercise of prudent managerial discretio

Grace in noway constitutingrebating or the use ofan unjust oru

deVice or means in violation of section 16 Second of the Act

ULTIMATE CONCLUSIONS

Fora liltlited period of time between January and March 196

connection with seven voyages loading at Valparaiso Chile G

unfairly treated Levatino and other shippers in the matter of s

accommodations and subjected Levatino and other shippers to un

and unreasonable prejudice and disadvantage in violation ofsec

14 Fourth and 16 First of the Act on account of Grace s failu

observe reasonable loading and booking procedures

Grace didnot subject Levatino to undue orunreasonable preju

or disadvantage or unjustly discriminate against Levatino in the 

nishing ofterminal and fumigation facilities duringthe 1966 and 

Chilean fruit and produce seasons

Grade did uotenter into any agreements with warehouse com

niesduring the 1966 and 1967 seasons which were of the type 

quirecf to be filed with the Commission pursuant to section 15 o

Act

Grace s settlementwith complainants in the All Chilean case did 

constitute rebating nor the use of an unjust or unfair device or me

to allow shippers to obtain transportation for less than regular ra

in violation of section 16 Second of the Act nor in any way vio

section 17 of the Act

WASHINGTON D C

August 17 la73

S NORMAN D KLINE

Administrative Law Judg

18 F
115

FEDERAL MARITIME COMMISSION

DOCKET No 7261

IN THE MATTER OF AGREEMENT Nos T 2455 T 2553

BETWEEN PHILADELPHIA PORT CORPORATION AND DELAWARE

RIVER TERMINAL AND STEVEDORING CO INC

LAVINO SHIPPING COMPANY RESPECTIVELY

Agreement Nos T 2455 and T 2553 as amended are agreements subject to the provi

sions of section 15 of the Shipping Act 1916

Agreement Nos T 2455 and T 2553 as amended are true and complete copies of the

understandings and or arrangements between the parties

The parties have implemented said agreements prior to receiving approval by the

Commission pursuant to section 15

The situation brought about by the subject lease agreements ie the operation of all

modern full container ship handling facilities within a port by a single operator

is found to be so anticompetitive as to be detrimental to the commerce of the

United States in violation of section 15

The intra port anticompetitive aspects of the subject operations warrant disapprovalby

the Commission of Agreement No T 2455 on the basis of undue or unreasonable

preference orprivilege to the Lavino interests to the detriment of other compet

ing terminal operators stevedores in violation of section 16 First

Approval of the Agreement No T 2455 would establish or enforce unjust or unreason

ahle practices in violation of section 17 of the Act

Agreement No T 2455 as amended is disapproved subject to approval upon resubmis

sion to the Commission if within 90 days of service of this report no tenant or

consortium thereof has submitted an acceptable bid for operation of the Tioga

facilities as set forth herein

Agreement No T 2553 as amended is approved

Edward Schmeltzer and Edward Sheppard IV for Philadelphia

Port Corporation respondents

FrancisA Scanlan and Sean O Callaghan for Lavino Shipping

Company and Delaware River Terminal Stevedoring Co Inc re

spondents

Martin McHugh and JamesALeonard for Atlantic Gulf Steve

dores Inc petitioners and Independent Pier Company intervenor

Donald Brunner Paul Kaller and DavidFisher Hearing Coun

sel

18 F M C
116 FEDERAL MARITIME COMMISSION

REPORT

Decided 12674

By THE COMMISSION Helen Delich Bentley Chairman James 

Day Vice Chairman Ashton C Barrett and Clarence Mo

Commissioners

This proceeding arises under a Commission Order of Investiga

served December 5 1972 naming Philadelphia Port Corpora

PPC Lavino Shipping Co Lavino and Delaware River Termina

Stevedoring Co Inc DRT S as respondents Atlantic GulfSte

dores Inc A G wasmade petitioner Hearing Counsel participa

in the proceeding On February 21 1973 the petition ofIndepend

Pier Company Inc Independent for leave to intervene wasgran

The investigation relates to lease agreements covering conta

facilities in the Port ofPhiladelphia Port

The Commission s Order ofInvestigation requires a determina

of the following questions

1

I

I

1 Whether Agreements Nos T 241515 and T 25153 as amended are agreements 

ject to the provisions of section 115 of the Shipping Act 1916 hereinafter the Ac

2 whether Agreements No T 2455 and T 215153 as amended are trueand comp

copies of the understandings and Iorarrapgements between the parties

3 whether the parties have in any manner implemented said agreements un

standings or arrangements prior to receiving approval by the Commission pursua

section 15

4 whether the agreements are unjllStly discriminatory orunfair as between car

or operate to the detriment of the commerce of the United States or are contra

the public interest in violation of the standards of section 115

5 whether said agreements should be approved disapproved ormodified purs

to section 115

6 whether the agreements grant undue or unreasonable preference oradvan

to D RT S and or Lavina orsubject A Gorothers to any undueoranyunreason

prejudice or disadvantage in violation of section 16 First and

7 whether the agreements establish or enforce unjust and unreasonable regulat

and practices relating to or connectedwith the receiving handling storing ordel

ing of property in violation of section 17

Sixteen days of hearings wereheld in Philadelphia and inWash

ton There were 23 witnesses 133 exhibits and 2 611 pages of te

mony

In his Initial Decision served January 17j 1974 Administrative L

Judge Stanley M Levy concluded that the subject agreements 

amended should be approved In so doing he found that the sub

leases are agreements subject to section 15 of the Act that the sub

Conunissioner George H Hearn did not participate

18 FM 
THE PARTIES

IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 117

leases are true and complete copies of the understandings and or

arrangements between the parties and that the subject leases do not

violate the standards of sections 15 16 First and 17 ofthe Act as set

forth in the Order of Investigation He did find however that the

parties had implemented the agreements prior to obtaining approval

from the Commission pursuant to section 15

Exceptions and replies to exceptions were filed by all parties to the

proceeding Oral argument was held before the Commission on June

12 1974

PPC is a nonprofit nonstock corporation whose Board ofDirectors

represents the City of Philadelphia the Chamber of Commerce of

Greater Philadelphia the Commonwealth ofPennsylvania the Dela

ware River Port Authority and the general public PPC was formed

in 1965 to be an intermediary party between the City ofPhiladelphia

which owns most of the marine terminals inPhiladelphia and private

terminal operators who lease and operate such facilities Marine ter

minal facilities in Philadelphia were leased to PPC pursuant to two

leases with the City

Lavino a terminaloperator agent and stevedoring company is the

lessee ofthe Packer container terminal DRT S the terminal operat

ing company which leases the Tioga container terminal is a wholly

owned subsidiary ofJ A McCarthy which in turn is awholly owned

subsidiary of Lavino Lavino McCarthy and DRT S have interlock

ing directorships and common officers and for all practical purposes

comprise a single entity

In addition to its leases at the Packer and Tioga terminals here

inafter set forth in detail the Lavino organization operates in thePort

of Philadelphia 17 general cargo berths at various piers

A G is awholly owned subsidiary ofJohn W McGrath Corporation

and operates seven general cargo berths in the Port

Independent a stevedore in the Port of Philadelphia since 1876

presently operates 13 general cargo berths 4 ofwhich are scheduled

for demolition

THE AGREEMENTS AND FACILITIES

Agreement No T 2455 is a sublease between PPC and DRT S for

Container Berths 4 and 5at the Tioga Marine Terminal Itwasentered

into on August 7 1970 and filed with the Commission for approval

pursuant to section 15 on September 21 1970

Agreement No T 2553 is a sublease between PPC and Lavino for

I8 FM G
118 FEDERAL MARITIME COMMISSION

Container Berths 4 and 5 at the Packer Avenue Marine Termina

wasentered into onAugust 6 1971 and filed with the Commission 

approval pursuant to section 15 on August 27 1971

Interim rental agreements intended to allow operation ofthe c

tainer berths as they might be completed in whole or in part w

entered into onApril 2 1971 and on June 29 1971 for Tioga 

Packer container berths respectively These were filed for Com

sion approval on August 27 1971

On December 28 1971 amendments to both Agreements w

filed with the Commission by PPC

The Tioga Imarine terminal was constructed on a fill site on 

Delaware River The facilities leased to DRT S pursuant to Ag

ment T 2455 comprise only a portion of the Tioga terminal comp

and are referred to as Tioga I Berths 4 5 1Tioga I Berths 

5 consists ofthe two upstream marginal berths totalling 1 272 fee

length together with approximately 22 acres ofcontiguous paved 

tainer handling and storage area a Kocks container crane crane 

and rail tracks and was substantially completed as ofAugust 1 1

An additional Kock s crane is being added to the terminal

Packer II Berths 4 5 like the Tioga Ifacility is constructed 

a fill site and like Tioga I is part of a larger terminal complex 

Packer Avenue I II marine terminals Packer II Berths 4 

consists of two downstream marginal berths totalling 1 211 fee

length and storage area a Kock s container crane crane rails and 

tracks An additional Kock s crane is being added to the termin

BACKGROUND

In reaching a determination of the issue of monopolization o

modem container facilities in the Port it is necessary to develop 

history of the advent of containerization in Philadelphia which 

minated in the subject lease agreements

From the late fifties to 1970 the PortofPhiladelphia was in a s

ofdecline The marine terminal facilities ofthe Port were deterio

ing Shipping lines were abandoning the Port The Port was fa

behind its competitor ports in cargo tonnage and in the developm

of modem cargo handling facilities Diversion of cargo away f

the Port to competiIli ports was increasing The momentum 

the container revolution waS increasing and was threaten

the Port with further loss of cargo The Port seemed to be dy

IThe remainingTioga facilities Tioga II consist of 3marginal berths 2slip berths 1 ofwhichis ararro 

a

300 000 square foot transit shed and approximately 20 acres of paved storage area These faciUties are lea

Sea Land Service Inc DRTSand Thur Ch m Service a divisiQrt of ORT Industriet Inc

18 F 
IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 119

This situation was a major reason for the formation of PPC in 1965

PPC under termsof a lease agreement with the City dated May 24

1966 as amended assumed the administration ofthe City s existing

leases with pier tenants and agreed to pay the City annual rentals

through 1998 for the use ofthese facilities This lease with the City is

entitled the Consolidated Lease Agreement

PPC entered into a separate agreement with the City with respect

to the planning constructing extending and improving ofadditional

facilities This agreement was executed on September 23 1966 and

is entitled the Port Improvements and Lease Agreement Port Im

provements Lease

PPC is the lessee sublessor of 38 different parcels of real estate

pursuant to its leases with the City These consist ofboth waterfront

property operated as marine terminals by the sublessees and prop

erty near the water utilized as terminal backup areas

PPC s

tenancy ofthe Tioga Iand Packer IIterminals is derived from

the Port Improvements Lease

PPC receives income basically from threesources 1 subsidies from

the City ofPhiladelphia and the State ofPennsylvania 2 rental in

come from piers and facilities other than Packer and Tioga and

3 rental income from Packer and Tioga

For all practical purposes rental income from other piers and facili

tiesequals the debt service and retirementrequirements onoutstand

ing bond issues for those facilities old debt

Rental income from Packer and Tioga does notpresently equal debt

service and retirement requirements on outstanding bond issues for

these facilities new debt To the extent that rental income is insuffi

cient tle balance to meet debt service requirements is paid out of

funds received from the City and State This difference is denomi

nated in this proceeding as a subsidy distinguished from full for

mula rental which is a rental equal to meet debt service require

ments Based on cargo forecasts and five year lease renewal terms

rentals for the container terminals are estimated to reach fullformula

rental in the sixteenth year Thereafter rental income should exceed

debt service requirements

In 1967 PPC commissioned McKinsey Co to undertake a study

as to the future needs and potential of the Port That report was

completed in September 1968 It indicated that the prospects for

attracting container traffic to the Port were very poor and that the

Port had already been bypassed However the report found that al

though the situation for Philadelphia was difficult it could be re

deemed if Philadelphia immediately began work on constructing

modern containerized terminal facilities Itrecommended that only

18 F M C
120 FEDERAL MARITIME COMMISSION

one new facility be developed and that the facility be an integra

container breakbulk facility

PPC rejecting the limiting recommendation of the McKinsey 

port decided to proceed with the development of two integra

breakbulk container terminals They were to be located at Tioga 

at Packer PPC had commenced a search for interested tenant

these proposedfacilities early in 1967 PPC s search period for tena

continued for approximately 20 months

PPC called general public meetings on July 6 1967 and Febru

13 1969 to describe the proposed facilities and to discuss its views 

the lease of the facilities including proposed rental payments

A mlijor point ofcontention in this proceeding is whether the 

nual rental figures quoted at these meetings ie 165 000 to 175 

per berth plus the costs of ancillary facilities were negotiable or n

negotiable

Protesting witnessescontend that they relied onthe PPC memo

dum distributed at the first meeting which stated in pertinent 

thateach prospective tenant must assure that it is prepared to ac

rental rates in the range discussed verbally Protestants thus ar

that the rentals quoted to all prospective tenants were thought 

them to be nonnegotiable However the record in this proceed

discloses that the rents were never actually described as nonnego

ble

PPC contends that its price policy is found in its letter ofJune 

1967 inviting the prospective tenantsto the July 6 1967 meeting 

following quotes are deemed to reflect their position

Since the facilities are now under construction the Corporation is in a positio

initiate discussion with prospective tenants

Rental rates will be set at a figure competitive with comparable facilities at o

ports There will be no bidding for facilities

Inaddition to possible rental rates the possibility of a consortium 

operate the terminal wasbroached Over the next several months 

Port renewed its efforts to interest various companies in leasing 

terminal The concept ofa consortium was one ofthe major meth

PPC considered to overcome the reluctance of individual term

operators to consider leasing a terminal on their own behalf

PPC proposed at the 1969 meeting that itmight assume 51 perc

of the interest and obligation of such a consortium in order to m

mize the financial risk of the private operators involved O

again as in the July 1967 meeting there was little interest am

those people participating in renting the terminals Shortly a

the February 1969 meeting A G and Independent inform

18 F
PACKER NEGOTIATIONS

IN THE MATIER OF AGREEMENT NOS T 2455 T 2553 121

PPC that a consortium did not appear feasible at that time

At this point PPC having no other companies interested in the

terminals devoteditself to negotiating the best possible terms it could

from the only two companies with any interest in the terminals Le

Lavino and DRT S Negotiations over terms conditions and rental

rates continued over the next several months These negotiations

were protracted and involved substantial controversy over lease

terms and conditions Eventually the two leases were executed the

Tiogalease onAugust 7 1970 and the Packer lease onAugust 6 1971

Instinctive in the question raised by the Order ofInvestigation for

determination is whether it is in the public interest to have the only

two modern container terminals in the Port of Philadelphia in the

hands of Lavino In resolving this question it is necessary to under

stand the events leading to the execution ofthe leases for those termi

nals

Prior to the formation of PPC the City of Philadelphia City or

Philadelphia began a program in the late 1950 s to rehabilitate the

Port when Piers 3840 were modernized Thereafter the City began

planning the Packer Avenue Terminal and first approached U S

Lines After U S Lines withdrew from the negotiations the City in

1962 approached Lavino and ultimately leased it the facility known

as Packer I a breakbulk facility

From the time the Packer negotiation commenced in the spring of

1962 numerous difficulties as to the physical configuration and con

ilicts with adjacent tenants wereencountered When agreement with

an adjacent tenant for the construction of a new berth at the northern

end of the terminal site could not be resolved the City decided to

extend the proposed facility further downstream As a result of this

change in plans a right of first refusal was granted Lavino on any

downstream berths whichmight be constructed later The redesigned

Packer I upstream breakbulk berths then became three marginal

berths running a

length of 1 823 feet and covering roughly 38 acres

When an agreement was finally executed in 1965 between the City

and Lavino the rental for Packer Icame to 665 000 per year for a

15 year term Although construction at Packer Ibegan in 1965 it was

not completed and operational until 1968 because further design

problems created delays

By this time PPC had been created and in late 1968 PPC informed

Lavino that it intended to proceed with the development of the

Packer Avenue extension Packer II that it would be designed for

18 F M C
122 FEDERAL MARITIME COMMISSION

containers and that all other terminal operators in the Port we

being advised that they could negotiate for this facility On Octob

18 1968 PPC asked Lavino whether itwould be willing to enter in

a consortium of terminal operators to operate Packer IIand wheth

Lavino would be willing to waive its right of first refusal which w

contained in its lease agreement with the City for Packer I Lavi

responded onNovember 1 1968 stating itwould be inclined to ag

to enter into a consortium and that it would be willing to wl live 

right of first refusal for a period offive years

Subsequently ameeting was held with prospective tenants onFe

ruary 13 1969 Shortly thereafter General Clark Executive Direc

of PPC informed Lavino that there was insufficient interest in t

consortium on the part of the terminal operators and that PPC h

decided to negotiate exclusively with Lavino regarding the Pac

container terminal Packer II As a condition ofleasing Packer II P

required that Lavino lease also the roll on roll offbElrth at full form

rental of 325 000 per year The lease for Packer II container ber

4 and 5 for a 5

year term provided for a minimum annual rental 

100 000 with a 10 rental on all containers handled in excess 

10 000 per year with renewal options at higher rentals The to

guaranteed rental for Packer Iand IIis 1 090 000 per YElar when fu

operational

The lease for Packer II Agreement No T 2553 was executed 

tween PPC and LavineonAugust 6 1971 and filed with the Comm

sion August 27 1971

On June 29 1971 PPC and Lavino entered into an interim ren

agreement submitted to the Commission onAugust 27 1971 cov

ing use of a new Kock s container crane at Packer II Berths 4 

upon its certification by the City and ofthe limited facilities wh

were then and soonwould become available The crane wascertif

for use on July 7 1971 and the interim agreement became effect

as of that date Further facilities became available and rental w

increased accordingly onMay 11 1972 and then onJuly 21 1972 T

first container was handled there on July 9 1971

One ofthe issues raised in the proceeding was the Elffect ofLavin

right offirstrefus ltolease additional facilities tol

e constructed at 

Packer Avenue Terminal Those opposing the approval of the Agr

ments contend that this right gave Lavino such an undue advanta

that it rendered fruitless any effort on their part to obtain a lease 

the container berths and hence they did not make a strong effort 

do so

As set forth previously this right of first refusal stemmed from 

earlier lease between Lavino and the City of Philadelphia und

18 FM
TIOGA NEGOTIATIONS

IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 123

which Lavino leased other portions ofthe Packer complex The right

offirst refusal allowed Lavino to lease the facility if it werewilling to

pay rental equal to that offered by any other prospective tenant

Any prospective tenant could outbid Lavino by any minimal

amount If Lavino refused to meet the additional offer the other

operator would obtain the lease The advantage to Lavino was that it

could obtain the lease by merely meeting the other offer The disad

vantage to other parties was that they had to exceed Lavino

Inspite ofPPC s letter ofJune 29 1967 inviting prospective tenants

to the July 6 1967 meeting which stated that the rental rates would

be set and that therewould be no bidding protestants argument

ofundue advantage to Lavino insofar as the Packer Avenue facilities

are concerned is well founded The fact that Lavino would waive its

right offirst refusal for five years would not give a potential consor

tium oftenants much in the way oflong term prospects for operation

of the Packer container berths

In 1967 PPC proposed to develop a new terminal at Tioga Where

upon DRT S was approached by PPC and agreed to the cancellation

of a leasehold interest in a 20 acre tract and to the sale in 1968 of a

25 acre parcel ofland to ppc These parcels were needed in order to

develop the proposed new terminal at Tioga

As a condition to DRT S agreeing to cancel its leasehold interest

and sell its 25 acre parcel PPC granted DRT S a

right offirst refusal

on the two downstream breakbulk berths Berths 1 and 2 to be con

structed at Tioga No right offirst refusal was evergranted to DRT S

or anyone else with respect to the upstream container berths Berths

4 and 5 at Tioga

As previously stated little interest was shown in leasing the Tioga

facilities after either the 1967 or 1969 meetings After several discus

sions with officials of DRT S PPC suggested that DRT S should

undertake to lease and operate the entire Tioga complex

The terms ofthe proposed lease were to be aminimum guaranteed

rental of 100 000 per year for the two container berths plus a 10

charge for each container handled over 10 000 containers up to a

maximum of 400 000 per year oncondition that DRT S also agreed

to take the lease on the adjacent breakbulk berths at full formula

rental of approximately 700 000 per year This resulted in a mini

mum rental of 806 250 per year and a maximum ofapproximately

1 100 000 per year for all the Tioga berths

18 F M G
124 FEDERAL MARITIME COMMISSION

DRT S and PPC also agreed that a condition ofthe lease would

that the terminal wasto be designed so as to allow for a

single termi

operator and stevedore as this would result in significant operat

cost advantages DRT S further agreed that if PPC received an of

from another potential tenant for the threeup stream two contai

and one breakbulk berths DRT S would stand aside There were 

other such prospective tenants

Because of continuing construction delays Luckenbach Steams

Co withdrew from its partnership with DRT S for operating Tio

in October 1969 This left DRT S without an experienced steved

ing company with the resultant loss of shipping contracts necess

to obtain business for Tioga In February 1970 DRT S commenc

negotiations with International Terminal Operating Company I

ITO as a potential partner or associate in leasing the Tioga Termin

but inJune 1970 ITO indicated that it wasnot prepared to enter i

such an arrangement at that time During these negotiations Gene

Clark of PPC was kept informed of progress as the leases for Tio

originally contained a clause allowing assignment to ITO should 

change its position In April 1970 DRT S also approached Lav

with the aim ofexploring acquisition by Lavino but Lavino stated t

it wished to await ITO s eventual decision On June 10 1970 ame

ing was held between Robert P Levy and Robert J Tarr of DRT 

and Mr Harry Galfand City Director of Commerce and membe

PPC Board of Directors General Clark and Irving Good who w

then the City s Deputy Director of Commerce at which time IT

decision and negotiations between DRT S and Lavino were 

cussed Although PPC raised no objection to the negotiations w

Lavino General Clark informed his Executive Committee that 

doubted that it would be in the best interests of the Port to conc

trate such a large proportion of its new facilities in the hands of 

operator Heremained pessimistic about the possibility ofany alter

tive however and advised the Committee there were no other in

ested tenants and the most important single factor was to gener

commerce in the Port

On June 15 1970 a general agreement on terms ofacquisition 

been reached by DRT S and Lavino DRT S orally kept PPC 

formed ofits negotiations with Lavino but neither Lavinonor DRT 

ever requested in writing a formal legal opinion from PPC whet

the acquisition by Lavino presented any problems to ppc

Throughout DRT S s discussions with PPC regarding negotiati

with Lavino PPC never advised DRT S that it had any objection 

Lavino s

taking over the Tioga Terminal A letter of intent to le

Tioga was submitted to PPC by DRT S onJuly 13 1970 A meet

18 FM 
IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 125

between DRT S and PPC was held August 3 1970 at which time it

was reported that virtually all matters relating to the acquisition of

DRT S by the Lavino subsidiary J A McCarthy Inc had been

settled and that a contract of sale had been entered

On August 7 1970 PPC in its capacity as tenant from the City

entered a lease agreement with DRT S for Tioga I Berths 4 5 for

a 5

year term with renewal options The lease agreement Agreement

No T 2455 was filed with the Commission on September 21 1970

Another lease covered Berths A ro ro 1 2and 3 breakbulk Each

lease contained a provision permitting the assignment ofthe lease to

ITO in the event that negotiations between DRT S and ITO were

resumed and became successful at a later date Each ofthe assignment

clauses required that ITO would have to take over all the berths

referred to in the other lease In otherwords ITO would not have the

right to take over Berths 4 and 5 container without also taking over

the other berths This provision for assignment was retained in the

September 17 1970 settlement between DRT S and McCarthy at

which time McCarthy purchased all ofthe DRT S stock equipment

ITO neverexpressed any interestthereafter and Lavino consequently

never assigned to ITO its rights under the lease

Und r the Tioga I Berths 4 5 sublease Agreement No T 2455

PPC agreed to make available portions of the terminal for use by

DRT S as they might be completed in whole or in part The sublease

provides that the initial rental for such partial occupancy would be

negotiated and agreed to in advance

By letter ofSeptember 24 1970 PPC advised DRT S thatthe new

Kock s container crane and a limited container storage area would

become available in the near future In its letter PPC proposed that

the incomplete facility would be leased to DRT S at a rental rate

computed at 25 percent ofthe applicable rental set forth in the Tioga

sublease

On April 2 1971 PPC and DRT S entered into an interim rental

agreement submitted to the Commission on August 27 1971 for

partial use ofTioga I Berths 4 5 effective as ofApril 5 1971 and

onSeptember 1 1971 the rental wasfurther increased as more facili

ties were completed The first container washandled thereonAugust

19 1971

On November 21 1972 PPC and DRT S agreed to delay com

mencement of the five year term in Agreement No T 2455 until

August 1 1973 The agreement also provided that DRT S would

begin paying the annual rental for Tioga I Berths 4 5 retroactive

to August 1 1972

Protestants contend that an equalization clause inthe Tioga lease

18 FM C
126 FEDERAL MARITIME COMMISSION

for Berths A 1 2 3 ro ro and breakbulk absolutely prohibited 

a practical matter PPC from giving consideration to the leas

of the container berths at Tioga to any tenant or group of tenants 

less than standard rental The full equalization clause states t

following

I

If during the original term of this Lease or any renewal or extension thereof Les

shall directly or indirectly lease license grant orotherwise permit any thirdpart

use any marginal berth forming part of the Tioga Terminal for general cargo purpo

on more favorable terms conditions and rates than those hereinspecified or otherw

charged to Lessee withrespect to the DemisedPremises including abatements if 

then the terms conditions and rates herein set forth or otherwise charged to Les

shall be made to conform to such more favorahle terms conditions and rates provid

however that this clause shall not apply to any arrangement made by Lessor w

PGW for the handling of liquelled natural gas or to any arrangement made by Le

for the use ofthe remaining berths ofthe Tioga Terminal primarily for the hand

of containers Lessor will promptly disclose to the Lessee the facts representing s

more favorable terms conditions and rates Emphasis added

The equalization clause thus states clearly that its provisions are 

applicalbe for any arrangement whereby the Tioga berths are lea

primarily for the handling ofcontainers but wasonly effective sho

PPC desire to lease the additional Tioga berths for breakbulk use

It is important to note however that the record indicates t

General Clark of PPC mistakenly believed that the equalizat

clause did apply to the lease of the Tioga container berths to anyo

other than DRT S Exhibit 17 p

4 Operating under this misapp

hension PPC s officials only pursued negotiations for Tioga Berth

and 5 with DRT S

ADDITIONAL CONTAINER SITES AND FACILITIES

In determining the issue ofmonopoly raised in this proceeding 

appropriate to determine the position of PPC regarding additio

container facilities in the Port and whether potential sites exist 

construction of additional facilities

Various PPCwitnesses testified thatPPC is ready to develop a th

container facility in addition to Tioga and Packer for any qualif

tenant who is willing to commit itself with the leue

A number of potential sites exist for development of a mod

container terminal 2 None of these si4lsjs without problems So

land acquisition would be necessary aXn the case of the Schuy

River and Reading Terminal and Northern Metal sites Some turn

basin problems exist as in the case of the Schuykill River site So

South Philadelphia Penrose and Schuyklll River sites Mid Philadelphia Area of pier 4057 and Re

Terminal Port Richmond sites North Philadelphia Northern Metals site

18 FM 
CONSORTIUM

IN THE MATfER OF AGREEMENT NOS T 2455 T 2553 127

upstream navigational problems exist as in the case ofthe Northern

Metals site

Unquestionably Packer andTioga are the most modern and efficient

container facilities available in the Port The record establishes how

ever that there are at least three other container handling terminals

Northern Metals and across the river Camden Marine Terminal and

Holt none ofwhich has the modern equipment and capability speed

for handling the larger fully containerized vessels that exist at Packer

and Tioga In addition deck containers aboard breakbulk vessels are

handled at other general cargo piers Of the approximately 34 700

containers handled in the Port in 1972 approximately 29 300 were

handled at Packer and Tioga and approximately 5400 at other facili

ties

Under the same terms and conditions as contained in the present

leases A G would be willing to join a consortium to operate both

Packer Avenue and Tioga berths 4 and 5 the entire Tioga terminal

or Tioga berths 4 and 5 A G alone would undertake to operate

Packer and Tioga berths 4 and 5 orTioga berths 4 and 5 but not the

entire Tioga terminal Independent would join A G evenif no other

terminal operators inPhiladelphia werewilling to commit themselves

to a consortium to receive assignment ofthe present leases under

terms and conditions now applicable for Packer Avenue and Tioga

berths 4 and 5 or 4 and 5 at Tioga only

Other terminal operators have indicated an interestinjoining such

a consortium A G believes it could form a consortium ofat least five

members

In any event only A G has indicated any interest in forming a

consortium for the operation of the entire Tioga terminal All other

expressions ofpossible interesthave been limited to joining a consor

tium only to operate the container berths and not to take over the

obligations ofthe breakbulk and ro ro berths A G does not offer to

operate the entire Tioga terminal alone

As has been previously discussedindetail whatever favorable terms

for leasing the container berths were granted by PPC they were

granted only on condition that the lessee lease the third breakbulk

and ro roberths at Tioga th lessee lease the ro ro berth at Packer

The terms and conditions set forth in the agreements in effect are a

package

The physical configuration ofthe terminals primarily because ofthe

location of the transit sheds for breakbulk operation and because of

18 F M C
128 FEDERAL MARITIME COMMISSION

the railroad track locations at each terminal more particularly 

Packer make it very difficult though notimpossible to operate eit

complex as separate breakbulk and container terminals Thus unl

a consortium could be formed to operate an entire complex bre

bulk ro ro and container berths or a single operator werewilling 

take over the entire complex the present operator would have 

continue to operate because of lack of a viable alternative

INITIAL DECISION

J

1

AJurisdiction

The Administrative Law Judge found that PPC was an other p

son subject to the Act by virtue of the fact that it still retain

control overthe use ofthe facilities subject to the leases in quest

Citing the Commission sinterpretive rule published at 46 C

530 5b 2

3

Judge Levy concluded that one aspect of the lease in

cates that PPGretains oversight control over the use of the facilit

Le the use clauses of the two leases 4The use clauses in ligh

the alleged anticompetitive effects that flow from the subject ag

ments are found by the Administrative Law Judge to subject 

agreements to the section 15 jurisdiction of the Commission

Inasmuch as Lavino and DRT S are undisputedly other perso

subjectto the Act the agreements as suchfall within the Commissio

jurisdiction The Commission must examine not only the terms o

agreement but also the competitive consequences which may be 

pected to flow from the agreement and other facts which show 

objective and results of the agreement Citing Agreement No 

Terminal Lease Agreement at Long Beach California 8 F M C 5

529 1965

Thus PPC and the lessees are persons subject to the Act and 

leases are such agreements as are required to be filed for approva

accordance with section 15 of the Act

B Implementation Prior to Approval

Section 15 requires that every person subject to the Act shall 

mediately file with the Commission a true copy of every agreem

entered into with another person subject ta the Act and make

3Thts rule includes upersOn subject to the Act Landlords whennot acting merely in thecapacity of les

realty butwho maintain some control overlessee s rates orcompetitive practices either by unilateral action 

mutual agreement

Clause 4 8 of each l which provides

these faolUties are primarily for thehandling of containers moving in waterborne commerce through th

of Philadelphia and other uses willbe so controlled as not to interfere withthis primary use Lessor shall ha

right ofinspection and review of such other uses

18 F
IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 129

unlawful to carry out in whole or in part directly or indirectly any

such agreement before approved by the Commission

The Administrative Law Judge rejected PPC s argument that even

if the leases are subject to section 15 they have not been implemented

since the only provisions ofthe leases which make them subject to that

section are the use clauses Since the use clauses have not been

implemented and PPC has taken no steps to enforce them it claims

that the leases to the extent that they are subject to Commission

jurisdiction have not been implemented Judge Levy found that once

it is determined that a particular part requires that the agreement be

filed pursuant to that section the statute is clear that the entire agree

ment must be filed not only the clause giving rise to jurisdiction And

that before approval no part ofthat agreement may beimplemented

Hence since the record established that the terminals have been

operated pursuant to the leases since 1971 PPC Lavino and DRT S

have been in violation of the Act since then

C Sections 15 16 First and 17

Section 15 requires that agreements between persons subject to the

Act found to be unjustly discriminatory unfair detrimental to the

commerce of the United States or contrary to the public interest be

disapproved cancelled or modified Citing the standards enunciated

in the decision ofthe U S Supreme Court in FMC v Svenska Amerika

Linien 390 U S 238 1968 Judge Levy concluded thatwhile Lavino s

alleged monopoly might otherwise be contrary to the public interest

there is evidence ofrecord which establishes that a sufficient justifica

tion would fairly detract from a finding that the agreements are con

trary to the public interest hence rendering them approvable within

the meaning ofsection 15 The Judge cites the following bases as the

overridingjustification for approval ofwhat would otherwise be agree

ments the terms ofwhich are contrary to the public interest 1 the

beneficialgrowth in overall tonnage shipped through Philadelphia 2

the influx ofcontainership operators to the Packer and Tioga facilities

contrary to the pessimistic attitudes ofmany observers 3 the efficient

and economical service currently being rendered at the two facilities

and 4 the conclusion that the operation ofboth terminals by Lavino

resulted from the failure ofany other operator to undertake the opera

tional risks and commit the necessary working capital Likewise the

Administrative LawJudge concludes that the record does notsubstan

tiate a finding that the agreements afforded any undue or unreason

able preference orprivilege to DRT S andI orLavino or subjectA G

or others to any undue or unreasonable prejudice or disadvantage in

18 FMC
I 130 FEDER L MARITIME COMMISSION

violation of section 16 First Judge Levy found that PPC has repea

edly indicated a willingness to construct a third container facility if 

responsible operator werewilling to euter into a letter ofintent f

the teasing of that facility upon mutually agreeable terms ancl

that 

such firm expression ofinterest in a thirdfacility has been forthcomin

from any party protesting the agreements in issue Nor wasit fou

that there had been a showing of the establishment ofany unjust a

unreasonable practices and regulations in the con uct ofthe termin

operations such as would be prohibited by section 17 of the A

Contrary to any such showing Judge Levy concludes that the p

ponderance of the evidence reveals that the conduct of Lavino a

DRT Sin their operation ofthe container facilities has been fair a

equitable evento the extent ofvoluntarily offering an opportunity 

open stevedoring to all interested and qualified parties at the Tio

facility

In conclusion the Administrative Law Judge pointedout the Co

mission s inherent power to review continuously any agreement fi

with the Commission aad to withdraw prior approval where it 

shown that the public interest is no longer being served

EXCEPTIONS

Exceptions and replies were filed by all parties to the proceedin

Lavino and DRT S jointly except only to that portion ofthe Init

Decision which found that they have violated the Act by implemen

tion of the subject agreements prior to Commission approval In 

Sence they argue that the necessity to begin operations as soon 

possible because ofthe lIxpenses already incurred the commitmen

service container ships being urgedto call at Philadelphia and the f

that they did file amended agreements for temporary operating 

proval towhich evenA G did not object should indicate the nec

sity to begin operations as soonas practical They argue that there w

no intent on the part ofrespondents to implement the agreements 

as to violate section 15

PPC excepts to the Judge s

finding that it had implemented 

agreements in violation of section 15 on the same basis as do Lav

and DRT S Inaddition it excepts to the Judge s conclusion that i

an other person subject to the Act stating that it falls within 

Commission s exclusionary rule under 46 CFR 530 5b 2 ie tha

a landlord who has relinquished all control over a terminal facilit

A G and Independent in a joint memorandum except to 

nndings in the Initial Decision which approve the leases and allow 

continued existence of what they contend to be the monopolis

18 F M 
IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 131

control by Lavino ofall modern container terminal handling facilities

in the PortofPhiladelphia In addition A G and Independent allege

numerous instances in theAdministrative Law Judge s conduct ofthe

hearing which they contend evidence substantial material and con

tinuing bias and prejudgment which impaired his ability to function

as an impartial judge ofthe facts and the law

Specifically A G and Independent allege that Judge Levy erredin

failing to consider the potential detriment accruing from the leases

and in failing to consider the detriment to Lavino s local competition

as a result ofthe alleged monopoly They allege errorfor failure to find

that the leases involved the potential of serious economic detriment

to the Port to the container lines serving the Port to other terminal

operators in the Port to other ships agents in the Port to the taxpay

ers whose tax investment will not realize an adequate return and to

all business interests whose economic well being depends upon a

flourishing and competitive economy within the Port

Furthermore A G and Independent allege that the finding ofthe

Administrative Law Judge that PPC had accorded all port interests

equal and fair treatment in its dealings with the Port community

regarding the Packer and Tioga leases was in error They further

allege error in the finding that Lavino had made bona fide efforts to

accommodate the interests ofother stevedores in the Port regarding

the operation of the container facilities Finally they allege error in

various evidentiary and procedural matters in the conduct of the

hearings resulting in recommended approval of the proposed lease

agreements and in the failure of the Administrative Law Judge to

make specific recommendations for the protection of protestants and

others similarly situated in the Port to the end that such interests be

accorded fair and equal access to the Ports publicly built modern

container terminal facilities

The alleged procedural error on the part ofJudge Levy involves

charges of advocacy questioning ofwitnesses so as to elicit answers

favorable to the respondents position failure to afford counsel for

A G and Independent as well as Hearing Counsel the opportunity

to clarify testimony of witnesses favorable to protestants position

whose testimony had been changed somewhat after the advocacy

questioning oftheJudge had elicited answers contrary to their earlier

testimony and a general trend of bias in the mannerin which the

proceeding was conducted

Hearing Counsel except to the Initial Decision to the extent that it

recommended approval ofthe lease ofthe Tioga container facilities

Specifically Hearing Counsel contend that the entire history sur

rounding the negotiations which led to the subject leases is clouded

18 FMG
132 FEDERAL MARITIME COMMISSION

with misunderstanding and misinformation to the extent that t

protestants and others similarly situated wereneverafforded the sa

treatment by PPC as were Lavino and DRT S The resultant discre

ancy between the rental costs offered the public and those gran

Lavino and DRT S coupled with the right of Hrst refusal on 

Packer container berths held by Lavino by virtue ofits lease for 

Packer breakbulk berths and PPC s misinterpretation of the effec

the equalization clause contained in the lease for the Tioga bre

bulk berths evidence the fact that the Lavino interests had an und

advantage and orpreference in obtaining the rights to these faciliti

In addition Hearing Counsel contend that the Administrative L

Judge had disregarded certain critical facts in arriving at his conc

sion ofthe lack ofharmfuleffects brought about by the Lavino mon

oly ie the lack of a timely available third potential container faci

comparable to Packer or Tioga the lack of existing facilities capa

of conversion to full container ship service in the scope of Packe

Tioga and the wide operational disparity in terms ofsize between 

facilities operated by the Lavino interests and all other facilities in 

Port in terms of the percentage of scheduled sailings handled sch

uled container sailings handled and total containers handled al

the year 1972 Exhibits 91 98 and 99 respectively In additi

Hearing Counsel contend that a Hnding that there was no plann

monopoly clearly overlooks the fact that the takeover of DRT S 

Lavino s subsidiary JA McCarthy Inc was contingent upon 

signing by DRT S of the leases for the entire Tioga complex Exh

90 paragraph l a

Furthermore Hearing Counsel dispute the Judge s conclusion t

the favorable competitive situation in container traffic now being 

joyed by Philadelphia as opposed to thatofits major port competito

New York and Baltimore does not show that the Lavino monopol

detrimental to the PortofPhiladelphia They contendthat this con

sion clearly overlooks the point ofissue in this proceeding the lack 

competition in container traffic among terminaloperators stevedo

within the Port

Hearing Counsel further contend that the speculative conclusio

Judge Levy that the three consortium proposals expounded by A 

are unworkable is clearly contrary to the record Hearing Coun

offer as an alternative proposal that the Commission disapprove 

Tioga lease only on the condition that the Commission approve up

resubmission within 45 days ofits Gnal order in this proceeding 

lease between PPC and DRT S for Tioga if during that period 

tenant or consortium of tenants makes itself available to PPC 

assignment of the lease

18 FM 
IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 133

Finally Hearing Counsel contend that the Administrative Law

Judge committed reversible errorin the handlingof testimony offour

witnesses during the proceeding citing a verbatim account from the

transcript ofthe testimony surrounding each allegation These allega

tions of errorfor the most part deal with the refusal ofJudge Levy to

allow further questioning after he theAdministrative LawJudge had

questioned the witnesses following complete examination by the vari

ous counsel Hearing Counsel contend that the Judge s questions

opened new areas of testimony which they werenot allowed to pur

sue

Hearing Counsel and A G and Independent requested oral argu

ment which was granted and as previously noted held before the

Commission on June 12 1974

REPLIES TO EXCEPTIONS

Lavino and DRT S filed a reply to the exceptions ofprotestants and

Hearing Counsel With regard to the allegations oferror on the part

ofthe Administrative Law Judge the respondents contend that prot

estants and Hearing Counsel are substituting a personal attack on the

presiding judge in lieu of their inability to produce on the record

evidence ofa harmful monopoly in the hands ofLavino Respondents

conversely argue that the presiding judge exhibited a totally unbiased

and iJnpartial demeanor throughout the proceeding

In addition respondents contend that the Administrative Law

Judge correctly found that

IWhile all prospective terminal operators were offered full and fair opportunities

to secure the subject leases they refused to commit themselves

2 There was no evidence of detrimental effect on competition within the port and

that should such ever arise its curelies in acommitment of Lavino s competitors to

operate additional container facilities in the port

3 The powerof the Commission continuously to review and if necessary disapprove

the subject leases provides a sufficient safeguard to any anticompetitiveeffects that may

arise in the future

4 The lease agreements have benefitted the port and

5 The consortium proposals are illusory and would prove unworkableto the jeopardy

of the recent competitive gains made by the port

PPC replied to the exceptions ofHearing Counsel and the protes

tants on basically the same grounds as did Lavino and DRT S It

concludes however with the contention that the real aim ofA G in

the proceeding is to attempt to use the Commission and the maritime

laws as a tool to reverse an unfortunate business judgment made by

A G in the 1960 s ie the decision not to pursue the leaseholds on

either orboth ofthe container facilities In conclusion they contend

18 F M C
134 FEDERAL MARITIME COMMISSION

that the Administrative Law Judge correctly found that the public

benefits to be derived from the leases morethan balance anypotentia

detriment to competition flowing therefrom

A G and Independent replied to the exceptions of PPC and Lav

no DRT S by a reiteration oftheir position in support ofthe Commis

sion exercising jurisdiction overthe subject lease agreements and ove

PPC as a person subject to the Act Similarly they argue that for the

reasons set forth earlier the subject lease agreements had been imple

mented prior to Commission approval

Hearing Counsel s reply to exceptions is a restatement of the argu

ments of protestants and findings of the Administrative Law Judg

with respect to the jurisdiction of the Commission over PPC and th

subject lease agreements as well as with respect to the implementa

tion of the agreements prior to approval

CONCLUSION

We concur with the findings of the Administrative Law Judge wit

regard to the issues ofthe jurisdiction ofthe Commission 1 overPP

as an other person subject to the Act and 2 overthe subject lease

as being agreements required to be filed under section 15 of the Ac

Specifically section 1 of the Act defines an other person as

any person not included in the term common carrier by water carrying onth

business of furnishing wharfage dockage warehouse or other terminal facilities 

connection with a common carrier by water

I

PPC clearly falls within this definition albeit indirectly by leasin

facilities to terminal operators The fact that Lavino and DRT S a

other persons was not contested

Having established that the subject leases are between persons su

ject to the Act we must find that the two leases do in fact fall with

one of the seven section 15 conditions These terminal lease agre

ments when looked upon separately would clearly fall within th

section 15 conditions Further when viewed together in light of th

fact that they provide for lease ofthe only two trulymodem containe

handling facilities in the port they clearly fall within the specif

condition of section 15 which requires the filing of agreements co

trolling regulating preventing ordestroying competition 46 U S 

814

For these reasons we adopt the specific findings ofJudge Levy th

PPC is an other person subject to the Act and that the involve

leases are agreements subject to the requirementsof section 15 ofth

Act

Furthermore we concur in the findings ofthe Administrative La

18 F M 
IN THE MATIER OF AGREEMENT NOS T 2455 T 2553 135

Judge thatthe subject lease agreements have been implemented prior

to Commission approval in violation ofsection 15 We therefore adopt

those findings of theAdministrative LawJudge set forth earlier in this

Report under our discussion of his Initial Decision

The key issue which remains to be resolved in this proceeding

therefore is whether infact implementation ofthese agreements has

created a monopoly inthe hands ofLavino inthe operation ofvirtually

all ofthe modern container handling facilities in the Port of Philadel

phia If so we must then determine whether the existing monopoly

is detrimental to the waterborne commerce of the United States or

contrary to the public interest or whether the monopoly operates as

an undue or unreasonable preference orprivilege to the Lavino inter

ests to the detriment of other competing terminal operators and or

stevedores in thePort ofPhiladelphia In addition we must determine

whether approval ofthe leases as presently being implemented would

establish or enforce unjust or unreasonable practices in violation of

section 17 of the Act

The record ofthe proceeding clearly substantiates a finding that a

monopoly does in fact exist Lavino and PPC have for the most part

admitted as much Those facilities which are capable ofhandling con

tainers in quantities less than carried by full container ships are not

viable competitors to Lavino Nor does the promise of future full

cOhtainer handling terminals offer an alternative competitive situa

tion to that which presently exists in Philadelphia The record indi

cates that it would take at least three years to construct acompeting

facility sufficient time to give Lavino an even greater stronghold on

container traffic moving through the Port In addition it is uncertain

that there is currehtly sufficient containerized traffic at the Port to

warrant operation of a third container terminal

The evidence does not however warrant a finding by the Commis

sion that themonopolistic situatiOn existing at the Port was the result

ofwrongdoing on the part ofeither PPC Lavino orDRT S The Port

needed a tenant for its container facilities Lavino was the natural

choice for the Packer facility because of its right offirst refusal on the

container berths DRT S needed an operating partner in order to

operate the Tioga container berths and kept PPCfully informed as

to its negotiations with Lavino The only fault arising under the

negotiations lies in the mistaken belief by PPC that the equalization

clause in DRT S s lease of the breakbulk berths at Tioga was opera

tive over any lease agreement to benegotiated for the Tioga container

berths Itwould therefore appear that PPC though unintentionally

did limit its negotiations for the Tioga container berths to DRT S

even though itappeared that there was some concernon its part that

18 FM C
136 FEDERAL MARITIME COMMISSION

by so doing they would be placing in the hands of one opera

Lavino all modern container handling facilities within the Port

We conclude that the present operation of the Packer and Tio

container facilities by Lavino is so anticompetitive as to be detrimen

to the commerce of the United States in violation of section 15 of

Act Furthermore we hold that the intra port anticompetitive aspe

of the subject operations warrant disapproval by the Commission 

Agreement No T 2455 between PPC and DRT S for the Tio

container berths such disapproval being based upon the undue 

unreasonable preference or privilege to the Lavino interests to 

detriment of other competing terminal operators stevedores in vio

tion of section 16 First of the Act Finally we conclude that Agr

ment No T 2455 must be disapproved in that approval of that ag

ment in concertwith Agreement No T 2553 Packer would estab

or enforce unjust or unreasonable practices in violation of section 

ofthe Act

We approve Agreement No T 2553 for by so doing we do 

deprive Lavino of all ofits container operations at the Port but al

it to retain its leasehold on what the record indicates is the m

utilized modern container facility at the Port namely Packer

Our disapproval ofAgreement No T 2455 is conditional howe

The Port is hereby directed to solicit bids for operation of the en

Tioga Icomplex both breakbulk and container These bids will 

solicited on the basis of separate offers for the breakbulk and for 

container facilities The Port in its discretion subject of course 

Commission approval may select a new tenant to operate the en

Tioga complex or it may continue its present lease with DRT S 

the Tioga breakbulk berths and select the most advantageous propo

for operation ofthe Tioga container berths from among those quali

bids Lavino or any ofits subsidiaries oraffiliates will not ofcourse 

qualified to bid on the container facility Should the Port determ

after examination ofall qualified bids that the present lease betw

PPC and DRT S for the Tioga breakbulk berths is more advantage

to its operations it may continue that lease and enter into a n

agreement with thlt bidder whose proposal for lease of the Ti

container berths is the most advantageous to the Port Should the P

determine after examination ofall qualified bids that itwouldbe m

advantageous to enter into a new agreement for operation of 

entire Tioga complex by an entirely new operator or consortium 

operators it may accept this bid and file the subsequent agreem

with the Commission for approval No bid has to be accepted 

rental terms ofwhich are less in amount than those currently fo

in Agreement No T 2455 If within 90 days of the service of 

18 F 
SEAL S FRANCIS C HURNEY

Secretary

IN THE MATTER OF AGREEMENT NOS T 2455IT 2553 137

Report no bid acceptable to both PPC and the Commission has been

received from a new tenant orconsortium thereof PPC shallresubmit

Agreement No T 2455 for Commission approval pursuant to section

15 of the Act Acceptance or rejection of bids for operation of the

Tioga facility shall of course be subject to Commission review as to

the misuse by PPC of the discretionary power granted herein

There is one further matter which requires our attention Various

allegations have been made by the Commission s Hearing Counsel

and by counsel for A G and Independent regarding possible bias and

erroronthe part ofthe Administrative Law Judge Subsequently they

have set forth several instances which they contend amount to revers

ible error by the Judge The charges made were based upon rulings

made by the Administrative Law Judge involving the issues of the

unjustifiable monopoly unreasonable privilege oradvantage and un

reasonable practices

Inasmuch as our decision inthisproceeding reverses Judge Levy on

these issues no useful purpose would be served in reversing and re

manding on the merits ofthese allegations Itsuffices to say however

that when new matter is raised through examination of witnesses

reasonable opportunity to cross examine must be provided

18 FMC
FEDERAL MARITIME COMMISSION

DOCKET No 7261

IN THE MATTER OF AGREEMEI T Nos T 2455 T 2553

BETWEEN PHILADELPHIA PORT CORPORATION AND DELAWAR

RIVER TERMINAL AND STEVEDORING CO INC

LAVINO SHIPPING COMPANY RESPECTIVELY

ORDER

12 23 74

The Federal Maritime Commission has onDecember 20 1974 ser

its Report in the subject proceeding which we hereby incorpor

herein in which we found

1 That the Agreements therein are subject to the provisions 

section 15 of the Shipping Act 1916

2 That said Agreements have been implementedprior to receiv

approval by the Commission pursuant to section 15

3 That the operation of all modern full container ship hand

facilities within a port by a single operator as brought about by 

subject lease agreements is found to be so anticompetitive as to 

detrimental to the commerce of the United States in violation 

section 15

4 That the intra port anticompetitive aspects of the subject op

tionswarrant disapproval by the Commission ofAgreement No T 2

onthe basis ofundue orunreasonable preference orprivilege to the 

vinointerests to the detrimentofother competing terminal operato

stevedores in violation of section 16 First of the Shipping Act 19

5 That approval of the Agreement No T 2455 would establish 

enforce unjust or unreasonable practices in violation ofsection 1

the Shipping Act 1916

6 That Agreement No T 2455 as amended be disapproved s

ject to approval upon resubmission to the Commission if within 

days of service of this Report no tenant or consortium thereof 

submitted an acceptable bid for operation ofthe Tioga facilities as 

forth herein and

138

18 F 
IN THE MATTER OF AGREEMENT NOS T 2455 T 2553 139

7 That Agreement No T 2553 as amended be approved

Therefore for the reasons enunciated in said Report

Itis ordered That pursuant to sections 15 16 and 17 Agreement

No T 2455 as amended be disapproved subject to the conditions set

forth above

It is further ordered That pursuant to section 15 Agreement

No T 2553 as amended be approved

Itisfurtherordered That in the public interestto assure continued

operations of container facilities in Philadelphia the effective date of

disapproval of Agreement No T 2455 as amended be stayed for a

90 day periodfrom service of the subject Report in order to meet the

conditions set forth therein

Itis further ordered That Respondent Philadelphia Port Corpora

tion shall submit to the Commission on or before January 22 1975 a

plan and schedule indicating how it intends to comply with paragraph

6 hereinabove If Philadelphia Port Corporation fails to submit such

a schedule in atimely fashion the stay ofthis order pursuant to the

immediate preceding paragraph will beimmediately vacated onJanu

ary 23 1975

Finally it is ordered That the plan and schedule of Philadelphia

Port Corporation and the effectuation thereofshall be subject to Com

mission surveillance andmay be subject to further Commission Order

as conditions warrant

By the Commission

SEAL 8 FRANCIS C HURNEY

Secretary

18 F MC
i

l

FEDERAL MARITIME COMMISSION

DOCKET No 71 29

BATON ROUGE MARINE CONTRACTORS INC

v

CARGILL INCORPORATED

1

Charges assessed and conditions imposed by respondent upon all stevedores opera

at its leased terminal faclUty do not constitute a modiBcation to an appro

section 13 agreement for which further Commission approval is required

No unreasonable preference orprivilege as contemplated by section 16 First of 

Shipping Act 1916 resulted from the imposition by respondent of charges 

conditions an all stevedores including respondent s subsidiary

The relationship between a terminal operator and a wholly owned stevedore does 

Ipso facto render charges assessed and conditions imposed equally an all st

dores as unduly anticompetitive or discriminatory especially in the absenc

proof of actual damage to the complainant

Assessment of charges and imposition of conditions upon stevedores found not to 

reasonably related to the economicand commercial benefits derivedby the st

dores and thus to be an unjust and unreasonable practice within the meanin

section 17 of the Shipping Act 1916

Failure to llIe new assessed charges and imposed conditions in terminal tariff foun

be an uQiust and unreasonable practice within the meaning of section 17 of 

Shipping Act 1916

The matter is remanded to the Administrative Law Judge for resolution ofthe sole is

of achieving a proper allocation formula withregard to actual benefits derived 

stevedores from use of terminal facilities and for arriving at a

proper cha

against stevedores based thereon

Edward S Bagley for Baton Rouge Marine Contractors Inc

Edward Schmeltzer and E Sheppard IVfor Cargill Incorporat

Donald Brunner Margot Mazeau and Patricia E Byrne as He

ing Counsel

i

I

REPORT

Decided Jan 3 1975

BY THE COMMISSION Helen Delich Bentley Chairman and James 

Day Vice Chairman Ashton C Barrett and Clarence Mor

n
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 141

Commissioners concurring and dissenting George H Hearn

Commissioner concurring and dissenting

I PROCEEDING

This proceeding arises from a complaint filed by Baton Rouge Ma

rine Contractors Inc BARMA or complainant on March 29 1971

alleging that Cargill Inc Cargill or respondent has violated and

continues to violate sections 15 16 and 17 Shipping Act 1916 the

Act by unilaterally modifying a lease agreement between Cargill and

the Greater Baton Rouge Port Commission Port which agreement

had previously been approved by the Commission Thesubject modi6

cation allegedly imposed unlawful charges and conditions upon steve

dores conducting business at the marine grain elevator at Port Allen

Baton Rouge Louisiana and was not filed with the Commission

BARMA seeks a cease and desist order

Cargill denies any modi6cation ofthe lease agreement unilateral or

otherwise or that ithas violated the Act Respondent admits to having

informed BARMA that itwould not deliver grain from the elevator to

any vessel employing a stevedore who had not agreed to certain pro

posed charges and conditions but maintains that such action was

lawful proper and within the terms of its lease agreement Hearing

Counsel intervened in the proceeding

Hearings wereheld in New Orleans Louisiana onNovember 30 and

December 1 2 and 3 1971 and onApril 24 and 25 1972 in Washing

ton D C

In his Initial Decision served December 1 1972 Administrative

Law Judge Ashbrook P Bryant concluded that the charges assessed

and the conditions imposed by Cargill upon the stevedores as a

prerequisite to loading grain on vessels at Port Allen constitute a

modi6cation of the lease agreement between Cargill and the Port

previously approved by the Federal Maritime Commission and the

execution of that modification without prior filing with and approval

by the Commission violates section 15 ofthe Act He also found that

the charges and conditions imposed by Cargill with minor exceptions

werenot reasonably related to the economic or commercial bene6tof

the stevedore from the use offacilities and services provided by the

terminal and thus constitute unjust and unreasonable practices viola

tive of section 17 of the Act Accordingly the Administrative Law

Judge found that Cargill should cease and desist from assessing charg

ing and collecting the fees and charges and imposing the regulations

found to be unlawful

As to the possible section 16 violations the Administrative Law

Judge found that the relationship between a terminal operator and a
i 142 FEDERAL MARITIME COMMISSION

wholly owned stevedore does not in and of itself render charges 

sessed and conditions imposed equally on all stevedores unlawful 

unduly anti competitive and discriminatory especially in the absen

of proof of actual damage to the complainant While a substan

competitive advantage may accrue to the parent subsidiary combin

tion from the assessment of charges and imposition of conditions 

all stevedores including the subsidiary no unreasonable preferen

or privilege of the type contemplated by section 16 First of the A

has been shown

BARMA filed exceptions to the Initial Decision on December 

1972 as did Cargill and Hearing Counsel on December 18 1972 

parties filed replies to exceptions onJanuary 12 1973 Oral argume

was held on March 7 1913

II FACTS

Parties

BARMA a Louisiana corporate entity is equally held by four co

tracting stevedores and or steamship agents T Smith Son In

Strachan Shipping Company Atlantic Gulf Stevedores Inc a

Texas Transport and Terminal Co Inc

Cargill is incorporated in Delaware and with home offices locat

in Minneapolis Minnesota Itis engagedin selling loading unloadin

storing and deliveringgrain and related commodities eXporting mu

of the grain through 12 terminals it operates including the Bat

Rouge facility At Baton Rouge Cargill is engaged in the business 

furnishing wharfage dock warehouse or other terminalfacilities 

connection with common carriers by water

Rogers Terminal and Shipping Corporation Rogers is a who

owned subsidiary of Cargill and operates asa generQ cargo arid gra

stevedore company steamship agent with operative offices at Bat

Rouge

The Port owns the grainelevlltorherein ditcussed and is aregu

tory agency of the State of LoUisiana The Port is engaged in t

business offurnishing wharfage dock warehouse or other termin

facilities in connection with common carriers by water

History

In 1955 the Port leased the gr elevator and wharf at Bat

Rouge to Cargill The four stevedore BrJm mentioned flarlier f

lowing encouragement by the Port and with the assurances of C

gill that the elevator would remain open competitively form

18 F M 
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 143

BARMA to compete for stevedoring operations at the grain facility

In August 1956 Cargill replaced BARMA with Rogers its subsidi

ary as sole stevedore on the grounds that BARMA s performance was

deficient Complainant was advised that it was no longer welcome at

the elevator

In March 1957 the Port and Cargill agreed that Rogers should be

the exclusive stevedore at the elevator BARMA refused to withdraw

and protested the exclusive stevedore arrangement which was pro

vided for inthe lease which thePort and Cargill filedwith the Federal

Maritime Board Board for approvaJ 1

While the Board approved the original lease Agreement No 8225

the amendment Agreement No 82251 was found to create in

Cargill a monopoly over activities which take place exclusively on the

vessels and not on terminal property and to be detrimental to the

commerce ofthe United States and that its operation would consti

tute an unjust and unreasonable practice relating to the receiving

handling and storing ofproperty in violation ofsection 17 ofthe Act 2

The amendment wasnot approved Accordingly BARMA continued

to operate as stevedore at the terminal on an open basis

The lease

The lease a comprehensive and detailed contract covering water

front land and improvements is for a term of20 years from September

7 1955 to September 6 1975 with options to renew under certain

conditions for additional periods of10 years each Cargill has the right

to have hold occupy possess and enjoy the leased premises during

the term and any renewal periods to the exclusion ofall others save

and except those using said leased premises with the consent express

or implied of lessee The obligations ofboth lessor and lessee with

respect to repairs renewals maintenance replacement and restora

tion of the premises not reimbursed through insurance proceeds are

specified within the agreement and the rights and obligations of the

parties are to be integrated with the overall operations of the Port

insofar as is possible without violating the otherprovisions ofthe lease

The leased facilities are to be maintained throughout the period ofthe

lease or any extended period thereof as a public port facility

ISee Agreements Nos 8225 and 8225 1 5 F M B 648 1959 The further agreement 82251 was as follows

Cargill further is required toand agrees to provideand furnish stevedoring services tovessels loading orunloading

atthe wharf it being recognized that vessels loading orunloading should be integrated into the overall elevator

operations so as to provide efficientservice both tosuch vessels and to persons depositing commodities into the

elevator It is to be a reasonable rule and regulation in the operation of the wharfwhich is part of the leased

property forCargill to condition the loadingorunloading of avessel upon the requirement that Cargill s integrated

stevedoring service be used by such vessels

2Agreements Nos 8225and 8225 1 supra note L

18 FMC
144 FEDERAL MARITIME COMMISSION

Lessee agrees that itwill establish and enforce reasonable rules 

regulations for the operation of the facility and will maintain 

operate it in an efficient mannerand will accept grain without 

crimination between persons desiring to avail themselves of s

facilities as to rates and services To the extent feasible lessee agr

to give preference to this grain elevator over other grain elevat

operated by lessee in the Gulfarea Further lessee agrees to pub

rates and charges for the handling and storage ofgrain competitive 

those for similar services at New Orleans and other competitive G

ports so as to insure a schedule ofrates rules and regulations comp

tive and comparable to those maintained in New Orleans and ot

competitive Gulf ports

So far as may be lawful the Port agrees to give lessee preferen

privileges in and to the docks wharves roads and railroad facili

necessary or convenient to the efficient and economical operation 

the leased premises and the business conducted therein and thereo

The Port agrees to give Cargill the most favorable rates for serv

and facilities granted to any other person The Ports rates shal

competitive with and not greater than rates for similar services 

privileges charged at other Gulf ports including but not limited 

New Orleans Louisiana Galveston and Houston Texas Noth

contained in the lease shall be construed as prohibiting the Port fr

charging normal and competitive dockage fees chargeable to sh

using the facilities but wharfage charges chargeable against the gr

shall not be charged by the Port Cargill shall have the exclusive ri

to operate a public grain elevator as defined by law within the P

area and shall have right offirst refusal onany additional grain stora

and handlingfacilities which the Port may construct in the event t

the presentfacilities become inadequate on such terms and for s

payments as the Port is prepared to make to responsible third pers

in good faith

As before stated the Board refused to approve the Cargill Rog

exclusive stevedoring arrangement at Baton Rouge This decision w

appealed and the Court ofAppeals affirmed the Board s decision 

In its report the Board had described in some detail the relati

ships among vessel master stevedore and elevator

The relationbetween vessel and stevedore involves trust reliance and dependence 

the skill reliability and efficiency of the stevedore in the performance of an impor

ship operating function Under the form of grain charter used in the Gulf includ

Baton Rouge the vessel owner appoints the stevedore except where by special pr

sion the right of appointing is given the charterer In all instances the decision o

matters of loading rests with the master the vessel and her owners are legally 

3See Greater Baton Rouge Port CommSGion v United StatN 287 F 2d 86 1961 cert den 368 us 98

18 FM
BATON ROUGE MARINE CONTRACfORS v CARGILL INC 145

contractually responsible for the proper loading and seaworthiness of the vessel and

they pay the cost of loading

There is a complete separation of the function of the elevator indelivering grain and

that of the vessel in receiving and stowing it There is no physical connection between

vessel and elevator except mooring and guide lines The latter hold the spout which

discharges the grain into the hatch under control of the stevedore The elevator has

completed delivery when the grain flowsout of the spout All remaining functions are

those ofthe stevedore who in effect takes overthe ship s operation for the time being

The elevator personnel perform no function on the vessel the stevedore personnel

perform no services in the elevator or on the wharf There is of course necessity for

cooperation between the two groups as the stevedores must signal terminal personnel

inorder to control the flow of grain p 651

The division ofresponsibility and authority as defined by the Court

and the Board remain largely unaltered and are presently operative

at Port Allen

In New Orleans Steamship Assn v Bunge Etc 8 F M C 687

1965 an exclusive stevedoring arrangement wasnot ruled on by the

Commissionbecause it wasdetermined that Bunge wasnot an other

person subject to the Act and hence we had no jurisdiction Subse

quent to that decision the Department ofJustice Antitrust Division

instituted an investigation into the exclusive stevedoring at Gulfgrain

terminals Consent decrees were entered against several elevators

including Bunge and another elevator located onthe Mississippi River

below thePort ofBaton Rouge whereby the defendant elevator own

erswereenjoined and restrained from imposing any requirement or

understanding that stevedoring services ofany particular person be

utilized at the elevators by vessels loading there and from denying

orotherwise restricting any person access to and the use ofthe facili

ties at the terminal ordock ofan elevator in order to provide stevedor

ing services for loading at the elevator

The injunctions did not however prohibit the elevator operator

from establishing reasonable regulations for access and use of the

facilities if such regulations were applicable to all

In 1966 Cargill was served with a civil investigation demanded by

the Justice Department concerning its elevator at PortArthur Texas

and had not in the interim period imposed any restrictions on the

stevedores at Baton Rouge

Cargill feels that marine terminal elevators provide benefits to

stevedores for which the elevator should be compensated In 1967

when the Houston elevator opened Cargill instituted the stevedore

agreement which has been in existence since that time All of

BARMAs members exceptT Smith Son Inc which does not oper

ate at Houston signed the agreement without complaint

In 1970 four otherLouisiana grain terminals instituted charges and

18 FMC
146 FEDERAL MARITIME COMMISSION

agreements similar to the one at issue Consequently Cargill i

letter of February 4 1971 and revised February 10 1971 inform

BARMA and other stevedores using its Baton Rouge facility ofcert

conditions the stevedores must meet to use elevators The basic agr

ment now in force provides as follows

The stevedore will provide sufficient crews of longshoremen so that the elevator 

operate at capacity The stevedore will pay 100 00 per hour if he fails to pro

enough longshoremen The stevedore will post a 2 000 00 deposit to secure this ob

tion and Cargill will pay interest on the deposit

The stevedore will pay 5 pet ton ofgrain handled for services and facilities prov

to it by Cargill and will pay 50 00 per vessel to defray the cost of cleaning the g

dock The stevedore will post a 1 500 00 deposit to secure these obligations

The stevedore will adhere to federal equal employment guidelines and regulat

The stevedore will use utmost care in his operations will hold Cargill harmless 

damages caused by the stevedore s operations and will provide evidence of adeq

liability insurance coverage by companies acceptable to Cargill

The stevedore will provide adequate supervision for his operations which w

performed in a workmanlike manner

BARMA protested the agreement but was advised by Cargill 

no vessels would be loaded unless the agreement was executed 

cordingly BARMA signed the agreement under protest BARMA 

Rogers thereafter raised their rates to compensate for the cha

imposed by Cargill

Cargill s initial charges were 511 a ton During the course of 

hearings in this case onDecember 17 1971 Cargill advised the st

dores that the 511 charge would be increasedto 811 per long ton ef

tive 30 days after the date of the Federal Maritime Commissi

decision in Docket 71 29

By letter of February 13 1971 the Port protested the propo

increase and requested Cargill to cancel orpostpone the increase u

it could be considered and legally resolved While the Port did 

intervene in the proceeding its executive director testified that 

Port considers Cargill saction in imposing charges onvessels utiliz

the facility or the stevedores hired by them to serve those vessels 

a violation ofthe lease agreement detrimental to the PortofGre

Baton Rouge and tending to reestablish Rogers as an exclusive st

dore through the manipulation ofthe access charges and stevedo

rates Since there are no access charges at the Public Grain Elev

in New Orleans which is the primary competitor ofthe Baton Ro

Grain Elevator the Port Commission fears that the Cargill cha

against stevedores which are being passed on to the vessel may 

der the Portnoncompetitive however there is no apparent subs

tiation of this fear

18 F
III INITIAL DECISION

BATON ROUGE MARINE CONTRACTORS v CARGILL INC 147

The Administrative Law Judge initially looked to the lawfulness of

the charges and conditions imposed by Cargill Cargill s position as

earlier stated is that its actions are within the authority and powers

granted to it under the lease completely legal and no modification of

its section 15 agreement has been effected

BARMA and Hearing Counsel urge that Agreement No 8225 has

been unlawfully modified by Cargill s unilateral action The Adminis

trative Law Judge in his consideration ofthe matter reviewing the

lease arrangement at Baton Rouge found reasonable doubt that the

original lease intended to and did clothe Cargill with authority to

impose the charges and conditions it did In its brief Cargill further

contends that arguendo even if its actions resulted in amodification

of the agreement since that modification was unilateral the Port

having no part in the assessment ofcharges and conditions upon the

stevedores and not joint or cooperative as envisioned by section 15

such modification would not be subject to section 15and thus not need

Commission approval

Hearing Counsel point out that there is no precise precedent for a

unilateral modification withinthe purview ofsection 15 but that since

section 15 agreements are not private contracts between private par

ties the Commission has the duty to oversee such arrangements

where they affect the maritime industry Hearing Counsel argue that

the fact that Cargill acted alone in imposing the charges and condi

tions does not divest the Commission ofits authority to consider the

import of the agreement

The Administrative Law Judge determined that the Act does not

permit substantial changes in the effect of a section 15 agreement to

be taken lightly Since the Act is remedial in this nature any doubt

should be resolved in favor of the applicability ofsection 15 and any

modification of such an agreement except in unusually clear cases

should be scrutinized by the Commission

The Administrative Law Judge further observed that the modifi

cation did introduce an element into the agreement which was not

contemplated at the time the lease was negotiated and accord

ing y ruled that the charges and conditions contained in Cargill s

letters of February 10 and December 17 1971 constituted a

4Cargill explains that the lease gives it only preferential and not exclusive use of the docks wharves roads

etc only because ofa peculiarity of Louisiana law which prohibits a

state body from easing certain waterfront

facilities such as docks to any person Cargill assertsthat in order tocomply with this law and still give terminal

operators and others amaximum degree of control over premisses forwhich they are paying the Port Commission

has adopted a concept of privileged use which according to Cargill in everymaterial respect is the same as a

fnUtease

18 F M C
148 FEDERAL MARITIME COMMISSION

1

modification of an approved agreement requiring section 15 

proval

The Administrative Law Judge in viewing the Cargill Rogers re

tionship found a situation fraught with potential abuse but found 

specific evidence on the record to substantiate charges ofundue e

nomic disadvantage to BARMA or other stevedores and shippers 

found little doubt that a substantial competitive and economic adv

tage would accrue to the Cargill Rogers arrangement from the im

sition of the charges herein considered but said the Administra

Law Judge itdoes not follow ipso facto that the charges and co

tions are unlawful since the charges and conditions are impo

equally onall stevedores sAccordingly while the Administrative L

Judge felt the potential anticompetitive effect flowing from the p

ent subsidiary relationship should be reason enough to closely sc

nize its charges and conditions for reasonableness he found no p

ofactual damage to BARMA and nounreasonable preference orpr

dice resulting simply from the Cargill Rogers relationship 6

As the crux of the case the Administrative Law Judge addres

himself to the question as to whether the charges and conditi

imposed on stevedores by Cargill as a prerequisite to doing busin

at Baton Rouge may be fairly and directly related to benefits deri

from the use of the telminals facilities and services performed 

Cargill

The Administrative LawJudge felt that no violence would be d

to generally accepted principals of fairness if such were the cas

require BARMA and others to pay for the benefits they receive

Cargill maintains that the charges and conditions are fair BAR

and Hearing Counsel contend that the facilities and services for wh

charges and conditions are imposed are not primarily for the ben

of stevedores and hence with a minor exception are unfair 

unreasonable

The Administrative Law Judge then proceeded to discuss the 

wards Differding Formula and the later Freas Formula used for 

determination and allocation of costs in marine terminals in rela

to the testimony ofPhilip E Linnekin Cargill s expert witness Es

tially the Administrative Law Judge in sifting down the testimo

came to the conclusion that the applicability of the Freas Form

can be affected by the judgment of a trained analyst by agreem

and or by custom and usage To apply the Freas Formula wh

Citing PltMton Svedorlnll Corp v

New Haven Terminal Inc 13 F M C 33 35 I069

CUlngLDk CharlnHarborand T

D8t vParta fhaumont 12 F M C 244 248 1969Phl aOcean 

Bureau vExport S S Corp I US SB B 838 1936 Parto NewYotk Authority vAB S ka al 4 F M 

1953

18 F
18 F MC

BATON ROUGE MARINE CONTRACTORS v CARGILL INC 149

historically was applied to general cargo terminals allocating costs

between vessel and cargo to cargo and stevedores while novel does

produce certain workable data which the Administrative Law Judge

referenced at length in his Initial Decision Applying that data to

formulate charges and conditions and thereafter imposing these

charges and conditions upon stevedores is not unlawful he found

provided the charges and conditions are fair reasonable and related

to facilities and services provided stevedores for their benefit As sup

port for this position the Administrative Law Judge noted that several

competitive grain elevators now assess similar charges and conditions

and there is no evidence of record that Baton Rouge has lost any

vessels to the public grain elevators at New Orleans although that

elevator does not impose like charges and conditions

The Administrative Law Judge discussed particular benefits to

stevedores including a shipping gallery and grain dock The shipping

gallery is a highly refined mechanical conveyor system for deliver

ing grain from the elevator to the vessel without which it would take

scores of longshoremen moving grain in bags to convey equal

amounts of grain The grain dock a platform at the river end ofthe

gallery houses the machinery and the spouts which bring the grain

into a position where it can be dumped into the vessel Additionally

water toilets telephones utilities and dock clean up and liaison ser

vice are also benefits to the stevedores for which it is contended they

should pay Additionally the Linnekin study allocates land rental

charges to the stevedores

The Administrative Law Judge then discussed each facility and ser

vice and arrived at the following conclusions

1 The shipping gallery According to the rule enunciated in

Greater Baton Rouge Port Commission v United States supra note

3 the function and responsibility ofthe stevedore does notattach until

the grain is discharged from the loading spout over the hold of the

vessel The loading spout can be equated with ships tackle or point

ofrest wherein general cargo is considered delivered to the ship The

speed of transit ofthe gallery is an advantage to the elevator not the

stevedore The Linnekin study allocated costs initially at the rate of75

percentofthe gallery rental to the stevedore 25 percent to the cargo

then 50 The constructed charges under this theory appear dupli

cative ofthe charges to the holders ofwarehouse receipts and accord

ingly the Administrative LawJudge found that the cost ofthe shipping

gallery is not shown to be a proper and reasonable charge against the

stevedores

2 Grain dock wharf Linnekin states the wharf benefits stevedores

because it allows ingress and egress to and from the vessel However
150 FEDERAL MARITIME COMMISSION

the Administrative Law Judge found that the vessel is the prima

beneficiary of the wharf However the cost had been allocated 1

percent against the stevedores The wharf included the entire ba

unloading facility pile clusters the dust collection system a mu

platform structure upper and lower catwalks and the spouts T

Administrative Law Judge found that the barge unloading facility 

used strictly for Cargill s benefit the pile clusters are used exclusiv

by the vessels and the dust collection system is used to avoid gr

dust explosions

3 Water toilets telephonesand utilities These items total 933 

per year and include certain unsubstantiated charges Basically 

stevedores are being charged for a Cargill supplied sound powe

telephone fixtures fuses bulbs and labor and Cargill furnished e

tricity for lighting the wharf Under Cargill s tariff the vessel is 

quired to furnish adequate lighting for night reception of cargo

4 Dock clean up and liaison service These items were allocated 

four manhours per day and costs thereof The Administrative L

Judge found that the dock is cleaned only sporadically and liais

fees of 25 000 a

year are unsubstantiated

5 Overhead expenses These were allocated at 2 3 percent to 

stevedores Such expenses included Cargill s overall terminal eleva

administrative expenses of which 16 88 percent was allocated 

Baton Rouge Minneapolis branch office administrative expens

management fees and New York office expenses

The Administrative Law Judge summarized his findings as follo

On the basis of the record the costs allocated to stevedores as 

basis for the charges and conditions imposed by Cargill have not b

shown to be reasonably related to use or benefit to stevedores fr

services and facilitiesprovided byCargill Theprincipal facilities up

which the charges and conditions are sought to bejustified by Ca

are the shipping gallery and the wharf Neither facility is maintain

and operated principally for the benefit ofstevedores The content

that the benefit to the stevedore from the shipping gallery and 

grain dock is the transportation of the grain one thousand feet fr

the elevator to the vessel is not valid The stevedoring function a

hence this benefit to stevedores does not begin for all pract

purposes until the grain is delivered atthe end ofthe spout The 

that the mechanism ofthe shipping gallery permits more rapid de

eryofthe grain at the end ofthe spout benefits the cargo and perha

the vessel Itdoes not appreciably benefit the stevedore His func

is to properly load the vessel with grain delivered by the term

at the end ofthe spout overthe hold Cargill s function is to make g

available for loading the vessel by delivering it at that point With

18 F 
IV EXCEPTIONS

BATON ROUGE MARINE CONTRACfORS v CARGILL INC 151

the shipping gallery in its entirety Cargill could not deliver the grain

from elevator to spout end Also the charge to stevedores for the

shipping gallery duplicates the charge on holders ofwarehouse re

ceipts for the same facility No cost allocable to the shipping gallery

may properly be charged to the stevedore

Since the Port Commission under the terms of the lease charges

vessels for the use of the wharf through dockage fees no part ofthe

cost of the wharfmay properly be charged to stevedores It does not

appear that either the clean up charge or the liaison charge is justified

on the basis ofthis record Nor is the allocation ofoverhead justified

on the basis ofthe record

The Administrative Law Judge thereafter discussed the four regula

tions Cargill has imposed upon the stevedores to wit 1 requiring

execution of an agreement that the stevedores will exercise utmost

care in conducting their operations coupled with a contractual in

demnity agreement 2 insurance coverage in specified amounts writ

ten with companies acceptable to Cargill s reasonable satisfaction 3

100 00 per hour liquidated damages for delays caused by stevedores

and 4 deposits totaling 3500 00 to secure payment ofthe charges

The Administrative Law Judge found the standard of utmost care

unreasonable and the indemnity agreements unfair as against public

policy He found the insurance requirement susceptible to abuse in

that Cargill must be reasonably satisfied as to which companywrites

the policy The 100 00 per hour liquidated damage provision is a

one sided arrangement The Administrative Law Judge felt that

BARMA was entitled to a

reciprocal clause Lastly he found the de

posit of 1500 00 to secure payment ofthe access and dock cleaning

charge to be unreasonable and unsupported by facts however the

2000 00 deposit to secure payment of liquidated damages wasfound

to be reasonable ifCargill posted a similar deposit for delays it caused

One argument raised by Hearing Counsel in its Answer and rebut

ted by Cargill in its Reply was that Cargill s failure to file the subject

charges and regulations in its terminaltariff is violative of section 17

ofthe Act The Administrajve Law Judge did not address himself to

this issue in the initial decision but we will consider it in our final

determinations

Exceptions and replies were filed by all parties in the proceeding

BARMA excepts to the initial decision on the single ground that it

is in error as a matter oflaw inthat it fails to hold that the compulsory

imposition ofthe charges against stevedores by Cargill in its dual role

18 FM C
152 FEDERAL MARITIME COMMISSION

I

as a terminal operator and stevedore is unlawful per S8 is unduly

anticompetitive and discriminatory constitutes an unreasonable pref

erence orprivilegein violation of 16 First of the Act and is an unjust

and unreasonable practice in violation of section 17 of the Act

Complainant urges that because of the status of the Cargill Rogers

arrangement it competes with BARMA and is thus levying charges

against competitors an illegal anticompetitivepractice BARMA calls

the Cargill Rogers relationship a sham urging that all that tran

spires is that when Rogers pays the charges money merely passes from

one pocket to the other Complainant compares this case to the Com

mission s decision in California Stevedore Ballast Co et al v Stock

ton Elevators Inc 7hereinafter Stockton and argues that Stockton

demonstrates precisely why Cargill s scheme is unlawful ie where

a terminal operator seeks to compete as a stevedore either directly

or through a stevedore subsidiary affiliate or subcontractor any com

pulsory charge imposed by it against competing stevedores will be

unlawful per se

BARMA urges that the substantial competitive and economic ad

vantage obtained by the Cargill Rogers arrangement constitutes ac

tual damage to BARMA and because Cargill is capable of absorbing

the cost the practice will eventually put BARMA out of business

Cargill in its exceptions supports the Administrative Law Judge s

decillion insofar as it 6nds that the charges and conditions imposed by

Cargill have not harmed BARMA are neither preferential nor dis

criminatory and do not violate section 160fthe Act Cargill takes issue

with that portion of the initial decision which concludes that the

charges and conditions constitute an un6 led modification ofa section

15 agreement and that they ate unjust and unreasonable practices in

violation ofsection 17 of the Act Cargill argues that the Administra

tiveLawJudge erred inconcluding that this case is an extension ofits

previous litigation and contends that the two cases are not related at

all

Cargill essentially reargues its position that it actedunilaterally and

hence the charges it has established were not instituted pursuant to

an agreement between Cargill and the Port Respondent then cites

several Commission cases wherein it washeld that wehave nojurisdic

tion under section 15 over unilateral action S

Cargill urges that it has

not modilied the initial lease agreement and that a fair reading of the

lease indicates that the Port meant to transfer plenary power to Car

8 F M C97 1964

See ABTHment No T2423Bstween tMPort ofSeanls Washington uPacific Molasses Co FMCDocket No

7 S 12 SRR 221 222 1971 Ag m No 9431 HongKong Tonnoge Ce1I l Agmum 10 F M C 134 140

1966

18 FMC
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 153

gill to deal with stevedores or any other third party at the elevator

Cargill maintains that lease disputes should be settled by the parties

and that the Commission should not act as an umpire ofsection 15

agreements As further support for its arguments Cargill cites Boston

Shipping Assn v PortofBoston Marine Terminal Ass n

9 where the

Commission held certain joint activities to wit a change in allocation

of a charge by parties to an approved section 15 agreement did not

constitute a new agreement ormodification ofthe existing agreement

Cargill maintains that the present case except for the joint activity

is identical merely involving the shift of a charge from one party to

another

Cargill further argues that the Linnekin studies establish that ben

efits do accrue to the stevedores contrary to the Administrative Law

Judge s findings that the costs are not reasonably shown to be related

to use or benefit to stevedores Cargill calls this decision erroneous

stating that it demonstrates a complete lack of understanding of the

Freas Formula and its use Cargill urges that the Commission decision

in Rates and Practices ofthe Pacific Northwest Tidewater Elevators

Ass n

lo in which the Commission at page 390 of that decision

adopted the standard suggested by Mr Linnekin that the Freas For

mula thatthe loading operation begins somewhere along the shipping

gallery should be controlling and that theAdministrative Law Judge

rejects this holding without explanation Cargill urges reversal ofthis

portion of the initial decision

Cargill cites several glaring errors in the initial decision and dis

cusses them as follows

1 The Administrative Law Judge dismissed the substantial testi

mony that the stevedores benefit from the high output and rapid

speed ofthe elevator

2 The cost allocated to the stevedores appears to be duplicative of

the charges to holders of warehouse receipts Cargill does not find

this on the record

3 A cost item of 933 per annum for water toilets telephones and

utilities was not susceptible to verification from underlying data Car

gill states its witness Pederson was available for cross examination

4 There are no figures to substantiate the sum of 25 000 for liaison

10 F M C 409 1967

11 F M C369 1968

I1Cargill surmises the reason for the Administrative Law Judge s

rejection of the controlling rule is that the

presidingJudge apparently thought that PacificNorthwest Elevators supra note10 was inconsistentwith the earlier

courtdecision in Greater Baton Rouge PortCommission supra note3 The two decisions are in no way inconsistent

says Cargill Greaur Baton Rouge Port Commltsion simply found that the FederalMaritime Board had jurisdiction

overmarine terminal elevators In the Pacific Northwest Elevators case seven years later the FMC exercised this

jurisdiction and set principles for cost allocationatthe marine tenninal elevators In the instant case the presiding

Judge was bound by the Pacific Northwest Elevators cost allocation principles

18 F M C
154 FEDERAL MARITIME COMMISSION

services Cargill states that while it furnished no figures it did g

testimony of its liaison functions and employed full time help in t

capacity

5 Lastly Cargill says the initial decision rejects any allocation 

cost for overhead to stevedores despite testimony of two expert 

countants

In summation Cargill requests reversal of the initial decision a

dismissal of the proceeding

Hearing Counsel fully subscribe to the Administrative Law Judg

ultimate conclusions except to strike and correct certain stateme

of fact 12 listing them as follows

1 Correct certain quoted language from the lease to conform to 

specific language of Articles 7 10 and 17 oBhe lease

2 Modify the quoted conditions imposed by Cargill as set fo

earlier in this report to read as follows 13

The stevedore will use utmost care in his operations and will provide evidenc

liability insurance coverage with limits as follows

Workmen s Compensation as required by statute

Employers liability including coverage under Federal Longshoremen s and Ha

Workers Compensation Act 100 OOO

Comprehensive generallill ltility including automobile

i bodily injury 200 OOO each person

ii 500 000 each accident

iii property damage 500 OOO each accident

V REPLIES TO EXCEPTIONS

BARMA replied to Cargill s exceptions urging that Cargill ha

monopoly in the elevator pursuant to the section 15 agreement 

that any actions taken under the agreement are subject to the ag

ment BARMA then rebuts Cargill s reference to the unchalleng

rule of Boston Shipping supra note 9 urging that the Commissio

well aware that the Court ofAppeals for the First CirQuit reversed 

Commission decision l and that the controlling theory in this ma

lJSuch fach have been corrected herein as necessary

13The origJnallanguage in the initial decision didnot specifically state the limits and categories of insura

be provided

14See POrlofBoaton Marine Term nalAta nvBoston Shipping ban420 F 2d 419 htClr 1970 BARM 

tnter ala that this case stands forthefact that modificationsof section 15agreement as wellas theoriginal agre

need Commission approval quoting as follows

Section 15 requires that modifications as well as the original agreement receive the prior approval 

Commission In Baston Shipping the Commission without any discussion of the broad language of the a

that where under the already approved agreement there was power to fix charges a change in incidence 

who was obUgated to pay was not amodification requirJng Section 15 filing and approval In the light 

strictures expressed in VW supra n I this holding teems unsupportable While with some consMenclI I

sented the Commu ffon SO past reading ofthestatute theCourtin VWpointed to the expansive language o

15 and specifically rejected the binding effect o the Commlsltons administrative construcHon 390 

27273 BARMA s emphasis

I

18 F
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 155

is represented by Volkswagenwerk v FM G15 BARMA urges again

that Cargill s charges and conditions are notjustified and provide no

benefit to the stevedore and that contrary to Cargill s contention the

decision in Rates and Practices ofPacific Northwest Tidewater Eleva

tors Ass n

supra note 10 is erroneous and not controlling

Cargill replied to the exceptions ofBARMA and Hearing Counsel

urging that contrary to the position of BARMA a terminal operator

affiliated with a stevedore operating at that terminal may impose

uniform charges against all stevedores operating at the terminal To

support this premise Cargill again cites the Stockton Elevator case 6

urging that no evil results from its relationship with Rogers as Rogers

is also assessed the charges and such charges are reflected in Rogers

tariff Cargill then refutes BARMA s claims ofantitrust monopoly and

urges that BARMAs claims of economic injury are speculative and

should be dismissed as found by the Administrative Law Judge

Lastly Cargill urges that BARMA s attack upon the Linnekin study

is improper and in error Cargill agrees with Hearing Counsels factual

exceptions but disagrees with Hearing Counsels statement that the

errors ofthe Administrative Law Judge do not vitiate the ultimate

conclusions reached by the Presiding Officer Concluding its reply

Cargill urges rejection of BARMAs exceptions

Hearing Counsel replied to Cargill s and BARMAs exceptions and

attempted to clarify the record

Hearing Counsel first address themselves to complainants excep

tions wherein BARMA urged that the Administrative LawJudge failed

to find thatwhere a terminaloperator seeks to compete as a stevedore

either by itself or through a subsidiary any charges it assesses against

competing stevedores would be unlawful perse Hearing Counsel state

that the Administrative LawJudge addressed himself to that point and

properly decided that charges ofthis type need notbe prohibitedsolely

because one party against whom such charges are assessed is awholly

owned subsidiary ofthe operator ofthe elevator

Hearing Counsel then reviews complainants argument concerning

the Stockton case wherein BARMA urges the Commission to impose

a rule to prohibit any terminal operator with a stevedore subsidiary

from assessing any compulsory charge for any reason Hearing Coun

sel say Stockton does not support such a conclusion 17 In Stockton it

390 Us 261 19 L Ed 2d 1090 88 S Ct 929 1968

16See also Pittston Stevedoring Corp v New Haven Termi lOl Inc 13 F M C 33 1969

J

Stoclcn was an elevator operatorwhich employed Jones as Jts stevedoring subcontractor It imposeda 15 cent

noncompulsory equipment rental charge on all stevedores operatingat its elevator exceptJones Stockton would bill

the vessel on the basis of a flat charge which indudedall service rendered the 15 centcharge and its profit In at

least one instance the 15 cent charge was not included in Stockton sbill tothe vessel In holding the charge violative

of section 17 the Commission said

We ag e with respondent that theemployment of One stevedoring subcontractor in preference to allother orevell

18 F M C
156 FEDERAL MARITIME COMMISSION

wasthe ambiguous tariff not the terminal operatorI stevedore com

nation that was the unreasonable practice

BARMA say Hearing Counsel has been attempting to show 

antitrust monopoly onCargill s part However sayHearing Couns

no facts have been adduced to prove this point

Hearing Counsel then citeCommission precedent in similar matte

as follows

1 A terminal operator is entitled to a fair return on its investme

and may make a fair and nondiscriminatory charge for the use of 

facilities citing Stockton

2 Such a fair and nondiscriminatory charge may beassessed again

stevedores provided such a charge is reasonably related to servic

rendered by the terminal operator to or for the benefit of the stev

dore Crown Steel Sales Inc et al v PortofChicago 12 F M C 35

373 1967 and Pittston Stevedoring Corporation v New Haven T

minal Inc supra note 5 and

3 No discrimination results where charges are uniformly applie

BostonShippingAssociation v PortofBoston Marine Terminal sup

note 9 and Terminal Charges at Norfolk 1 U S S B B 357 3

1935

Hearing Counsel submit that the Administrative Law Judge pro

erly examined the evidence and applied the foregoing standard

Turning its attention to Cargill s exceptions Hearing Counsel sta

that respondent in citing several cases

18 misses the point of the de

sion in these cases which contrary to Cargill s

interpretation we

decided on the single issue that noagreement waspresented since o

of the parties in each proceeding had withdrawn

Hearing Counsel then argue that the Administrative Law Jud

correctly determined that the charges and conditions constituted 

modification of the section 15 agreement which modification had n

been filed with the Commission for approval

Hearing Counsel take issue with Cargill s statement that it has p

nary power to deal with stevedores and others Stevedores say Hea

ing Counsel are hired by the vessel and subject to the master oft

vessel Further the Port has promulgated rules for stevedores and 

to the exclusion of another does not necessarily constitute an unreasonable regulation or praotice un

section 17 citation omitted But that is not thequestion here The issue here does not concern who 

be respondent s subcontractor rather it is thedifference in treatmentaccorded by respondent toJones and to i

as a stevedore on the oDe hand as compared with the treatment of complainants on the other This differe

in treatment results from the imposition of the rental charge upon complainants but not upon Jones Moreo

it is not imposed b respondent acting as owner and operator of the terminal upon respondent acting in 

capacity of astevedore in the same manner as it is imposed upon complainants Emphasis added

llAgreement No T 2423 Between the Port ofSeattle Washington and Pacl Jo Molas reCo supra note8 In

American Freight Conference Cargo Pooling Agreements 14 F M C 38 1970 and Agreement No 9431 H

Kong Tonnage Gelling Agreement supra note 8

18 F M 
BATON ROUGE MARINE CONTRACfORS v CARGILL INC 157

is therefore illogical to assume that the Port was transferring ple

nary powers to Cargill to deal with stevedores

Hearing Counsel then argue that in spite of Cargill s urgings the

Administrative LawJudge distinguished the cases in relying upon the

proper cases

19 rather than Pacific Northwest supra note 10 and

properly rejected portions of Mr Linnekin stestimony Hearing

Counsel find Mr Linnekin s total testimony in the proceeding to be

worthless

Lastly Hearing Counsel specifically refute Cargill s five specific er

rors as being without merit Hearing Counsel in summation find the

exceptions ofboth complainant and respondent erroneous and urge

their dismissal

VI ISSUES

The basic issues to be resolved by the Commission are as follows

Section 15

Do the charges assessed and conditions imposed by Cargill on the

stevedores as a prerequisite to loading vessels at PortAllen as set forth

in Cargill s letters of February 10 and December 17 1971 constitute

amodification ofthe approved lease agreement between thePort and

Cargill

Section 16

1 Have Cargill s actions resulted in actual damage to BARMA

2 Does the relationship between Cargill Rogers ipsofacto render

the charges and conditions imposed on all stevedores equally unlawful

as unduly anticompetitive and discriminatory

3 Has unreasonable preference or privilege as contemplated by

section 16 First of the Act been established from the charges and

conditions imposed on all stevedores including Cargill s subsidiary

Rogers although substantial competitive advantage exists in the Car

gill Rogers relationship

Section 17

1 Are the following charges and conditions reasonably related to

economic or commercial benefits to stevedores from the use of the

facilities and services provided by Cargill

a Eight cents per ton of grain handled for services and facilities

provided by Cargill

lllAgreement Nos 8225and 8225 1 supra note 1 Greater Baton Rouge Port Commission v

US supra note3

18 F M C
158 FEDERAL MARITIME COMMISSION

b 100 00 per hour liquidated damages for failure to providesu

cientcrews ofstevedores so that the elevator may operate at capac

c that stevedore will use utmost care in his operations

d that stevedore will provide evidence of adequate insurance 

bility by companies acceptable to Cargill and

e that deposits totaling 3500 00 will be posted by the steved

to secure payment ofaccess dock cleaning fees and liquidated da

ages for delays

2 Should Cargill be ordered to cease and desist from those actio

cited under the aforementioned issue found not to be reasona

related to economic or commercial benefits to stevedores

3 Does the failure to file with the Commission notice ofnew charg

and conditions impQsed upon stevedores in Cargills tariffresult in 

unjust and unreasonable practice in violation ofsection 17 ofthe A

VII CONCLUSIONS

Section 15

Itis our opinion tQat the Administrative Law Judge erred in find

that the charges and conditions imposed by Cargill s letters ofFeb

ary 10 and Decem er 17 1971 constituted a modification of 

Commission approvedlease agreement between Cargill and the P

Nowhere in the lease is there any restriction on lessee s granted 

thority to establish and maintain rates for the handling and storage 

grain saving only a lessee could not access dockage charges t

being reserved to the lessor and b the rates for storage and hand

grain must be competitive and comparable with rates at New Orle

and other competitive Gulf ports Art 10 ofleaseAgreement F

8225 20 In all other respects relative to rates rules and regulatio

Cargill was as free qfrestrictions as itwould have been had it own

the facilities

The lease did not require identical rates The lease required o

competitive rates and according to the record in this case the 

that grain has moved and is moving in capacity volume via Ba

Rouge is persuasive evidence that the rates are competitive Some 

all of the rates could even be higher than rates at New Orleans 

other Gulf ports and still be competitive if Baton Rouge wer

more efficient elevator for it is the aggregate costs to the merch

inclusive of speed in loading waiting time distance from the G

dockage etc which establish whether the rates are competitive

30Article10 of thelease also provides in partthat the rates rules and regulations shallbe subjoct totheap

of public regulatory bodies having jurisdiction thereof

18 F 
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 159

What was the extent and scope of the approval given to this lease

by the Federal MaritimeBoard in 1959P We take official notice of our

own records relating to that approval action 21 Our examination

thereof discloses there areno conditions restrictions orqualifications

contained in the Board s order approving the lease and no record

indication ofBoard consideration everhaving been given to imposing

conditions restrictions or qualifications on lessee s plenary power

overrates rules and regulations The Federal Maritime Board having

approved plenary rate authority this Commission may not lawfully

modify reduce or restrict that approval without initiating and follow

ing the notice and hearing procedures established by section 15 Ship

ping Act 1916 and section 9 Administrative Procedure Act

The lease authorized lessee to establish any competitive rates for

storing and handling grain and that authorization was not restricted

only to those rates or charges which may have been in effect when the

lease was adopted This was a long term lease and the parties used

broad expansive language in the grant ofratemaking authority for

conditions and needs change with passing time To have attempted to

define every conceivable item of use or service for which lessee was

free to assess charges or to make rules and regulations in this long term

lease would have been difficult Instead the drafters wisely limited

themselves to identifying only those things which the lessee was not

permitted to do

Cargill is operating under authority granted to it by and within the

limits ofthe approved lease The charges assessed by Cargill against

stevedores constitute actions taken within the lease authority and do

not constitute either a modification of the approved agreement or

2lSwift Company v Federal Maritime Commission 306 F 2d 277 at 281 D C Or 1962

The Board mustbe given reasonableleeway in delineating the scope of the agreement and therefore the extent

of its prior approval

Trans Pacific Freight Conference ofjapan v FMC 314 F 2d 928 9th Cir 1963

UAn incomplete list of services facilities and uses madeavailable by port elevators as indicated by terminal tariffs

on file with this Commission Koppel Bulk TerminalTariff No 1 FMCT No 1 North PacificGrain Growers Inc

Tariff No 3 include the following

Receiving elevation from truck rail cars barge

Shipping tovessels rail cars barges trucks

Weighing in Weighing out Cleaning

Storage Segregation Drying

Smutting Fumigation Treating for weevil

Blending Aeration Cooling

Binning Turning Sampling and inspection

Wharfage Dockage Line handling charges

Fresh water

Rental of marine leg or sucker

Rental of spreaders and other equipment

Rental tostevedores of storage and office space

Electric power tovessel

Electric power tograin spreaders

Service and facilities charge

18 F M C
160 FEDERAL MARITIME COMMISSION

independent action by Cargill taken outside its lease authority Thu

the charges and conditions imposed on the stevedores by the Carg

letters do not requite further approval by the Commission und

section 15 We therefore reverse those findings oftheAdministrati

Law Judge with respect to the section 15 issue

Section 16

With regard to the issue ofactual damages to BARMA as a result 

imposition of the naw charges and conditions we concur with t

Administrative LawJudge Noevidenceofrecord hasbeen present

to show actual damage to BARMA as a result of the new charges a

conditions

We further concurwith the Administrative LawJudgein his findi

that the relationship between Cargill and Rogers did not in and 

itself render unlawful the imposition of the charges and conditio

imposedequally upon all stevedores Therecord while indicating th

a situation exists that could give rise to discriminatory practices do

not indicate that anyl unlawful situation does in fact exist 23 The Co

mission has long reqognized the legality of terminal operators a

conducting stevedorlng operations So long as the Cargill Rogers re

tionship remainsat arm s length Rogers pays to Cargill the same eig

cents per ton charges as BARMA and other stevedores and nocomp

itive advantage is given Rogers over BARMA and its members 

unreasonable preference orprivilege exists that would be violative 

section 16 First of the ACt 20

I

Reasonableness ofOharges and Conditions

The primary issue before the Commission in this proceeding 

whether the charge and conditions imposed upon the stevedores 

Cargill are just and reasonable within the meaning of the seco

paragraph of section 17 of the Act which provides

Every such carrier and every other person subject to thUi Act shall establish obse

and enforce just and reas inable regulations and practices relating to orconnected w

the receiving handling storing ordelivery of property Whenever the Board findst

any such regulation orpractice is unjust or unreasonable it may determine prescr

and order enforced a

just and reasonable regulation or practice

I

laThe record establishes that Cargill has billed andcollected thecharge in question both from BARMA and 

Ragers If in order for Cargillto realize afairreturnfrom capacity useof thefacilities Cargillrequires say 100 

revenue peryear from the assessnient on stevedores then it is obvious that Cargill must collect the full charge 

ton no matter who does thestevedoring Thus this is not a

situation where Rogers wUl receive a

compe

advantage forRogers must pay thecharges in orderfor Cargill to be made whole Thefactual situationhere is 

unlike that which existed in Cal fornls Stevedore Ballast Co vStocktorr EI vators Inc 8 F M C97 1964 w

the port elevator failedto assess 1cbarge against its house stevedore butdid assess the charge against all o

stevedores

Halmill LumbeT v

Purl of New York AuthorltV 11 F M C 494 1968 12 F M C 29 1968 13 F M C 

1970 Chr Saluesen Co Ltd v West Mich Dock Market Corp 12 F M C 135 141 1968
BATON ROUGE MARINE CONTRAGfORS v CARGILL INC 161

Respondents in the operation oftheir grain terminal elevators are

other persons within the meaning of section 17 and as that term is

defined in section 1 of the Act 25

Furthermore the term practice as used in section 17 of the Act

is associated with rates and charges 26 We will thus discuss each charge

and condition separately

1 The service and facilities charge

As previously discussed this charge is to be assessed at eight cents

per ton ofgrain handled for services and facilities provided by Cargill

Respondent contends that this charge is based upon the benefits

derived by stevedores for use ofits facilities for which it contends it

should be reimbursed We accept this basic contention The question

then is whether the practices ofrespondent in its determination and

allocation of costs are reasonable We will examine only the factors

which were used to determine the charge as to the reasonableness of

each such factor Ittherefore follows that if anyone or all such under

lying factors are found to be unreasonably related to the benefits

derived therefrom by stevedores then the practice of assessing

charges based upon those factors is itself unreasonable 27 This finding

would not therefore preclude respondent from assessing a charge

against stevedores based upon those supplied services and facilities

that were found to be ofactual benefit to stevedores

The basis upon which Cargill seeks to assess the eight cents per

ton charge arises under the following services and facilities provided

1 the shipping gallery 2 the grain dock wharf 3 water toilets tele

phones and utilities 4 dock clean up and liaison service 5 overhead

expenses and 6

trimming machines 2

The specific description of each ofthe above services and facilities

has heretofore been discussed under our review ofthe Administrative

LawJudge s initial decision We will thus only consider the underlying

costs to Cargill of each item the allocation ofany or all ofthat cost to

stevedores and the reasonableness of such an allocation based upon

the actual benefits derived by stevedores from the use or availability

ofthat service or facility

First wewill look at the shippinggallery Respondent contends that

one halfofthe benefits derived by use ofthe shipping gallery flow to

UColifornia v us 320 US 577 1944

16Intercoasta lnvestlgation 1935 1 DS S B B 400 432 1935

uTransamerlcan TtailerTransportlne eta

v Federal Maritime Commission No 24 019 492 F 2nd 617 624

D C Ci Jan 28 1974

8By its letter of December 17 1971 respondent advised the stevedores ofits intention toraise the initial five

cents charge now in effect to eight cents thirty days after the effective date of adecision by the Commission in

favor ofCargill This charge would absorb the earliersought SOper vessel dDck clean up charge as wellas one ent

per ton charge for the use of trimming machines which was not contested

lOG lf r
162 FEDERAL MARITIME COMMISSION

the stevedores the other half flowing to the cargo Past applicat

of the Freas Formula to grain elevator operations have normally 

sessed one half of the costs of the shipping gallery to the cargo 

one halfto the vessel The Commission has previously approved 

allocation Rates ofPacific Northwest Tidewater Elevators Associa

supra note 10 There as here Linnekin contended that the c

benefits equally from the faster loading and greater efficiency m

possible by the gallery by lowering the loading expenses We con

with this contentioJil The controversy arises however overthe all

tion of the remain gfull fifty percent to the stevedores

The normal pra6tice followed in past Commission proceed

would allocate this latter fifty percent to the vessel Stevedores do 

benefit from the speed and efficiency of the shipping gallery to 

same extent as doe either the cargo or the vessel under past app

tions of the Freas Formula As stated above the cargo benefits 

incurring lower lo ding expenses The vessel benefits by havin

spend fewer days in port for loading operations thus allowing 

transport more shiploads over a shorter period oftime But no s

benefit can be equ ed to stevedores Infact it can be argued that 

speed and efficiency of the shipping gallery works to the detrime

stevedores providihg shorter working hours by fewer men and th

fore less revenues to the stevedores We recognize that the c

associated with the use of the shipping gallery are allocable to th

who derive an ecoIlomic and commercial benefit from the use the

We do not however recognize that the stevedores fall into this re

ent category at lellst not to the degree as that of the cargo or 

vessel

As Linnekin has stated and past Commission decisions have 

proved the cargo b9nefits to the extent offiftypercent ofthe alloca

expenses associated with the shipping gallery The remaining 

percent of allocable expense is thus attributable to the other 

beneficiaries namely the vesseland the stevedore But not all of 

remaining fifty pe cent can be attributable to the stevedore or 

vessel individually A portion ofthis remining fifty percent is alloc

to each and any charge sought to be imposed upon either mus

based entirely ther on Therefore the allocation ofa full fifty perc

ofthe costs of the sJipping gallery to the stevedores is an unreason

practice within the meaning of section 17 of the Act29

A similar conclusion is reached with regard to the allocation of 

liThe charge s associated with the shipping gallery are wharfage within the definition of that term 

Commissionrules 46 CFR 533 6 d 2 Inasmuchas theleaseonly precludes Cargillfrom assessing dockage a

the vessel 46 CFR 533 6 d 1 this charge would be assessable against thevessel tothe extentsought to be im

on thestevedores

18 F
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 163

total costs ofthe grain dock and wharf to the stevedores The Commis

sion inthe Pacific Northwest Elevators case approved allocation ofthe

total costs ofthe grain dock to the vessel However inthis proceeding

the terms of the lease between Cargill and the Port preclude Cargill

from charging dockage to vessels calling at its facilities Charges as

sociated with use ofthe grain dock wharfanalogous to normal dockage

charges against vessels are not chargeable to the stevedores There is

however no prohibition against charging wharfage to the vessel

Stevedores benefit from the privilege ofingress and egress from the

vessel and to some degree from the use of the spouts but inno way

can the total cost for the use of the dock be attributed to stevedores

The cargo benefits from the use of the spouts as does the vessel for

the same reasons they benefit from use of the shipping gallery We

therefore concur with that finding of the Administrative Law Judge

that the charge inasmuch as it relates to use of the barge unloading

facility the pile clusters the dust collection system and the spouts to

the extent assessable against cargo or vessel is an unreasonable prac

tice under section 17

The record provides scant evidence regarding the assessments of

charges for the various utilities and overhead expenses associated with

Cargill s operation However the allocation to stevedores of 933 00

per year for water toilets telephones and utilities does not appear to

be so unreasonable as to justify disapproval Nor does the amount of

overhead expenses allocated to the stevedores appear to be unreason

able The costs associated with the use ofthe trimming machines were

not contested

Those costs however which are associated with dock clean up and

liaison service have not been justified on the record The evidence

presented shows that the docks are cleaned only sporadically and that

the 25 000 per year for liaison services was unsubstantiated Those

portions ofthe overall costs which are based upon these factors have

therefore not been shown to be reasonably related to the benefits

derived therefrom by the stevedores As such we find the assessment

of any charges based upon these services and facilities to be unreason

able practices within the meaning of section 17 of the Act

In weighing the overall effect ofthe various factors used to derive

the eight cents per ton charge we find sufficient unwarranted alloca

tions of costs to stevedores to sustain a finding that the imposition of

any charge which wascompiled by use ofany ofthe aforementioned

unwarranted cost factors to bean unreasonable practice under section

17 Respondent should thus cease and resist from assessing such

charges where based upon costs of services and facilities found herein

to be unassessable against stevedores

18 F M C
164 FEDERAL MARITIME COMMISSION

I

2 The conditions sought to be imposed

We find that the imposition of an indemnity requirement of 

per hour for delays caused by failure to provide sufficient number

longshoremen to an unreasonable practice within the meanin

section 17 This isa one sided requirement with no compensa

awarded to stevedores for delays caused by Cargill Likewise 

requirements for use of utmost care in its operations for evide

of adequate liabilitY insurance coverage insofar as the insurance c

panies must be acceptable to Cargill and for posting deposits to sec

payment ofthe service and facilities charge and the delay indem

charges are found to be equally one sided and thus unreasonable p

tices within the meaning of section 17 With regard to the insura

requirement it wQuld appear to be sufficient to accept insura

coverage from anY company licensed to do business in Louisiana

I

I

Failure to File ScMdule ofCharges

The Commission s General Order 15 46 CFR 533 provides in 

tion 533 3 that all terminal operators with certain exceptions 

applicable here file a schedule or tariff showing all its ra

charges rules and regulations relating to or connected with the 

ceiving handling storing and or delivering ofproperty at its te

nal facilities As noted earlier the Administrative Law Judge did 

address this issue in his Initial Decision We however consider 

respondent s failure to comply with the aforementioned provision 

be an unreasonable practice in violation of section 17 of the Act 

as such do hereby order that respondent file forthwith any and 

charges and conditions within the limits authorized by this decis

which Cargill intends to impose Wefurther direct Cargill to cease 

desist from all practices found unreasonable herein

REMAND TO ADMINISTRATIVE LAW JUDGE

We adopt the r commendation of Commissioners Barrett 

Morse in their con urring and dissenting opinion that the case 

remanded to the Ad ministrative LawJudge for a resolutionofthe s

issue ofthe proper allocation ofservices and facilities benefits to ste

dores based upon actual use as outlined in this report in order 

arrive at a

charge that can be properly assessed against the stevedo

Commissioners Ashton C Barrett and Clarence Morse concurri

and dissenting

We are not appointed to simply call balls and strikes Rather 

are appointed to develop a full record in all cases and to decide m
BATON ROUGE MARINE CONTRACfORS v CARGILL INC 165

ters on their true merits and in the overall public interestand not on

mere procedural shortcomings or on incomplete or inadequate re

cord 30 If there is any question still remaining in the minds of the

majority that there exists a reasonable relationship between costs

benefits and the assessment charge in thisproceeding we recommend

the matter be remanded for a resolution of this issue including addi

tional evidence if necessary

We are in agreement with Chairman Bentley and Commissioner

Day that the charges assessed and the conditions imposed by respon

dent upon all stevedores operating at the leased terminal facility

constitute activities and charges falling within the scope of Agree

ment No 8225 and do not constitute a modification to an approved

section 15 agreement for which further Commission approval is

required 31

We are in agreement with Chairman Bentley and Commissioners

Day and Hearn that no unreasonable preference or privilege as con

templatedby section 16 First ofthe Act resulted from the imposition

by respondent ofcharges and conditions on all stevedores including

respondent s subsidiary

We are in agreement with Chairman Bentley and Commissioners

Day and Hearn that the relationship between a terminal operator and

awholly owned stevedore does not ipsofacto render charges assessed

and conditions imposed equally on all stevedores undulyanticompeti

30Isbrandtsen Co Inc v United States 96 F Supp 883 at 892 1951 aird per cotiam 342 US 950 quoting

with approval thefollowing views of CommissionerAitchison of the Interstate CommerceConunission concern

ing the obligations ofadministrative agencies lhey are not expected merely to call balls and strikes or toweigh

theevidence submitted by the parties and let the scales tip as they will The agency does not do its duty when it

merely decides upon apoor ornonrepresentative record As the sole representative of thepublic which is a

third

party in theseproceedings the agencyowes the duty toinvestigate all the pertinent facts and tosee that they are

adduced whenthe parties have not putthem in The agency must always act upon the record made and ifthat

isnot sufficient it shouldsee the record issupplemented before it acts It must always preserve the elements of fair

play butit Is not fairplay for it to create an injustice instead ofremedying one by omitting toinform itself and

by acting ignorantly whenintelligent action is possible

31It has been contended that these actionsby Cargill constitute an unapproved unilateral modification of the

approved lease Absent implied tacit oractual consent by Port tothe unilateral modi6cation weare unable to

6nd an agreement between twoormore personsapprovable under section 15 AmericanMail Line Ltd v Federal

Maritime Commission F 2d CA DC June 28 1974 Slip Opinion page 19 Aunilateral undertaking by

asingle party does not constitute a section 15 agreement There may be unilateral action takenby one person

beyond thescope of theapproved section 15 agreement but thatpurely unilateral action is not itself a

section 15

agreement As said in TransshipmentAgreement 10 F M C 199 215 1966 It Takes Two toTango One who

acts unilaterally beyond and outside the scope of an approved agreementSubjects himself to the penalties of the

Shipping Act 1916 as well as to antitrust Carnation 383 US 213

Commissioner Hearninterprets theapproval ofAgreement No 8225 as notauthorizing Cargill to make the 5lf

charge against stevedores Although inthis respect the majority isopposed to CommissionerHearns

views additional

comment is appropriate Swift Company v

F MC 306 F 2d 277 281 1962 holds

The Board mustbe givenreasonable leeway in delineating thescope of the agreement and therefore the extent

ofits prior approval

In our opinion a delineation may only be made with the greatest of cautionand only after athorough review

oftherecord and with all appropriate due process safeguards for unlike a modification under section 15 which

has only prospective application and Is made only by order after notice and hearing a

delineation has both

prospectiveapplication andretroactive application withpossible seriouseconomic Shipping Act 1916 and antitrust

implications particularly in respect to activities taken prior to the delineation Such a

review has not beenmade

by theCommission in this case

lQ JU f
166 FEDERAL MARITIME COMMISSION

tive or discriminatory On this record there was no proof of un

competition or discrimination

We are in agreement with Chairman Bentley and Commissio

Day and Hearn that respondent s failure to publish and file 

charges and conditions in its terminal tariffis an unjust and unrea

able practice within the meaning of section 17 of the Act

We agree with Chairman Bentley and Commissioners Day 

Hearn that the 100 per hour liquidated damages for delay provi

is an unreasonable practice under section 17 of the Act

We differ with Chairman Bentley and Commissioners Day 

Hearn in their conclusions that the 511 service and facilities charg

is an unreasonable practice under section 17 ofthe Act 33 We find 

conclude that said charge is lawful is adequately justified on 

record and its determination assessment and collection is no

unreasonable practice under section 17 of the Act

We adopt the findings offact set forth in Part IIof the above re

ofChairman Bentley and Commissioner Day which are notin con

with the following supplemental findings

BARMAhas been operating continuously as a

stevedoring con

tor 34 at the Cargill elevator since the inception of the latter s op

tions in 1955 In 1956 Rogers Cargill s wholly owned subsid

began operating in competition with BARMA

Under the lease dockage is the only fee the Port may charge ves

calling at the grain elevator ThePorts tariff states that all other f

rules and regulations pertaining to the grain elevator are to be fo

in Cargill s tariff

The charges and regulations complained of herein are simila

those presently in force at a number ofgrain elevators in the Gulfa

including Cargills elevator at Houston and have been assessed 

Cargill to all stevedores operating at Port Allen including its wh

owned subsidiary Rogers

Cargill retained Mr Phillip E Linnekin a partner in the inte

I

liThe majority s consideration of the projected 8 charge rather than the 5 charge now assessed by Ca

asource ofconfusion The charge in effect at thetime of hearing and at thepresent time is 5 The 5

charg

be raised in the future to 8 At the5 rate Cargill alsa assesses an additional 50 pervessel tocover dock cle

This 50 charge will be elimJnated when the 8

charge goes into effect As aresUlt discussion of the 5

cleaning charge with respect to the 8 rate is irrelevant and results in a finding of unreasonableness with r

to a nonexisting charge

33The majority states that Charges associated with useof the grain dock wharf analogous to normal do

charges against vessels are not chargeable to thestevedores The S charge however Is neither analogou

normal dockage charge nor 1s it associated with docking Dockage is strictly limited to the vessel s privil

berthing a parking fee for vessels Cargllls

5

charge on theother hand is acharge for the use of thete

facUities and equipment furnished by Cargill and used by the stevedores in the handling 0 cargo 46 

333 6 d 1 i Pacific Northwest Elevators Assn supra at 403

34Sometjmes referred toas thestevedore The term stevedore as used herein may mean either the ste

ing company for example BARMA or theemployee ofthestevedoring company The employee of thesteve

company is moreaccurately called a

longshoreman butis not infrequently called astevedore Hence whenth

stevedore is used it may mean depending upon thecontext eitherthe stevedoring company orthe longsho

As used herein the term stevedore usually refers to the stevedoring company

10 ro 
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 167

tional certified public accounting firm of Main Lefrentz Co to

study the propriety and reasonableness of these charges Mr Linne

kin an expert in this field has appeared before the Commission in

numerous proceedings and assisted in the development of the so

called Freas Formula which forms the basis for his allocations and

methodology in this proceeding Previous studies in other proceedings

were initiated for the purpose of allocating terminal costs between

vessel and cargo only Mr Linnekin s study in thisproceeding consid

ers and justifies the imposition ofcharges against stevedores on the

ground that the stevedores use the terminal facilities and receive

benefit from the use thereof

Mr Linnekin classified the leased property into the categories of

land and improvements He valued the land on the basis of its

original cost and the improvements on the basis ofthe original unde

preciated construction COSt35 He determined that the percentages

these two categories bear to the total combined value of the land and

improvements amounted to 54 and 94 6 respectively Applying

these percentages to Cargill s annual rental payments of 673 600 he

determined the amount of said payments applicable to each category

as 36 374 to land and 637 226 to improvements Ofthe land rental

he allocated 7 to the stevedore for the grain dockwharf and 93

to cargo

The largest item allocated to the stevedore is rental allocable to the

shipping gallery and to the grain dock wharf

The shipping gallery is a conveyor system for the delivery ofgrain

approximately 1 000 feet long running from the elevator headhouse

to the loading spouts situated on the wharf Itdelivers the grain at a

loading speed of 1 000 tons per hour and thus permits a faster loading

ofthe vessel than would be possible at a less efficient and less modern

facility or by manual loading and stowing of the vessel

Improvements made by Cargill to the elevator terminal facilities

increased the annual volume of grain available for shipment and

hence the loading capacity The turnover rateis 16 5 ie the elevator

is emptied and refilled sixteen and one halftimes during a one year

period The loading capacity of the elevator has been increased from

the original 20 million bushels ayear to 113 million bushels in 1971

Inasmuch as the flow of grain to the vessel is directed by the steve

dore s employee the longshoreman inrespect to the loading and trim

of the vessel the stevedore s function commences at a point some

where between the headhouse and the water end of the shipping

gallery It is unnecessary in this proceeding to determine where pre

cisely that point lies 36

3SUtilization of fairmarket value ororiginal cost depreciated or other valuation formula would have had but de

minimis effect un the end results in this proceeding
168 FEDERAL MARITIME COMMISSION

I

Questions of ultimate responsibility as to the delivery of the g

at the end of spout or elsewhere or questions when transfer of 

to the grain ultimately occurs or questions whether the shipper 

vessel or the consignee ultimately pays the stevedore are quest

arising under sales contracts and charter parties and have nothing 

do with the question whether the stevedore receives a benefit fr

the use ofthe shippinggallery and ofthe wharfforwhich a charge m

be made

Mr Linnekin excluded the portion of the shipping gallery wh

extends overthe wharffrom his definition of the shipping gallery 

allocated 50 ofthe balance ofthe shippinggallery to stevedores 

50 to cargo

The wharf referred to herein also as grain dock wharf situate

the water end of the shipping gallery houses the loading spo

through which grain is discharged into the hold of the vessel 

lower part of the wharfis also used by the stevedore for access to 

vessel Mr Linnekin denned the wharf so as to exclude the ba

unloading facility and dust collection system and to include that p

tion of the shipping gallery which extends over the wharf from 

point that the two form a Tn Heallocated 100 ofthe rental allo

ble to the wharf to the stevedore

The spillage of grain on the wharf as well as dust generated 

loading operations creates asafety hazard which requires cleaning 

the grain dock wharf after vessel loading Cleaning the grain do

wharf requires approximately 16 man hours and may be done o

when the dock is free ofvessels 3r

Cargill spersonnel spent an aver

of four man hours a day on dock cleaning at a cost to Cargill in 1

of 6045 The 50 per vessel charge will be incorporated in the p

posed charge of 811 per ton loaded 38

A full time employee of Cargill is available 24 hours a day se

days a week for liaison service to the stevedore This includes 

relay ofmessages to and from the stevedore and assisting the ste

dore in planning and preparing stowage of the vessel at a cost to 

I

36The statement in Greater Baton Rouge Port Commlsalon 5 F M B 648 at 651 quoted in the majority r

that the function and responsibility ofthe stevedore does not attach until the grain is discharged from the lo

spout is misleading It is true that physical contactby the stevedore does not occur prior to that time butdire

control overthe movement of the grainfrom the headhouse at theelevator end ofthe shipping gallery throug

shipping gaJlery and thence to the loading spouts is vested in the stevedore s employee longshoreman a

effected by signals from the longshoreman to theelevator employee at the headhouse controls Furthermore 

longshoreman manually movesthe direction of thesPouts toassure that thegrain flows into theproper hatche

areas within theship sholds Thus it isclearthat forthe purpose of allocating costs as between elevator cargo 

and stevedore the point of rest is definitely somewhere in the area between theheadhouse and the w

Unnekin utUized that pointof rest for cost and benefit allocation purposes

31143 vessels spent 260 loading days at the terminal in 1971

uThe Port Commission tariff also contains asimilar charge of 50 pervessel of 3 000 net tons ormore fo

cleaning of its general cargo docks

18 F M 
BATON ROUGE MARINE CONTRACfORS v CARGILL INC 169

respondent of 25 000 per annum In light of the services rendered

the stevedore the liaison charge is fully justified

The 23 ofthe total elevator overhead allocated to the stevedore

is based on the percentage that total projected annual revenue from

charges against the stevedore bears to the elevator s constructive gross

revenue

The lease authorizes Cargill to assess a facilities and user s charge

against stevedores

The rates and charges assessed by Cargill for the handling and

storage of grain are competitive with rates and charges for similar

services at other Gulfports including but not limited to New Or

leans

There is no duplication between the charge assessed by Cargill

against the stevedore and the dockage charge assessed by the Port

against the vessel or Cargill s charge to holders of warehouse re

ceipts

In determining if the 51t charge against stevedores is lawful and

justified on this record we must apply the following basic principles

oflaw applicable to terminals

1 Ourratemakingjurisdiction overrates ofterminals rests solely on

the second paragraph ofsection 17 ofthe Act

2 We do not have ratemaking power comparable to our ratemak

ing authority over common carriers in our domestic off shore com

merce to establish the rates to be charged 9

3 We have jurisdiction only to halt rates orpractices which we find

are unreasonable orunjust and have limited power to translate these

statutory prohibitions into dollars and cents terms by establishing a

minimum or maximum rate 40

4 Itis an unjust and unreasonable practice for a terminal to provide

free or charge noncompensatory rates for services or use of facilities

for such practice results in imposing a disproportionate share ofthe

39fhe Commission does not possess theratemaking authority over tenninal operators under section 17 tothe

extent of that authority which is held over carriers by authority of the IntercoastalShipping Act of 1933 California

v US supra City of Los Angeles v F M C 385 F 2d 678 1967 In this area there need be only areasonable

relationship between the charges assessed and the services orbenefits provided VolkswagenUJefk v FM C supra

at 282 Evans Cooperage Co v Board of Commissioners 6 F M B415 418 1961

40City of Los Angeles v F M C supra at 681

Thetariff 6lOO by aport is significantly different from the tariff 6led by a

common carrier With respect to the

fonner the Commission isonly authorized to haltrates orpractices which are unreasonableordiscriminatory Subject

to its limited powertotranslate thesestatutory prohibitions into dollars and cents termsby establishing amaximum

or minimum rate the Commission has no ratemaking power with respect toports Thesituation is much different

with respect to common carriers for Section 18 of the Act 46 USc 817 explicitly gives the powerto establish

the ratestobe charged and the carrier isobligated toabide by its effectivetariffwithoutexception on painofcriminal

flnes We are not prepared to say that the Commission was required todo what Congress has refrained from doing

and expand section 18 so as to include ports

Rates and Practices 0

thePacific Northwest Tidewater Elevators Assn supra see disclaimer at 371

This is not intended to suggest that we do not have jurisdiction tocorrect undue preferences oradvantages etc

under section 16 and other sections of the Act

18 F M C
170 FEDERAL MARITIME COMMISSION

cost ofthe terminal on other users of other terminal services or fa

ties 41

5 In establishing the lawfulness of a charge under section 17 

terminal need establish only that the charge is reasonably related 

the service or benefit 42

Several things are to be borne in mind First the Freas Form

which has been utilized by the Commission is but one formula 

means which may be utilized to equitably spread the costs of o

ing and operating a port terminal amongst the various users of 

facility The Freas Formula does not purport to be the sole form

or necessarily the best formula Itis adequate well recognized a

widely used on the Pacific Coast It should not be used to def

charges which legitimately should be assessed The objective 

the Freas Formula is to determine costs hence no conside

tion was given to value of service and other factors which must 

considered in determining the level of the rates Its objective 

explained in Terminal Rate Structure California Ports 3 U S M 

57 59 61 1948 where all wharfinger expenditures were app

tioned to vessel and cargo only because in that proceeding ve

and cargo were the only interests involved A vessel was held 

ble to the terminal for all usages and services from but not inc

ing point of rest on outbound traffic all other wharfinger co

were assessed against cargo

Second because under the original Freas Formula all wharfin

costs were allocated as between vessel and cargo it would app

unnecessary to belabor the fact that a charge may nevertheless 

4lPractlc8S Etc olSan Francisco Bay Area Terminals 2 USM C 588 603 1941 lnvestlsation of Wh

Charges at Pacific Coost Ports 8F M C 653 657 1965 The Commission in Docket 555 found also th

failureof aport terminal tocharge compensatory ratesfor a

particular servicecasts an unfair burden on users of

service in violation of sections 16 and 17 ofthe 1916 act

4iVolkawagenW8Tk Etc v FM C supra at 282 Thetest is whetherthe charge levied isreasonably re

to theservice rendered

Eoon8 Cooperage Co v Board a Commissioners 8upra at 418

The first second fourth sixth and tenth exceptions in effect say that thecharges are unreasonable becau

specific service is rendered tothe complainant and that the Examiner did not consider theevidence showing 

The Examiner however considered evidence that wharf tollage does not necessarily cover expenses and se

directly rendered to the cargo and also gave weight to the opinions of complainant s witness on this poin

Examiner found that complainant sbarge and the cargo involved enjoyed substantialbenefits from theservice

facilities provided by the respondent Complainant s barge was tied to the ship and such mooring would n

possible unless thewaterberth was dredged deep enough to accommodate theship and unless the mooring fac

were adequate for the ship Police protection was also present and notdenied to thecomplainant regardless 

fact that direct vision by the policeman might be difficult The firetug was available for protection withou

charge having been levied thus far except for the cost of chemicals used in fire fighting Both forms of prote

had to be paid for by users of respondent s property as well as those who shared in overall benefits incl

incidental benefits of the commission s facilities The fact that theoperators of theship must also pay charge

considered and not found to be controlling

Complainant contends that by definition it is an essential element of wharf tollage that the cargo pass ov

wharf and that the charge should be for the use of the wharftoavoid being unreasonable We do not need 

too concerned about other definitions of wharftollage The commission has made a charge tohelp defray its 

of operatingfacilities as measured by cargo handled in the area and the only question is whether its faciliti

being used and the commission isperforming aservice reasonably related to its charges The Examiner cons

the evidence and found that it was
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 171

assessed against stevedores or carloaders orother persons for services

provided to them or for facilities made available to them and from

which they derive benefits Hence if a terminal makes a grain

spreader available to a stevedore the Freas Formula does not prevent

the terminal from assessing a fair charge for use ofthat grain spreader

See Crown Steel Sales Inc et al v PortofChicago supra The same

reasoning applies to a charge against stevedores for benefits received

by them in respect to utilization ofthe terminal facilities

Chairman Bentley and Commissioners Day and Hearn concur in

the view that a charge would lie against stevedores for benefits from

utilization of the facilities but so they contend the record fails to

disclose that the practices of respondent in its determination and

allocationofcosts are reasonable Wedisagree with thatlatter conclu

sion This is not a conventional rate case The proofs required to

establish a reasonable relationship between the charges assessed and

the benefits received need notbe made with anything like the degree

of precision required in a rate case See Evans Cooperage supra

where the Commission allowed a charge stating at 419

In view of the finding that there can be no precise equivalence between services

rendered and the charges we would agree with the Examiner that the record contains

nobasis upon which reasonable allocation of costs could bemade Terminal RateStruc

ture California Ports 3 U S M C 57 60 69 1948

Despite absence ofbasis upon which reasonable cost allocations could

bemade the charge wasallowed because ofan affirmative finding that

on the facts of that case there could be no precise equivalence be

tween services rendered and the charge assessed The same principle

applies here

The error ofChairman Bentley and Commissioners Day and Hearn

lies in a too narrow adherence to the principles ofthe original Freas

Formula entirely overlooking and disregarding the stated objective in

that case of allocating wharfinger costs as between vessel and cargo

only Actually the Freas Formula promulgated in 1948 in Terminal

Rate Structure California Ports supra has been expanded in Inves

tigation of Wharfage Charges at Pacific Coast Ports supra to autho

rize wharfage charges at grain terminals which terminals did notexist

on the Pacific Coast at the time the Freas Formula was adopted as

being wharfinger special facilities and in Crown Steel Sales Inc

et al v Port of Chicago supra ii was recognized that the Freas

Formula must be varied to recognize local differences in practices

procedures and objectives That case held in part at 373

All costs should be apportioned to the various services concerned There is noquestion

that facility costsare being incurred inconnection with a stevedoring b truck load

ing and c wharfage These costs should be distributedaccordingly and the stevedoring
172 FEDERAL MARITIME COMMISSION

portion recoveredby the stevedoring business through their contract rates charged 

vessel the truck loading portion by the terminal operators through their truck load

charges or some tariff charge agamst the cargo and the wharfage porlilon thro

wharfage charges coupled withreduced rents Although noexhibit was presented 

Linnekin testified that using actual oosts revealed in respondents operating stateme

which weredisclosed to complainants hecalculated andapplied facility costs inacc

ance with the service apportionment provisions of the Freas Formula Eventually 

course the apportionment of ter alservice costs for given commodities as betw

cargo and vessel becomes academicbecause all such costs as weB as those of the w

transportation are ultimately borne by the cargo importer

Chairman Bentley Commissioners Day and Hearn state

The normal practice followed in past Commission proceedings wouldallocate this la

fifty percent to the vessel Stevedores do notbenefit from the speed and efficienc

the shipping gallery to the sameextent as does either the cargo or the vessel under 

applications of the Freas Formula As stated above the cargo benefits by incur

lower loadingexpenses The vessel benefits by baving to Bpend fewer days in port 

loading operations thus allowing it to transport more shiploads over a shorter pe

oftime But no such benefit can beequated to stevedores In fact it can be argued 

the speed and efficiency of the shipping gallery works to the detriment of stevedo

providing shorter working hours by fewer men and therefore less revenues to 

stevedores

I

I

Crown Steel squarely refutes the generalized statement that T

normal practice followed in past Commission proceedings would a

cate this latter fifty percent to the vessel

That statement is also misleading when it argues that less re

nues accrue to the stevedores If it means fewer longshoremen 

employed and less longshore wages paid then it is correct But lo

shoremen are not parties to this proceeding and the impact on th

was not an issue in the CMe Ifit means what it says that less re

nues accrue to the stevedoring contractors Rogers or BARMA i

incorrect The record is clear that at this facility stevedores are p

on tonnage of grain loaded to vessel and that stevedore revenue is 

computed on longshore labor costs plus amark up for overhead a

profit or some other formula hence the stevedoring rate per 

multiplied by the number oHons loaded establishes the compensat

paid to the vessels stevedore and this is so whether a given tonna

takes 24 hours to load or 72 hours to load or whether line gang 

longshoremen orten gangs oflongshoremen areutilized 4s Obviou

with a given tmnage loaded to vessel the shorter the loading per

and the fewer longshoremen employed the greater the profit to ste

dore

Chairman Bentley and Commissioners Day and Hearnfurther sta

43Mr james F Carrier General Manager of Rogeu stated Oll cross examination that although he anH

pate

making aprofit of 75 perton on grain loaded and stowed manually in sacks percentage wlse he was happie

the slightly more than 2 cents perton pront on grain loaded in bulk at Daton Rooge elevator

18 FM
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 173

We recognize that the costs associated with the use of the shipping gallery are

allocableto those who derive an economic and commercialbenellt from the usethereof

We do not however recognize that the stevedores fall into this recipient category at

least notto the degree as that of the cargo or the vessel Therefore the allocation

of a full fiftypercent of the costs of the shipping gallery to the stevedores isan unreason

able practice within the meaning of section 17 of the Act

They assert in Footnote 29 this wharfage charge would be

assessable against the vessel to the extent sought to be imposed on the

stevedores Wharfage would be directly assessable against the ves

sel only if the tariff so provided and the Cargill tariff herein does not

so provide Under our General Order 15 46 CFR 533 6 d 2 wharf

age may be assessed against cargo or vessel or both 44 Whether the

ultimate cost may end up as being for the expense ofthe vessel turns

on the terms of the applicable sales contract and charter party But

even if that is the ultimate end result it is no answer to our problem

Rates of Pacific Northwest Elevators Ass nsupra at 388 There is

neither reason nor logic other than General Order 15 to restrict the

charge to cargo or to vessel if in fact an interest other than cargo or

vessel receives a direct benefit from use of the facility This is recog

nized in Crown Steel supra when partofthe costs ofthe facility were

allocated to stevedoring part to truck loading and part to wharfage

cargo whereas onthe Pacific Coast all this cost is allocated to wharf

ageInfact where two different persons each receive a benefit from

a given facility we have often held it improper to assess the entire

charge for that benefit against only one of the recipients No one

contends that the stevedore is not using the terminal facilities and

services furnished by Cargill or that the stevedore does not receive

some benefit therefrom Footnote 29 would do violence to the princi

ple that each recipient should bear its fair share of the charge when

it states that the 51 charge would be assessable against the vessel to

the extent sought to be imposed on the stevedores

From the above quoted statements of the majority it is implicit the

majority recognizes that stevedores are recipients ofbenefits from the

efficiency ofthe shipping gallery albeit so they contend not to the

same extent as does either the cargo or the vessel under past applica

tionsoftheFreas Formula 45 underscoring supplied and the steve

18 F M C

Hfn Footnote 28 the majority labels or likens thecharge assessed forthe use of the shipping gallery to wharf

age Wharfage however as defined in 46 CFR 533 6 d 2 is acharge assessed against cargo or vessel for the

movementor passage ofcargo over ontoor under wharves orbetweenvessels when berthed at wharf It is

solely a charge foruse of the wharfand does not cover the cost of services orthe use of any equipment such as the

shipping gallery by which the cargo is moved tothewharf The shippinggallery here is apieceof equipment similar

in its function toagantry crane orapipeline Afee for the useof the shipping gallery may be assessed therefore

in addition toand separately from wharfage just as fees are charged for the use of gantry cranes forkliftsorother

terminal equipment as listed in the tariffs of tenninal operators generally and of the Baton Rouge Port Authority

specifically

oUnder the Freas Formula costs and charges were distributed initially to vessel and cargo Generally expendi
174 FEDERAL MARITIME COMMISSION

j

dores fall into this recipient category but not to the degree 

that of the cargo or the vessel and a portion of this remaining fi

percent is allocable to stevedore and a portion to the vessel

Here then is the cruxofour differences The majority while reco

nizing that stevedores are users of the facilities and do receive 

benefit therefrom would disallow all charges against the stevedo

solely on the basis that while in past cases costs were allocated o

judgment evaluation ofbenefits 50 to cargo and 50 to vessel he

Linnekin failed to apportion the vessel s 50 of the benefits or cos

as between stevedore and vessel Thus they reason when cargo 

benefited to 50 and vessel and stevedore combined are benefited 

a given facility for the remaining 50 to allocate this full remaini

50 to stevedores only is an unreasonable practice But it autom

cally follows that to deny all charge against stevedores because of 

imperfect allocation would result either in imposing all 50 agai

vessel or would deny Cargill a fair monetary return and if the f

allocation all to stevedore is an unreasonable practice when the t

interests stevedore and vessel benefit then the latter allocation 

to vessel as recommended by the majority in Footnote 29 m

also be an unreasonable practice 46 But the basic issue here is n

whether stevedores should have been allocated 50 or 40 

20 or 5 of the aggregate benefits but rather whether t

5v charge is fairly related to the benefits actually received 

stevedores We find the record establishes such fair relationsh

Finally under Volkswagenwerk there need be only a reasona

relationship between benefit and chargenot the strict math

matical and direct relationship between rates and fully allocated co

as required in a domestic rate case and which the majority appears 

apply to this case

With respect to dock cleaning no one disputes that grain spilla

creates a safety hazard which requires periodical cleaning of the gra

dock BARMAs witness recognized that at one time two men spe

8 or 9 hours washing down the dock with hoses Considering th

cleaning can be done only when the dock is empty and keeping 

mind that ships often dock at short intervals or even one right follo

ing the other and are loaded at any time during the day or at nig

it is evident that dock cleaning cannot be done after every vessel T

50 per vessel charge therefore is no more than a reasonable and f

i

1

tures were assigned to the activities in whose furtherance they have been incurred Contributions of both labor 

facUities weremeasured by the propprtion lte use made thereof Proportionate use was determined generally 

time space Of valuebasis wherepossible otherwise judgment was used Terminal RateStructureCalifornia P

supra at 612 Judgment was the determinant in arriving at the proportionate uses of the wharf and ship

gallery in the instant case

461nvestlgatlon of Free Time PracticeaPort of San Diego 9 F M C 525 1966 at 549

18 FM 
BATON ROUGE MARINE CONTRACTORS v CARGILL INC

method ofuniformly allocating the cost ofdock cleaning whether or

not it is done after every vessel

Itis ofmore than passing interest to note that BARMAstated onthis

record therewould be no great difference to competing stevedores if

the charge in question is assessed provided Rogers does not compete

for stevedore business at this facility 47 This comment is indicative of

the fact that one ofBARMA s primary purposes is to force Rogers to

cease doing business at the facility rather than to eliminate the charge

assessed equally against all stevedores

Mr Linnekin s formula for allocating costs and services between

cargo vessel and stevedores constitutes a fair and equitable method

ofallocating costs amongst those interests and establishes a reasonable

relationship between the charges assessed and the services and ben

efits provided

The stevedoring contractor who charges an agreed rate per ton

loaded into the vessel benefits directly from the increased loading

capacity of the Port Allen grain elevator as well as from the high

efficiency ofits loading equipment including the shipping gallery and

the grain dock wharf

There is a reasonable relationship between the charge to stevedores

and the benefits received by the stevedore from the services and

facilities including dock cleaning and liaison services

In turn Cargill is entitled to compensation for these provided ser

vices and facilities

175

41Tr of Oral Argument of March 7 1973 pages 46 47

Commissioner Morse It seems tome I saw somewhere in the briefperhaps not in your brief an allegation

to the effectthat this type of a shipping elevator should not be permitted to also conduct stevedoring

operations on the premises

Mr Bagley Counsel Yes I think that the elevator has a

choice that it shouldbe made by this Commission to

have a choice

If it does not compete with stevedores it willreally makeno great difference tostevedores whether or not such

a charge is imposed on them

In other words if areasonable and proper charge should be made by an elevator against some part of the

shipping operation and there is no competition between the elevator through its subsidiary orits affiliate with the

stevedores working at the elevator and all stevedores are standing in the same position and each one is an indepen

dent contracting stevedore not an affiliate then the fact that this charge is imposed uniformly across the board

on each of these stevedores will not in any manner affect their competitive relationship

The assessment in question was 511 perton atthe time the ease was heard by theAdministrative Law Judge but

will be subsequently raised to 811 perton BARMA s basic fearis further explained in the following colloquy Tr of

Oral Argument of March 7 1973 page 50

Mr Bagley I think that whereyou have a

tax imposed upon one ortwo competitors and the tax is imposed by

the parent of the one the house stevedore you fairly obviously have in the hands of the parent and its subsidiary

the right to control competition between those two

I frankly do not recall thosefigures that were referred to today But any time that Cargill wants toputBaton

Rouge Marine Contractors out of business all it has to do is lower the rates by Rogers to something which will be

below Baton Rouge Marine Contractors

When it does this Cargill will have a

five cent increment which will be profitable on everyton it loads which

will be compensation received by it overand above its cost load

We say that in this is the danger which we do not believe should be allowed by this Commission under an

agreement regulated by it

The record discloses that Cargill has neverfailed to assess the 511 charge against Rogers

18 F M C
176 FEDERAL MARI fIMECOMMlSSION

The assessment of the charges against stevedores is necessary 

order that Cargill achieve a fair return on the leased facilities

Therefore we conclude that the charge sought to be asses

against all stevedores operating at the Cargill leased facility is reason

ably related to the economic and commercial benents derived by 

stevedores and the assessment thereof is ajust and reasonable pract

within the meaning of section 17 of the Act

The Order We object to the breadth and scope of that paragra

of the Order which provides

It is further ordered That no charge to stevedores for use of respondent s services 

facilities based upon allocations of costs found therein to be unreasonable may 

imposed by respondent until such charge has been found reasonable on remand 

until a tariffreflecting such charge has been liled with the Commission

In our opinion and em this record we have nojurisdiction to is

an order which forbids any charge against stevedores until s

charge has been found by us to be reasonable On this record and 

the period oftime to which the recordspeaks four ofnve Commissi

ers have found that respondent provided services and facilities 

stevedores and that stevedores received benefits therefrom for wh

a charge could be assessed only the level of the charge being 

resolved by us Had the above quoted order been restricted to 

5i charge and to the period of time covered in these proceedin

there conceivably might be support in law for such order But i

not so restricted for on its face it is broad enough to apply to a cha

ofless than 5iapplicable duringthe period covered by this recorda

which charge may be supportable by other cost allocations or mod

cations of those cost allocations used in this proceeding and event

new charge established as oftoday based on today s costs and bene

and which respondent might now nle with us under our Gene

Order 15 46 CFR533 Inour opinion wemay not evenon this reco

prohibit either of such new nlings for it amounts to an exercise 

injunctive power which on this record and in this situation we do 

have Transpacific Freight Conf o Japan v FMB 302 F2d 875 D 

Cir 1962

Our jurisdiction over tariff nling practices ofterminals is based 

Section 17 Shipping Act 1916 and upon our General Order 

46 CFR 533 Itis inherent in General Order 15 that a terminal ta

rate filing is effective the day the tariff is filed with us unless the fil

itself specilles a deferred effective date 48 As to terminal tariff min

we do not have suspension authority as we do have in respect to ta

4fIAs originally proposed General Order 15 would have required 30 days advance filing of terminal tariff

rules and regulations The 30 day rule was objected to because cif lack of authority tojrescribe such advance 

and the requirement was dropped 30 FederalRegister 12681 1965

18 FM 
BATON ROUGE MARINE CONTRACTORS v CARGILL INC 177

filings by common carriers in our domestic offshore commerce under

Section 3 Intercoastal Shipping Act 1933 46 U S c 845 nordo we

have specific statutory authority to reject a terminal tariff filing as we

do have in respect to 6lings by common carriers by water in our

foreign commerce under Section 18 b 4 Shipping Act 1916 46

U S C 817

Hence if we have terminaltariffrejection authority absent a hear

ing and afinding of a violation ofthe Shipping Act 1916 it is only

when based on the premise that the filing is so defective in form or

substance as to be patently a nullity as a matter ofsubstantive law and

that administrative efficiency and justice are furthered by such rejec

tion Municipal Light Board etc v Federal Power Commission 450

F 2d 1341 D C Cir 1971 We do not have such a nullity before us

See also Arrow Transportation Co v Southern Ry Co 372 U S 658

1963 United States v Scrap 412 U S 669 6979 1973 Continen

tal Air Lines v CAB F 2d D C Cir 1974 Rejection of

Tariff Filings 13 F M C 200 1970 Australia Atlantic and Gulf

Conference 16 F M C 27 32 1972

The effect ofthe Orderis evenmore drastic than a suspension order

It purports to give us jurisdiction to approve the level of a rate before

the rate may become effective and with no limit on how long our

determinations may require That quoted portion of the Order is

illegal and void for want ofjurisdiction

Commissioner George H Hearn concurring and dissenting

I

agree that there are no violations of section 16 As to section 17

Iconcur in the conclusions set forth by Chairman Bentley and Com

missioner Day Idisagree with the conclusion with respect to section

15 and find a violation thereof

Itis to some degree true that the lease agreement between Cargill

and the Port permits Cargill a broad range of discretion on matters

concerning operation of the terminal but as concluded by the Ad

ministrative Law Judge it is not apparent that the agreement permits

the type ofactivity engaged in by Cargill with respect to stevedores

Substantial evidence ofthe initial intended and approved perimeters

ofthe agreement can be found in the statement ofone ofthe parties

The General Counsel ofthe Port Commission requested Cargill to at

least postpone the imposition ofthe charges and conditions until ap

proved by the Commission 49

491nitial decision fn 10 and accompanying text

18 F M C
178 FEDERAL MARITIME COMMISSION

This insistence on adherence to the terms of an agreement is crucial to the contin

existence of the right of persons dealing with conferences and other groups enjo

antitrust exemptions under section 15 to know how they may reasonably expect t

alFected by the concerted activity of such groups

Ifone of two parties to an agreement cannot find authOrity in 

agreement for the specific activity it must be presumed that th

parties willbe in nomore advantageous position to construe the ag

ment

Clearly the filing and approval requirements of section 15 can

be defeated by the contention that the modificationof the agreem

is unilateral It has been recently held 51 that the fact of there be

parties to an agreement not subject to the Shipping Act does 

remove the agreement from section 15jurisdiction Were it otherw

parties to an agreement could avoid FMC jurisdiction by the Sim

device of including a person not subject to the Act

Similarly to accept Cargill s argument wouldallow parties as her

to avoid approval of agreement modifications by formulating them 

the acts of only one party

S FRANCIS C HURNEY

Secretary

GOPacific CoodEuropean ConferenceRules 10 and 12 14 FM C 266 278 1971 See also jointAgree

Far st Conference and Pacific Westbound Conference 8 F M C 553 558 1965

NYSA lL4v FMC F 2d I974

18 F M
FEDERAL MARITIME COMMISSION

DOCKET No 71 29

BATON ROUGE MARINE CONTRACTORS INC

v

CARGILL INCORPORATED

ORDER

18 F M C

179

The Commission has this day entered its Report in this proceeding

which is hereby made a part hereof by reference

Therefore it is ordered That respondent cease and desist from

assessing those charges and imposing those conditions found to be

unlawful therein

Itis further ordered That this proceeding be and the same hereby

is remanded to the presiding Administrative Law Judge for further

proceedings to determine the proper charge if any assessable against

complainant and those similarly situated for services and facilities

provided by respondent which are properly allocable to complainant

and those similarly situated

Itisfurther ordered That the presiding Administrative Law Judge

issue a supplemental decision of his findings in the proceeding on

remand

Itisfurtherordered That should it choose to impose certain condi

tions respondent immediately file with the Commission a tariff re

flecting those conditions withinthe guidelines set forth in our Report

herein sought to be imposed

Itis furtherordered That no charge to stevedores for use ofrespon

dents services and facilities based upon allocations of costs found

therein to be unreasonable may be imposed by respondent until such

charge has been found reasonable on remand and until a tariff reflect

ing such charge has been filed with the Commission

By the Commission

SEAL 5 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 749

CONSOLIDATED INTERNATIONAL CORPORATION

v

CONCORDIA LINE BOISE GRIFFIN

STEAMSHIP COMPANY INC AS AGENTS

NOTICE OF ADOPTION OF INITIAL DECISION

Jan 9 1975

No exceptions having been filed to the initial decision in this p

ceeding and the Commission having determined notto review sam

notice is hereby given that the initial decision became the decision 

the Commission on January 9 1975

By the Commission

SEAL 8 FRANCIS C HURNEY

Secretary

180

18 FM
FEDERAL MARITIME COMMISSION

No 749

CONSOLIDATED INTERNATIONAL CORPORATION

v

CONCORDIA LINE BOISE GRIFFIN

STEAMSHIP COMPANY INC AS AGENTS

IR F M C

181

An agreement to settle a proceeding brought under Section 22 of the Shipping Act

alleging a violation of Section 18 b 3 of the Shipping Act can be approved only

upon an affirmative finding that such violation occurred

Cameras and enlargers arewithin classification of machines under respondent stariff

Machines include any device consisting ofstatic ormoving parts orboth which

utilize and convert energy motion orforce from oneform into another to perform

a useful function

Settlement of reparation proceeding approved with modification

c J Meyers Mrs and William Levenstein for complainant

Stanley 0Sher for respondent

INITIAL DECISION OF SEYMOUR GLANZER

ADMINISTRATIVE LAW JUDGE 1

By complaint filed pursuant to the provisions ofSection 22 ofthe

Shipping Act 1916 2

and served February 25 1974 Consolidated

International Corporation complainant asks reparation in the

amount of 7 530 73 with interest from Concordia Line respondent

The claim arises from fourteen shipments of cameras photographic

enlargers and their parts from Alicante Spain to Philadelphia Penn

sylvania aboard respondents ships during the period from December

24 1972 through November 30 1973 By joint motion the complain

ant and respondent request authorization to settle for the fullamount

of the claim but without interest

IThis decision became the decision of the Commission 1 9 75

46 use 1821

3The complaint does not contain an express prayer for interest butit does pray for such other sums as the

Commission may determine tobe proper as an award of reparation Thequoted term has been construed by the

Commission as a prayer for interest However by subsequent agreement ashipper injured because it was assessed

an unlawfulrate may elect towaive interest on its claim United StatesBorax ChemicalCorporation vPacific Coast
182 FEDERAL MARITIME COMMISSION

Briefly the complaint alleges violations of Section 18 b3 of t

Shipping Act 1916 4

in that the respondent charged and collected t

tariffrate for Cargo N 05 for the fourteen shipments instead of t

tariff rate for Business and Industrial Machines N O S The answ

consists of what is in effect a general denial and three affirmati

defenses

Inasmuch as the answer also states that the respondent cannot d

termine whether to consent to shortened procedure on the prese

state of the record an interesting allegation in the light ofsubseque

events I

urged the parties to confer with a view toward entering in

a stipulation offacts which would permit disposition under the sho

ened procedure ofRule 11 of the Rules of Practice and Procedur

The parties conferred and after some delay they filed a stipulati

of facts accompanied by a letter from complainant requesting 

belated briefing schedule The respondent did not explicitly alter 

representation concerning shortened procedure but itdid acquies

in the briefing schedule suggested by complainant Since the briefi

proposal expressly invoked Rule 11 procedures the respondent 

deemed to have assented to the conduct of this proceeding witho

the need for oral hearing

The briefing schedule which the parties requested was approv

but briefs were not filed Before the due date for the opening br

respondent made its offer of settlement By letter the complaina

advised meofthe offer and ofthe forthcoming motion to approve t

settlement In addition complainant wrote that the offer to set

obviates the necessity for going forward with briefs The meaning 

the quoted remark is not entirely clear but in the context of t

limited scope of the stipulation and motion both printed in f

below itraises this threshhold question When an offer ofsettleme

is made and accepted by the parties to a reparation proceeding is 

Commission nevertheless required to exercise its decisional functio

by making findings and ajudgment onthe merits oris it simply oblig

to mechanistically place its imprimatur of approval on the arran

European Conference 11 FMC 451 470 1968 In any event the award of interest is discretionary on the 

of theCommission Flota MercanteGrancoJombtana SA vFederal Maritime Commission 373 F 2d 674 681 

Cir 1967

446use t817 b 3 It provides as pertinent No common carrier by waterin foreign commerce or confere

of such carriers shall charge or demand or collect or receive agreater or less ordifferent compensation fo

transportation of property orfor any service in connection therewith than therates and charges which are spe

inits tariffs on file withtheCommission and duly published and in effect at the time norshall any such carrier re

refund orremit in any manner orby any device any portion of the rates orcharges so specified nor extend or

to any person any privilege orfacility except in accordance with such tariHs

46 CFR 502 181502 187 UnderRule 11 acomplaint proceeding may be conducted under shortened p

dure without oral hearing with the consent of the parties

6It Is the function and power of the presiding Administrative Law Judge to act upon offers of settlement 

10 g of the Rules of Practice and Procedure 46 CFR 502 174

18 FM 
CONSOLIDATED INTERNATIONAL CORP v CONCORDIA LINE 183

ment In my judgment the Commission is not relieved of the deci

sional responsibility in these circumstances

Itis true that the Commission is guided generally by the principle

that settlements ofcontroversies are to be encouraged 7 but this ap

proach is available only withinthe boundaries ofthe underlying statu

tory scheme which as provided in Section 18b 3 directs common

carriers to collect the rates and charges specified in their tariffs and

forbids rebates remissions or refunds oflawful charges Itfollows that

an agreement to settle a proceeding brought under Section 22 ofthe

Shipping Act alleging a violation ofSection 18 b 3 can be approved

only upon an affirmative finding that such violation occurred Cf

Ketchikan Spruce Mills v Coastwise Line 5FMB 661 662 1959 cf

also Rule 6c ofthe Rules ofPractice and Procedure 46 CFR 502 93

applicable to Special Docketapplications which provides in pertinent

part that satisfied complaints will be dismissed in the discretion of

the Commission Here to support a finding ofviolation it must be

shown that the respondent did charge and collect a greater compensa

tion than its tariffs authorized With the foregoing discussion in mind

it is appropriate to go on to the facts of the matter

The parties stipulated to the following facts pertaining to the four

teen shipments 8

1 The complainant is incorporated in the State of Delaware Itis

located at 4501 South Western Boulevard Chicago Illinois Its princi

pal business is the Marketing of graphic arts equipment

2 The respondent is a common carrier by water in the trade from

Spain to U S North Atlantic Ports and is subject to thejurisdiction of

the Federal Maritime Commission in accordance with the provisions

of the Shipping Act 1916 as amended

3 The complainant paid and bore the freight charges assessed by

respondent for the shipments in controversy Said charges were paid

less than two years prior to the date the complaint was filed with the

Federal Maritime Commission

4 All ofthe shipments in question were transported by respondent

from Alicante Spain to Philadelphia Pa U S A

5 All of the shipments in question consisted of one or more ofthe

following articles

a Consolidated Fast Darkroom Cameras 24 size approximately

10 long by 4 7 wide by 69 high

b Consolidated C 16 Color Enlargers approximately 8 6 long by

38 wide by 5 high weighing approximately 2085 pounds

7Merck Sharp Dohme IntemationalA Division of Merck Company Inc v

Atlantic Lines 14 SRR 232 235

1973 adopted SRR Uanuary 2 1974

The stipulation encapsulates material set forth more comprehensively in the complaint

18 FM C
184 FEDERAL MARITIME COMMISSION

c Consolidated Super 100 Cameras approximately 12 long 

310 wide by 63 high

d Lensboard Assemblies Rear Cases Vacuum Packs and Cop

boards

6 Thearticles shipped are all used commercially in the Graphic A

industry and for commercial photography and are fully described 

Attachments 1 2 and 3

9

7 At the time the shipments moved page No 53 ofresponden

tariff Spain U S North Atlantic Westbound Freight Conference Ta

F M C No 6 specified rates for Cargo N O S and page No 

published rates for Machines N O S Machines Business N O 

and Machines Industrial N O S There are no qualifications restri

ing these descriptions The rates for the three Machines entries a

identical

8 Respondents tariff does not listany article specifically describi

Cameras Enlargers or parts for Cameras or Enlargers

9 Respondents tariff effective at the time the shipments in qu

tion moved provided in Rule 3 page 22 as follows

Shipments of Parts Integral parts of commodities listed herein unless otherwise 

cifled will be accorded the rate basis for the commodity

10 Complainant contends that the applicable rates for the transp

tation services rendered by respondent in connection with the 

shipments in question are those published in Spain U S North Atla

tic Westbound Freight Conference Tariff F M C No 6for Machin

N O S and that it has overpaid respondent the sum of 7530 73 

the 14 shipments

The motion for authorization to settle reads as follows

The parties have agreed to settle the claims which are the subj

of the complaint in this proceeding as follows

1 Respondent will pay complainant the sum of 7530 73 witho

interest in settlement of the 14 claims listed in the complaint

2 The parties agree that said settlement should be based upon 

rates published in Spain U S North Atlantic Westbound Freight C

ference Tariff F M C No 6 for Machines N O S with due reg

to the Stipulation of Facts filed June 17 1974

3 Payment will be made within 30 days from the date ofComm

sion authorization

4 A Motion to dismiss the proceeding with prejudice will be ma

by complainant upon receipt of payment

Theattachments arre advertising brochures oontaining thespecifications of thecommodities transported At

ment 1 describes theConsolidated Fast Darkroom Camera attachment 2the Consolidated C i6 ColorEnla

Attachment 3 tbe Consolidated Super 100 Camera and parts shown In paragraph 5 d of thestipulation

18 FM 
CONSOLIDATED INTERNATIONAL CORP Y CONCORDIA LINE 185

The parties request authorization to make the aforesaid settlement

The stipulation and motion do not present the entire picture How

ever when their contents are read in conjunction with the complaint

it seems reasonable to conclude that the parties intend to agree that

the respondent charged the higher cargo rate 10 for the shipments

but that the respondent now concedes that it should have charged the

lower machines rate Respondents reason for the application of

the machines rate rather than the cargo rate is leftunstated Thus

despite anypresumption favoring the fairness correctness and valid

ity ofthe settlement 12 there remains the question whether the cam

eras and enlargers are classified as machines or whether they take

the broader classification of cargo since there is no specific tariff

classification for cameras or enlargers This is the issue on which ap

proval of the settlement turns

The brochures disclose that the enlarger and the cameras have

components consisting of a complex ofmoving and stationary parts

Some ofthe parts are powered electrically while others such as worm

gears are operated manually To state the obvious the cameras are

designed to photograph particular copy on film and the enlarger is

designed to enlarge or reduce filmed transparencies Conforming to

applicable precedent those qualities entitle the commodities and

their parts to be classified as machines

In United Nations Childrens Fund v Blue Sea Line 12 SRR 1067

1972 the carrier initially assessed a lower machinery rate for com

modities but later rebilled the shipper at a higher cargo rate for the

shipment there involved In dealing with the question ofwhich rate

was applicable as a matter ofnovel impression the Commission ex

plained thatin a tariffinterpretation problem the threshhold determi

nation is whether there is an ambiguity in the tariff and if it is found

to exist to then strictly construe the tariff provisions against the car

rier resolving any doubt infavor ofthe shipper 12 SRR at 1069 1070

see also United States v Interstate Commerce Commission 198 F 2d

IOPage 53 of respondent s tariff which specifies the rate for cargo was revised several times during the

pertinent period Atthe timeof the first three shipments the contractrate was 106 25 W1M per2nd revised page

53 effective December 19 1972 the same rate remained in effectat the time ofthe fourth shipment per3ed revised

page53 effective March 6 1973 at thetime of thenextseven shipments the rate was 117 00 W1M per5threvised

page53 in effectwhen the last 3 shipments weremade butthe rate fOf all W1M basis rates were increased by 2 50

per 2nd revised pageTitle A effectiveSeptember 25 1973 atthe time of the last shipment there was a

7 bunker

surcharge per 3rdrevised page 49 effective November 18 1973

llPage 66 of respondents tariff specifying the rate for machines was also revised a number of times during

the pertinent time period Per 4th revised page 66 effective November 7 1972 in effect at the time of the first

shipment the contract rate was 8150 W M the rate remained the same for the next three shipments per 5th

revised page 66 effective February 6 1973 the rateforthe followingsixshipments was 89 75 per8threvisedpage

66 effective September 20 1973 9th revised page 66 effective September 12 1973 in effect atthe time ofthe

last four shipments retained the rate shown in 8th revised page 66 but the last three shipments took the 2 50

increase noted in n 10 supra and the last shipment took the 7 bunker surcharge mentioned in n 10

IIISee n7

supra

18 FMC
186 FEDERAL MARITIME COMMISSION

958 966 n 5 D C Cir 1952 The Commission went on to 6nd 

ambiguity by virtue of the fact that the commodities could com

within either of the two classi6cations In reaching that result t

Commission found that the de6nition of machine includes any d

vice consisting of static or moving parts or both which utilizes a

converts energy motion or force from one form into another to p

form a useful function

Thus applying the usual canons and techniques of interpretati

and noting no real uncertainty as to the tariff standard see Nation

Daily Products Corporation KraftFoods Division v Missourl Kansa

Texas Railroad Company 385 F 2d 173 177 5Cir 1967 I6ndth

the cameras and the enlargers are machines and that responde

should have charged the rate for that classi6cation 13 Where a co

modity shipped is included in more than one tariff designation th

which is more speci6c will be held applicable I

And where two d

scriptions and tariffs are equally appropriate the shipper is entitled 

have applied the onespecifying the lower rates United States v G

Refining Company 268 U S 542 546 1925 Accord Norfolk a

Western Railway Company v Permaneer Incorporated 455 F 2d 

7879 8 Cir 1972

I find that the respondent charged demanded and collected 

greater compensation for the transportation ofproperty than the ra

and charges which are speci6ed in its tariffs on 6le with the Comm

sion and duly published and in effect at the time of the fourte

movements in violation of Section 18b 3 The motion for authori

tion to settle is grantedand respondent is ordered to pay complain

the sum of 7490 86 15 without interest in full settlement ofthis rep

ration proceeding within 30 days This is a6nal order and it har

seems necessary to require complainant to HIe another motion 

dismiss the proceeding with prejudice as the motion to settle wo

have the complainant do upon receipt of payment

S SEYMOUR GLANZER

Administrative Law Judge

WASHINGTON D C

December 13 1974

I3Given theclassUlcation of machines in r poi1 dents tariff it is inexplicable why respondent sagent reje

theimplementation of that ratefor cameras and enlargers on January 4 1974 in thefollowing wards With re

to the above account and your mamo dated October 18 1973 attaching invoices covering various shipmen

Concordia vessels covering reproduction machinery and requesting refurids for same We regret we cannot alte

rates as assessed since our tariff does not provide any classification for these machines Thus general cargo rate

applicable

uCitations omitted

UIn computing its claim forrefund for thetwelfth shipment made on October 4 1973 claimant overlooke

2 50 rate increase which went into effect onSeptember 25 1973 Recalculated theclaim must be reduced b

sum of 39 87

18 F M 
FEDERAL MARITIME COMMISSION

DOCKET No 7239

OCEAN FREIGHT CONSULTANTS

v

ROYAL NETH STEAMSHIP CO

Reparation granted

Henry S Wegner for Complainant

A J Rosner for Respondent

REPORT

Decided fan 27 1975

BY THE COMMISSION Helen Delich Bentley Chairman andJames V

Day Vice Chairman

This proceeding comesbefore the Commission on a petition for recon

sideration filed by Ocean Freight Consultants OFC following the

issuance ofthe Commission s Notice ofAdoption ofInitial Decision In

his Initial Decision Administrative Law Judge Stanley M Levy dis

missed OFC s complaint determining that OFC had not sustained its

case failing to shoulder its heavy burden ofproof

FACTS

OFC instituted this proceeding as assignee ofJohnson Johnson

International seeking reparation in the amount of 383 44 OFC con

tended that Respondent Royal Netherlands Steamship Company

RNS erroneously assessed a freight rate higher than that payable

under the tariff The circumstances follow

On April 23 1971 Respondents vessel the CHIRON sailed from

New York to Puerto Cabello with among other items 27 bags of

Cab O Sil measuring 184 cubic feet weighing 459 pounds The bill of

lading dated April 23 1971 listed these items as 27 bags of Cab O Sil

187

18 F M C
188 FEDERAL MARITIME COMMISSION

and assessed to this cargo the Cargo N O S rate of 86 per 40 cu

feet Upon arrival in Puerto Cabello the vessel was unloaded t

cargo claimed by the consignee and the freight paid

On post audit the shipper discovered the alleged error and 

October 22 1971 filed a claim with the carrier for 395 60 alle

ing that the cargo in question was 99 percent silicon dioxide a

should have been rated at 53 per 2000 pounds the rate for s

con dioxide under Respondents applicable tariff The carr

rejected OFC s claim by letter of November 10 1971 on t

basis of a tariff rule requiring that articles be described not by th

trade names but rather by the common name applicable to s

articles

In support of its position Complainant provided a letter from t

manufacturer of Cab O Sil confirming that the product is in fa

99 percent silicon dioxide Additionally Complainant presented 

statement from the chairman of a conference not here involved s

porting its position

THE INITIAL DECISION

Judge Levy dismissed the complaint concluding that

This is not a case of inadvertent misdescription The choice of description 

clearly before the shipper It elected a particular description The tariffprovided dif

ent rates in accordance with the description selected by the shipper

Complainant in its exceptions took issue with the Administrat

Law Judge s findings and argued that his decision opens the door 

the very discriminations and prejudices that section 18 b of 

Shipping Act was designed to preclude OFC cited pertinent p

tions of the Harter Act in an attempt to show thatthe carrier 

certain responsibilities to determine thatwhat is actually shipped is 

fact described on the bill oflading contending that the carrier sho

not be permitted to profit from its failure to assure that the bil

lading properly describes the shipment In conclusion Complain

submitted that it had presented uncontroverted evidence as to w

was shipped Respondent did not raise any issues as to the proof 

what was actually transported

Respondent in its reply restatedits position that under the appli

ble provision ofthe Conference s tariff the carrier can only assess 

I

Item 2h original page No 9 of Us Atlantic Gulf Venezuela Netherlands Antilles Conference Fr

Tariff F M C No 2 states

Bills of Lading describing articles by trade name are not acceptable forcommodity rating Shippers are req

to describe theirmerchandiseby its common name toconform tomerchandise descriptions appearing herein 

of Lading reflecting only trade names will be automatically subject to application ofthe rate specified herei

Cargo NOS as minimum

18 FM 
OCEAN FREIGHT v NETHERLANDS SS CO 189

Cargo N O S rate to articles described by trade names only on bills

of lading

By Notice of October 29 1973 the Commission having reviewed

this case on exceptions and replies adopted the Initial Decision albeit

on dissimilar grounds Inits present petition for reconsideration OFC

again urges that it must have sustained its case since its evidence is

uncontradicted Additionally OFC claims that insufficient treatment

was given OFC s Harter Act claims as to the burden imposed upon a

carrier

DISCUSSION AND CONCLUSION

We have reviewed the record ofthisproceeding inlight ofthe issues

raised in the pending petition for reconsideration and have concluded

that reparation should be granted We think that by the evidence

presented by Complainant which is unrefuted by Respondent the

Complainant has been shown to have met the heavy burden of proof

which must be sustained in cases such as this The record evidence

shows without contradiction that Cab O Sil consists of99 Silicon

Dioxide and therefore should have been so rated by Respondent We

have also spent a great deal of time and exertion in examining the

defense relied upon by Respondent herein We conclude that the

defense put forward merits discussion here

Respondent alleges that the rule in his applicable tariff mandates

the application of a Cargo N O S rate to cargo described by trade

name only We have accepted a similar defense with respect to a tariff

rule regarding contested weights or measures of cargo in our recent

case of Kraft Foods v Moore McCormack Lines Inc There is how

ever a glaring dissimilarity between this case and Kraft In the Kraft

case we permitted the carrier to rely upon a tariffrule which stated

in pertinent part

Claims for adjustment of freight charges if based on alleged errors in description

weight andlor measurement will notbe considered unless presented to the carrier in

writing before shipment involved leaves the custody of the carrier

There the rule was clearly stated and left the carrier no discretion

either to consider or refuse to consider a claim filed with it after the

cargo had left its custody This is clearly distinguishable from the rule

with which we are here presented

The applicable rule sought to be relied uponin the present proceed

ing permits a carrier to apply the Cargo N O S rate as aminimum

to cargo described by trade name only This sort of flexible standard

presents the opportunity for discrimination between shippers and as

such cannot be relied upon by a carrier

18 F M C
190 FEDERAL MARITIME COMMISSION

Since wewill not allow reliance on the rule here the shipper is fr

to show by whatever evidence he may adduce the nature ofthe ca

transported Ifhe can do so in satisfaction ofthe heavy burden ofpr

placed uponhim heis entitled to reparation Here we conclude t

Complainant has sustained hisburden His evidence is unrefuted a

therefore under our rules 2

is accepted as fact

We hasten to add however that we confess sympathy for a car

faced with rating a

cargo described only by trade name His posit

is as defenseless as wasthe carrier sposition in Kraft Foods That be

so we note that in the future we are inclined to look more favora

upon a defense such as that proposed here provided the rule sou

to be relied upon is in fact a rule Should such a rule mandate 

application of the Cargo N O S rate to cargo described by tra

name not as minimum but as the only rate applicable we would 

more favorable to sustaining reliance on that rule We are unable 

do so here however for the reasons stated above

Wenote the disagreement ofCommissioners Barrett and Morse w

our conclusion as to the validity of the rule here in question T

dissent however is premised on hypothetical facts which obviate 

need for a rule such as that before us The need for a trade name ru

arises when the carrieris not informed ofthe commodity being shipp

except by its trade name description To assume as do Commission

Barrett and Morse that a determination of the proper rate whet

Cargo N O S orhigher rates under a discretionary rule will be ma

by the carrier s agent also assumes perforce that that agent knew 

actual description of the commodity shipped In such a case th

would benoneed for a rule suchas Item 2h because the person rat

the shipment would knowwhatthe rule assumes hedoes not know

Reparation granted

Commissioner George H Hearn concurring and dissenting

The Commission issued its original decision in this case

3

onOcto

29 1973 Iam now glad that the interval has brought two ot

members of the Commission into agreement with at least the re

of my dissenting opinion on that 6rst occasion when Iwould h

granted reparation However Iam unable to accept the rational

Chairman Bentley and Commissioner Day Ido not agree either w

their treatment of the tariff rule orwith that of Commissioners B

rett and Morse or with their gratuitous advice as to an acceptab

rule

Rule 3 d 46 eFR 1502 64

1AdopUon of Initial Decision 14 SRR 139

18 F
OCEAN FREIGHT v NETHERLANDS SS CO 191

Chairman Bentley and Commissioner Day reject the respondent s

defense based on the tariff rule and I agree My decision to grant

reparation however is based solely on the complainants ability to

meet its burden ofproof and not on the wording ofrespondent s rule

There is no need therefore to distinguish between the tariff rule in

this case and the one inKraftFoods v Moore McCormack Lines Inc 4

or to decide whether the words as minimum are determinative 5

In essence the Bentley Day and Barrett Morse views are no differ

ent They disagree only as to the effect ofthe words as minimum

Ultimately under both views if the tariffrule is in proper form the

shipper is to be denied reparation ipso facto The intent either way

is evident in the Bentley Day opinion here the carrier s position is

as defenseless as wasthe carrier s position inKraft Foods The result

is that not only does the majority provide the carrier with a defense

but with an irrebuttable presumption rendering the shipper action

less 6

Inasmuch as I concur in the grant of reparation in this case we

will have to await another case to see the possible full effect ofthe ma

jority view Thus the advice offered in the Bentley Day opinion

on how to defeat shippers claims is not just a matter of sym

pathy for carriers defenselessness but a forecasting of a mis

application of section 18 b of the Shipping Act further to that of

Kraft

The claimant here bases its claim in part on the Harter Act 49

U S c 193 which places on the carrier the burden ofissuing the bill

oflading to the shipper Itmay be that this does not provide grounds

for an action undertheShipping Act 7Yet the provisions ofthe Harter

414 SRR 603 1974 Petition for Reconsideration denied December 13 1974

While I agree with Commissioners Barrett and Morse that their trade name rule is but an extension ofKraft

there is no error as they ascribeto me concerning trade name cases and misrating cases Rather Ifind the error to

be in their majority Kraft decision in the first instance and would allow acomplainant tomeet theburden of proof

in all these cases regardless of the type or existence of atariffrule

tilt is unnecessary for me to decide the effect ofthe words as minimum I find the use of the tariffrule with

orwithoutthosewords as ameans of barring reparation toresultfrom an improper interpretation of section 18b3

of theShipping Act See my dissent in Kraft 14 SRR 603 606 If however it were necessary to decide the validity

of the tariffrulewith and without as minimum I could not choose because I find both invalid when used as abar

to shippers claims Without those words the rule is unlawfulfor the reasonsset forth in the Barrett Morse opinion

With as minimum the rule is unlawfulbecause it discriminates between two types of shippers one whose shipment

would qualify for acommodity rate higher than the Cargo NO S rate and another whose shipment would qualify

for alower than Cargo NO S rate As to the former the Barrett Morse rule would require application of the

commodity rate leaving the shipper unpenalized and no worse off thanif he had not used the trade name As to

the shipper whose cargo would take alower than Cargo N O S rate the Barrett Morse rule would mandate the

Cargo N O S rate penalizing the shipper for usingthe trade name Thus the shipper of lower rated goods would

be penalized for using the trade name but not the shipper of higher rated goods This is unfair and unlawfully

discriminatory treatment See e g Valley Evaporating Co v Grace Line Inc 14 F M C 16 21 1970 These

difficulties in agreeing upon and formulating a rule which confonns with section 18b

3 and other Shipping Act

requirements illustrate my view that no such rule should be accepted as a

complete barto reparation The problems

would be obviated by adhering tomy views expressed in the Kraft case

l

Royal Netherlands 55 Co vFMB 304 F 2d 938 1962 OFCv Royal Netherlands 5 5 Co Adoption of Initial

Decision 14 SRR 139 141 1973

18 FM C
192 FEDERAL MARITIME COMMISSION

Act taken together with section 18 b3 of the Shipping Act clea

evince a congressional intent to weigh the balance evenly betwe

the shipper and the carrier and not so heavily in favor ofthe carr

as the majority proposes to do here

Consequently based upon my views set forth in Kraft whic

incorporate herein by reference Iconcur in the grant ofreparatio

For the same reasons Idissent from the grounds stated by Chairm

Bentley and Commissioner Day from their anticipated enforceme

of the form of tariff rule they suggest and from the conclusio

reached by Commissioners Barrett and Morse

Commissioners Ashton C Barrett and Clarence Morse dissentin

We would deny reparations

After many months of consideration the Commission by vote 

Chairman Bentley Vice Chairman Day Commissioners Barrett a

Morse Commissioner Hearn dissenting issued its decision in Kra

supra and just recently denied a petition for reconsideration

The basic and controlling principle enunciated in Kraft is set fo

in the following excerpt 14 SRR 603 at 606

Section 18 b 3 makes itabundantly clear that a carrier is strictly bound to the te

of the tariff as filed This mandate applies not only to the rates published therein 

to the various terms rules regulations and conditions included within that tariff wh

areas mucha part ofthe tariff as arethe rates themselves Footnoteomitted Likew

unless in anappropriate proceeding we find tariffrules and regulations to bein viola

of the Shipping Act 1916 they must be strictly applied by us

Appropriate proceeding means here proper notice and oppo

nity for hearing re lawfulness of tariff trade name rule 5 U S C 5

et seq

Under Kraft the first issue to be resolved here is the quest

whether Tariff Item 2 h which provides

Bills of Lading describing articles by trade name are not acceptable for commo

rating Shippers are required to describe their merchandise by its common nam

conform to merchandise descriptions appearing herein Bills of Lading reflecting 

trade names will be automatically subject to application of the ratespecified herein 

Cargo N O S as minimum

is or is not lawful under the standards ofthe Shipping Act 1916 

only in the event that we should find Tariff Item 2 h unlawful wh

we do not so find would we everreach the second question in th

reparation cases which question is whether the shipper has sustai

its burden of proof in its contention that the shipment was misra

614 SRR 603 606

18 F 
OCEAN FREIGHT v NETHERLANDS SS CO 193

by the carrier We adhere to the principles ofKraft and its applica

tion to Tariff Item 2 h

Chairman Bentley and Vice Chairman Day assert that the trade

name rule TariffItem 2 h establishes a flexible standard and presents

an opportunity for discrimination between shippers and as such can

not be relied upon by a carrier and conclude the tariffrule is unlaw

ful We disagree

We contend that a reasonable and realistic reading of Tariff Item

2 h establishes a rate rule which leaves no room for qualification or

discretion Tariff Item 2 h declares that ifthere is a tariffcommodity

rate applicable to a shipment described by the shipper by tradename

and which rate is higher than the Cargo N O S rate then that higher

commodity rate must apply not the lower Cargo N O S rate oIn

another situation in which a shipper describes the shipment by trade

name the Cargo N O S rate applies evenwhere as in this case the

tariff contains a lower commodity rate which would have applied had

the shipment been described by commodity rather than tradename

In either situation there is and can be but one lawful rate applicable

These applications ofrates are mandated by Tariff Item 2 h when it

uses the words will be and automatically This language leaves the

carrier s

rating clerk no room for discretion or flexibility This is not

to saythat a

rating clerk may not make amistake Le misrate a given

shipment but the possibility of that human error exists no matter

how artfully worded a tariff rule may be

On the present record we find and hold that Tariff Item 2h is a

reasonable and lawful effort by the carrier and conference to ensure

that all shippers be treated alike the rule requires that all shippers

declare to the carrier the true nature ofthe shipment in order that the

shipment be properly rated by tariff commodity descriptions rather

than declaring the shipment by a trade name in which latter event

the carrier would not be advised of the true nature ofthe shipment

and therefore might not be able to provide like treatment to differ

ent shippers To assure that the true description of the shipment is

given Tariff Item 2h in the usual situation imposes what in

essence amounts to an added freight charge the spread between

the commodity rate and the usually higher Cargo N O S rate

on the shipper who declares the shipment only by trade name

Tariff Item 2h inclusive of the phrase as minimum assures

absence of discrimination If the phrase as minimum is omit

Commissioner Hearn appears toclassify the trade name rule as falling within the principles applicable toerrors

in description and misclassification In this he errs for the tarifftrade name rule isbut an extension of Krait rather

than a dispute as to proper rating of a shipment in which latter situation the burden of proof iscritical

10Jhe term commodity rate is used only as an example Theappropriate applicable rate whether speci6c

generic orclass would be applied by thecarrier

18 FMC
194 FEDERAL MARITIME COMMISSION

ted a loophole is left open which could result in discriminati

There are only three conceivable factual possibilities in the trad

name situation One the Cargo N O S rate exceeds the commod

rate Two the Cargo N O S rate is less than the commodity rate a

Three the Cargo N O S rate and the commodity rate coincide T

third possibility coincidence of rate cannot conceivably raise a pro

lem in the area in which we are now concerned and will not 

discussed further

Accordingly the problem can best be explained by giving two 

amples in each instance the shipment being described only by tra

name the first example being a situation where the tariff commod

rateis less than the Cargo N O S rate and the second example be

a situation where the tariffcommodity rate is greater than the Car

N O S rate

First example Assume the commodity rate is 50 and the Car

N O S rate is 60 Under Tariff Item 2 h supra if the shipper 

clares the shipment by trade name he is automatically assessed 

60 rate no more because here there is no applicable commodity r

in excess ofthe Cargo N O S rate and noless because ofthemand

as minimum of Tariff Item 2 h If Tariff Item 2 h provided p

cisely as it now provides except that the phrase as minimum w

omitted and this would be a trade name rule to which Chairm

Bentley and Vice Chairman Day state

i

We hasten to add however that we confess sympathy for a carrier faced with ra

a cargo described only by trade name Hisposition Is as defenseless as was the car

position In Kraft Foods That being so we note that In the future we are Incline

look more favorably upon a defense such as that proposed here provided the rule so

to be relied upon is in fact a rule Should such a rule mandate the application o

Cargo N Os rate to cargo described by tradename not as minimum but as the 

rate applicable we would be more favorable to sustaining reliance on that rule

then in applying that abbreviated rule one can reach but one 

swer namely that in this first examplesituation the carrier autom

cally would have to assess the Cargo N O S rate Therefore 

obvious that merely declaring the as minimum portion to be ille

will not help claimant one would have to declare the entire tra

name rule unlawful Le have no trade name rule at all in orde

support an order herein in favor of claimant Evenif we rollowed 

Bentley Day philosophy which we do not we and from the qu

tion supra seemingly they would not bejustifiedin holding unlaw

Tariff Item 2h absent as minimum and again applying suc

abbreviated Tariff Item reparations herein would be denied

Second example Assume however the situation where the Ca

N O S rate is less than the commodity rate For example the Ca

18 F 
OCEAN FREIGHT v NETHERLANDS SS CO 195

N O S rate is 75 and the commodity rate is 100 In this factual

situation but with a Tariff Item 2h which has the phrase as mini

mum omitted the rating clerk will apply the Cargo N O S rate

initially initially for he may have no informationbefore him justifying

application of a commodity rate and because ofthe mandate in Tariff

Item 2 h to automatically assess the Cargo N O S rate of 75 and

evenwhen the carrier ascertains the true nature ofthe shipment the

carrier nevertheless must continue to apply the 75 Cargo N O S rate

rather than the 100 rate for the tariff rule absent as minimum

mandates that in such situation the Cargo N O S rate and only that

rate automatically applies This is a loophole which could be

seized upon by the unscrupulous shipper and would result in discrimi

nation in favor of such a shipper who would be assessed a 75 rate

absent as minimum and against the honest shipper who would give

the proper tariff commodity description ofthe shipment and pay the

100 rate If however the TariffItem 2 h includes the phrase as

minimum then when a shipment is declared by trade name it is

rated at 75 in the first instance for want ofmore complete descrip

tion but when the true nature ofthe shipment becomes known to the

carrier the shipment must be ratedaccordingto its correct commodity

rate of 100 With the phrase as minimum included the carrier has

no choice or flexibility if it abides by its filed tariff for general princi

ples of tariff construction obligate the application of a specific com

modity rate if one exists in preference to and to the exclusion ofthe

application of a Cargo N O S rate Thus it is clear that the as mini

mum phrase does not grant an opportunity for discrimination On

the contrary its presence closes a loophole which would otherwise

exist permitting discrimination if the as minimum is deleted from

the rule

Having found Tariff Item 2h to be lawful the shipment having

been declared to the carrier by trade name only the commodity rate

being lower than the Cargo N O S rate and the Cargo N O S rate

having been assessed by the carrier as mandated by TariffItem 2 h

that concludes the matter

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

II From the various common carrier tariffson file in this agency we take official notice that it is not uncommon

toseeacarrier oraconference publish commodity ratesat a level higher thanits published Cargo N 0 S rates This

mayoccur forexample in respect to ratescovering chemicals fresh produce refrigeratedcargo and other merchan

dise where special handling refrigeration orhazard may be involved

18 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 7248

PACIFIC MARITIME ASSOCIATION COOPERATIVE

WORKING ARRANGEMENTS POSSIBLE VIOLATIONS

OF SECTIONS 15 16 AND 17 SHIPPING ACT 1916

The ILWU PMA Nonmember Participation Agreement between thePacific Mari

Association and the International Longshoremen s and Warehousemen s Uni

subject to the jurisdiction of the Federal Maritime Commission under sectio

of the Shipping Act 1916

The ILWU PMA Nonmember Participation Agreement is not labor exempt

j

ThomasJ White NormanE Sutherland Alex L Parks Manley 

Strayer Cleveland C Cory and Gary R Bullardfor Petitioner Po

Edward D Ransom and RobertFremlin for Pacific MaritimeAss

ation

Norman Leonard for International Longshoremen s and Wa

housemen s Union

Thomas N Gleason for International Longshoremen s Associat

Gerald Grinstein Michael P Crutcher Louis F Nawrot Jr Rob

A Koelker and Richard F Ford for Port ofSeattle

Francis Scanlan and C P Lamhos for North Atlantic Shipp

Association

Paul J Kaller and Donald Brunner as Hearing Counsel

REPORT

Decided Jan 27 1975

BY THE COMMISSION Helen Delich Bentley Chairman James 

Day Vice Chairman Ashton C Barrett and George H He

Commissioners

Background

This proceeding was instituted to determine whether amaster 

lective bargaining contract and aSupplemental Memorandum ofU

196

10 1i 
PACIFIC MARITIME ASSOCIATION 197

derstanding No 4SMU 4 entered into by the Pacific Maritime Asso

ciation PMA and the International Longshoremen s and Warehouse

mens Union ILWU embody any agreements between and among

the members ofPMA which are subject to the requirements ofsection

15 ofthe Shipping Act 1916 the Act whether the implementation

of these contracts by the PMA and the ILWU would result in any

practices which are violative of sections 16 and 17 of the Act and

finally whetherthere are any laborpolicy considerations which would

operate to exempt such agreements or practices from any provision

of the aforementioned sections of the Shipping Act 1916

The Commission s

investigation was initiated at the request of the

petitioner ports who maintain that the subject agreements provid

ing for the employment of longshore labor are agreements within

the meaning ofsection 15 ofthe Act which should have been filed for

Commission approval pursuant to that section

On October 19 1972 the Commission issued its FirstSupplemental

Order Severing Jurisdictional Issues In that Order the Commission

decided to determine separately the matter of its jurisdiction under

section 15 over the subject agreements Additionally the Commission

advised therein that it would consider whether any labor considera

tions would operate to exempt those agreements or the practices

resulting therefrom from the provisions of sections 15 16 and 17 of

the Act

Thereafter petitioner ports submitted a revised version ofthe SMU

4 entitled ILWU PMA Nonmember Participation Agreement

which was made part of the collective bargaining agreement under

consideration in this proceeding In its Second Supplemental Order

Consolidating Jurisdictional Issues served January 30 1974 the Com

mission found that the ILWU PMA Nonmember Participation

Agreement 2 wasthe same in all its substantive essentials as the SMU

4 the only difference between the two being that the revised

agreement was embodied in the master collective bargaining agree

ment between the PMA and ILWU 3

The Commission proposed

18 FMC

IThe Ports of Anacortes Bellingham Everett Grays Harbor Olympia Port Angeles Portland and Tacoma

iFor the sake of convenience we will refer to the ILWU PMA Nonmember Participation Agreement as the

Revised Agreement TheRevised Agreement like its predecessor SMU 4 requires that 1 nonmembers join the

PMA foran indefinite period as acondition to the direct employment of anymember of the joint PMA ILWU work

force 2 any separatecontrad with JLWU conform tothe provisions of the Revised Agreement and the Pacific Coast

Longshore and Clerks Agreement 3 nonmembers eroploy members of the joint work force only through PMA

allocation procedures and the ILWU PMA dispatching halls 4 nonmembers pay dues and assessments and accept

proportionalliabjlity as to obligations of the PMA and 5 nonmembers adhere to PMA decisions as to work

stoppages strikes and lockouts

3PMA takes issue with the Commission s statement that the only difference betweenSMU 4 and the Revised

Agreement is that the latter is embodied in the master collective bargaining agreement PMA believes that this

language may create the false impression that tbere was some difference in treatmentof thenonmember participa

tion agreement 1111913 by PMA and ILWU in order to avoid FMCjurisdiction over the agreement PMA in order

to dispel any notion which may arise from theCommission s

statement pointout that whilethe Revised Agreement
198 FEDERAL MARITIME COMMISSION

therefore to 1 grant the supplemental petition of the petitio

ports and 2 include the ILWU PMA Nonmember Participa

Agreement in the current deliberations rising outofthe First Sup

mental Order In order to accord every possible due process par

were afforded an additional opportunity to address themselve

these actions by the Commission The comments submitted in 

sponse thereto have been fully considered by the Commission 

found for reasons stated below not to dissuade us from our ea

views

Before addressing ourselves to the jurisdictional question at i

here we should first like to dispose of a preliminary matter ra

by Hearing Counsel Hearing Counsel have suggested that beca

the master collective bargaining agreement including the Rev

Agreement involve antitrust and related labor policies and 

quire a determination of whether parties engaged in collective 

gaining have exceeded the scope of legitimate bargaining 

Commission should defer jurisdiction to either the NLRB or 

courts and await their decision If the agreements are found law

Hearing Counsel would then have the Commission examine 

implementation of the agreements in the light of sections 16 

17 of the Act

As we noted in New York Shipping Association NYSA lLA M

Hour Tonnage Method ofAssessment Possible Violation ofSec

15 16and 17 ShippingAct 1916 16 F M C 381 397 398 1973 

matter of deferring the legality of a bargaining agreement to 

exclusive primary jurisdiction of the NLRB was presented to 

disposed ofby the Supreme Court in Meat Cutters Union v Jewe

Co 381 U S 676 1965 InJewel Tea it was alleged that the u

and other retail stores had conspired to prevent the retail sale ofm

before 900 A M and after 600 P M The prohibition was containe

a collective bargaining agreement and the question of the la

exemption from the antitrust laws was presented The union 

tacked the appropriateness of the District Courts jurisdiction on 

ground that the controversy waswithin the exclusiveprimary juris

tion ofthe NLRB The Supreme Court rejected this contention on 

was physically incorporated into the 1973 master collectjve bargaining agreementwhereasSMU 4 wassimpl

a

supplement to the 1972 master collective bargaining agreement the agreements are not at all unlike sinc

form part oftheir respectIve master coUectlve bargaJnJng agreements

While wedo not share PMA s concern that the challenged language in our SecondSupplemental Ord

create mjsleadlng impressions in order toallay PMA s fear and to avoidany further misinterpretation we

state on the record that we have neverdoubted that either SMU 4 orthe Revised Agreement was part of the 

collective bargaining agreement in effect at the time nor was it our intention to question the parties mo

treating the two agreements differently In fact however PMAs apprehension is nonconsequentiaJ since 

method of incorporation has the same effect It is the substance and not a

change in form of theagreeme

its corresponding impact uponemployers in the industry that concerns the CommJssJon

18 F 
PACIFIC MARITIME ASSOCIATION 199

ground that the NLRB jurisdiction was primarily restricted to the

policing of the collective bargaining process and was not concerned

with the substantive merits of the agreement once it was signed As

it was in the New York Shipping case this holding is dispositive ofthe

suggestion made here that we defer jurisdiction over the Revised

Agreement to the NLRB

Before us is a complaint that alleges not that the parties have

refused to bargain but rather that they have entered into an agree

ment in violation ofthe shipping and antitrust laws As a result the

NLRB is without available procedure to investigate the legality of

the ILWU PMA Nonmember Participation Agreement This Com

mission however has been vested with authority overthe approvabil

ity of this agreement and the exercise of such authority is consistent

with the principle of primary jurisdiction as acknowledged by the

Court in the Jewel Tea case that preliminary resort should be had

to the agency which administers the statutory scheme in order to pro

tect the integrity of that scheme See Port of Boston Marine Ter

minal Assn et al v Rederiaktiebolaget Transatlantic 400 U S 62

1970

Hearing Counsels alternate suggestion that the Commission defer

the present matter to the courts is equally without merit Since the

Commission has already intervened in the counterpart District Court

case and requested that court to stay its proceeding therein which it

has done until the Commission has had an opportunity to pass upon

the status ofpertinent agreements under the Shipping Act it would

be both inconsistent and counterproductive for us to now ask that the

matter be litigated before the court More importantly we believe

that consideration of the Revised Agreement in light ofthe require

ments ofthe Shipping Act is a legitimate concernofthis Commission

and one that is properly before us The Commission simply cannot

deferto the courts matters which are so intricately involved with its

responsibilities underthe shipping statutes As we said in United Steve

dore Corp v Boston Shipping Association 16 F M C 7 1972 when

establishing the applicable criteria a labor related agreement

See discussion of Supreme Court on this pOint in Meat Cutters Uuion vJewel TeaCo supra at page 687

must be scrutinized to determine whether it isthe type of activity which attempts

to affect competition under the antitrust laws or the Shipping Act The impact upon

business which this activity has must then be examined to determine the extent of its

possible effect upon competition and whether any such effect is a direct and probable

result of the activity oronly remote Ultimately the relief requested or the sanction

imposed by law must then be weighed against its effect upon the collective bargaining

agreement

18 F M C
200 FEDERAL MARITIME COMMISSION

Accordingly we believe that under the circumstances this wlimld 

an inappropriate case for the Commission to withhold its determ

tion out ofdeference to the expertise of either the NLRB or 

courts With this in mind we proceed with a discussion of thejuris

tional issues involved

Initially Respondent PMA and Intervenors ILWU and CONAS

raised the same objections to the Commission s

jurisdiction over 

parties to the master collective bargaining agreement as were 

vanced by NYSA in New York Shipping IlUpra Specifically th

parties contend that 1 since PMA is an association with some me

bers who are not common carriers or other persons subject to 

Act and 2 since one of the parties to the collective bargain

agreement is a labor union the Commission has no jurisdiction o

the agreement

These arguments were not only laid to rest by this Commission 

our decision in the New York Shipping case sup ra but also rejec

by the court in NYSA and LA v FMG 495 F 2d 1215 2nd Cir A

8 1974 cert denied U S October 29 1974 Insupport

the Commission s jurisdiction overa multiempl oyer bargaining ass

ation and the agreement entered into among its members the co

there stated

We find the merits considerably less difficult than the issue of reviewability ind

given the decision in Volkswagenwerk 390 U S 261 1968we see noneed for ma

such heavy weather on the subject as the Commission did Footnote omitted

The assessment agreement fits the definition of 15 since it imposes obligation

common carriers by water and other persons subject to the Shipping Act to 

terminal operators see 49U S C 801 An agreement to which such persons arepa

is not taken out of fI5 by the fact that persons not fitting that deGnitil lto 

stevedoring contractors who are not terminal operators are also bound Volkswa

werk established that an agreement among water carriers stevedoring contractors

terminal operators allocating assessments for benefitsnegotiated with a longshorem

union requires approval under 15 The FMC tookjurisdiction ofT 2390 the prede

sor of the present assessment formula apparently without objection and dire

certain modifications its action has been sustained without any suggestion that 

FMC lacked jurisdiction over the agreement in a comprehensive opinion by the 

trict of Columbia Circuit Transamerican Trailer Transport Inc v FMG supra 

petitioners urge that the present case isdistinguishable on the basis that the agreem

in Volkswagenwerk and Transamerican TrailerTransport weresolely among steve

ing contractors terminal operators and carriers while the ILA took an active pa

negotiating and is a party to the agreement here at issue This is a distinction with

a difference To be sure the FMC has no concern with so much of the agreeme

provides what wages and other benefits shall be paid to the longshoremen grieva

procedures and similar matters But even though we fully accept that the lLA ha

important stake in the existence of a workable and reliable assessmentformula this 

For the sake of convenience PMA the ILWU and the Council of North Atlantic Shipping Associ

CONASA will hereinafter be collectively referred to as Respondents

18 F M 
PACIFIC MARITIME ASSOCIATION 201

notrelieve the FMC of its duty to determine whether the formula is reasonable in its

effects on shipping That inquiry is just as important as under the predecessor agree

ment and under the agreement in Volkswagenwerk rd pages 27 3536

Further we Bnd that the Revised Agreement before us is factually

substantially similar to the assessment agreement which the Supreme

Court found subject to section 15 in Volkswagenwerk v FMC supra

Consider the parallels In Volkswagen 1 the ILWU and the PMA had

laboriously negotiated on the establishment ofthe Mech Fund which

in part liberalized the union s fringe benefit program 2 the only

interestofthe ILWU was to insure that payments were made into the

fund and 3 the PMA wanted to reserve to itself how the payments

were computed and the ILWU left that to PMA Here 1 PMA and

the ILWU have stated on the record that they have over a period of

years negotiated a program of fringe beneBts and that this program

wassupported by the payments ofbothmembers and nonmembers of

the PMA 2 the only interest of the ILWU is allegedly to assure that

all industry users ofILWU labor made payments into the fringe ben

efit fund and 3 PMA wants to reserve to itself all control ofindustry

users oflabor

Inspite ofthese obvious similarities Respondents here contend that

the rationale ofthe Volkswagen case is inapplicable here because the

assessment agreement under consideration in Volkswagen wasexclu

sively concerned with the relationship between association members

and their customers while SMU 4 and its successor the Revised

Agreement involve matters offundamental concernto the uni0n and

its members

Whateverbe the merits of this argument PMA itselfreadily admits

that the purpose of the supplemental agreements is to do away

with the free ride previously enjoyed by Petitioners and other

similarly situated ports and to place nonmembers on the same

competitive basis as members of the PMA In short the effect

of the Revised Agreement is to control or affect competition be

tween members and nonmembers Section 15 of the Shipping Act

speciBcally subjects to Commission jurisdiction all agreements between

persons subject to the Act which control regulate or prevent com

petition Thus we conclude that the Revised Agreement must

be filed for Commission approval unless it is entitled to a labor

6petitioners however continually allude to the lack of any Iegitimate interest of the ILWU in the PMAs

attempt to control the competition between members and nonmembers

In responseto ourSecondSupplemental Order all the parties tothis proceeding have incorporated by reference

theirremarks concerning SMU4 and have asked the Commission toapply them equally to the Revised Agreement

Consequently we have substituted the term Revised Agreement wherever an argument was usedwithreference

to SMU 4

epMA forexample would bind nonmembers to PMA lockouts thus preventinganonmember from continuing

operations while members facilities are shut down

18 F MC
1

202 FEDERAL MARITIME COMMISSION

exemption 9

For reasons stated below we find that the Revis

Agreement is not entitled to such an exemption

The nature and scope of the so called labor exemption from 

antitrust and shipping laws have been considered and discussed 

considerable length by the Commission in its decision in BostonSh

ping supra In that case the Commission in reviewing three lab

related agreements applied doctrines of law which had evolv

through the courts in itnumber of cases arising under the antitr

laws Recognizing the judicially accepted principle that the fruits 

collective bargaining are generally excepted from the application 

the antitrust statutes the Commission explained therein that

The labot exemption originated inthe area of accommodation of the labor laws 

the antittust1aws To preclude the application ofthe antitrust laWs to various c

bargaining agreementsenteredinto between labor and management the courtsca

outof the antitrust laws a labor exemption by means of whichsuch agreementsw

held to be immune from attack under antitrust laws Thus the analogy to a l

exemption from the shiPtling laws Is obvious 16 F MC 11

Indetermining whethedabor related agreements are subject to 

provisions of the Shipping Act 1916 or labor exempt the Comm

sion has advised thatjust as in the courts accommodation of the la

laws and the antitrust laws itwould proceed onan ad hoc case by c

basis and apply the various criteria evolved in the courts as gu

lines or rules of thumb for each factual situation As detailed in 

Boston Shipping case these criteria are as follows

1 The collective bargaining which gives rise to the activity In question must b

good faith Other expressions used to cnatacterize this eltllnnt are arms length 

eyeball to eyeball

2 The matter is a mandatory subjeCt of bargaining e

g wages hours or wot

conditions The matter mustbe a proper subject cif union concern ie it is intima

related ot primarily and commonly associated with a bona IIde labor purpose

3 The result of the collective bargaining does notimpose terms on entitles ou

of the collective bargaining group

4 The unionis notacting at the behest of or in combination with nonlabor gro

i

e there Is no conspiracy with management

ogeattle has presently petitioned for severance and stay fr6m this proceeding all issues relating to them

collective bargaining contract except for the Revised Agreement BecalJse theRevised Agreement is differ

operation from the remaining sections of the collective blrgllining contract Seattle maintains that the la

immaterial to theComndsslon s concern egpecially SJnee it raises 4sues alr eatJydecided by the NLRB See I

et al and CaUforniaCartal6 Company etal 208 NLRB No 124 February 15 1974 wherein the NLRB 

asubstantJaI pDrtJon ofthemaster collectivebargaining contract unlawful As heretofore mentioned becauSe 

are involved intheNational LaborRelationsActandtheShipping Act un6 theAct two dtlferent purposes it 

notrtecessarily foUow that aholding underNLRB concepts would be equally applicable to out responsibilities 

the ActConsequently whilewe canagreewithSeattle thate Revised Ajreement within the collectivebarg

contract is theonlll agreement among and betweenmembers of PMA having section US ramifications the

remains the question of thelegality ofthe agreements among and between members of PMAunder sections

11 of the Act Far this reason weareQenying Seattle s petition Far purposes of this interlocutory proce

however weate heremafter limiting our cUscussion solely to the Reyjsed Agreemllrit

18 F
PACIFIC MARITIME ASSOCIATION 203

Failure of an agreement to meet anyone ofthese criteria is sufficient

to consider withholding a labor exemption As we explained in the

Boston Shipping case these criteria are by no means meant to be

exclusive nor are they determinative in each and every case 16

F M C 12

There is considerable factual conflict among the affidavits from offi

cials of various organizations and purported notes taken at PMA

meetings as to whether the Revised Agreement was the simple prod

uct of as PMA asserts eyeball to eyeball good faith bargaining or

as contended by Petitioners was insisted upon by PMA as a part of

its longrange program to force all persons and entities utilizing long

shore labor to join PMA as a member and to subscribe to and follow

PMA s labor policies Whatever be the merits of the parties argu

ments we need reach no conclusions on this issue since our finding

that the Revised Agreement is not entitled to a labor exemption rests

entirely on other grounds

As to the second criteria sections 8 a 5 and 8 d of the National

Labor Relations Act 49 Stat 452 define the mandatory issues of

collective bargainingas wages hours and otherterms and conditions

ofemployment Although the National Labor Relations Act does not

define what constitutes terms and conditions ofemployment other

than wages and hours the NLRB with the approval ofthe courts has

initiated a system ofclassification by dividing subjects of bargaining

into three categories mandatory permissive and illegal Whether or

not a subject ofbargaining is mandatory or permissive depends upon

the extent to which the agreement addresses itself to the labor rela

tions of the contract employer vis a vis his own employees 1o Obvi

ously while union and management may bargain on mandatory and

other issues this does not necessarily mean that any agreement con

cluded will not violate the antitrust laws and or the Shipping Act

Petitioners submit that at best the subject ofthe Revised Agreement

is permissive only In support thereof Petitioners advance a three

prong argument the substance ofwhich alleges that the ILWU gained

nothing that it did not already have by the terms of the overall

PCLCA Petitioners first contend that notwithstanding the Revised

Agreement nonmembers would continue to contribute to the fringe

benefit programs in the same amounts as PMA members and signified

their willingness to continue to do so Secondly they maintain that

while the Revised Agreement resolved the problem of steady

IOSee NLRB v Borg Warner Corp 356 US 342 1968 Nat Woodwork Manufacturing Assoc v NLRB 386

US 612 1967

IIPCLCA Pacific Coast Longshore Clerk Agreement which established the PMAILWU joint work forcein

1935 is the basic collective bargaining agreementwhich has been amended to include a Memorandum ofUnder

standing in which the Revised Agreement is apart thereof

18 F M C
204 FEDERAL MARmME COMMISSION

men by requiring uniformity with PCLCA s provisions this was 

actuality PMA s problem and not that ofthe ILWU who allegedly h

no interest therein Finally Petitioners argue that the requirem

that participating nonmembers would pay dues and assessments i

PMA to support labor relations programs and would adhere to PM

labor policies had no relationship to hours wages orworking con

tions 12

Thus Petitioners position here is that the issue here does not 

volve altering ormodifying the wages hours orworking conditions 

the ILWU areas which would understandably be ofprimary conc

to the union but rather involves the matter of what a nonmem

must agree to as a condition to directly employing ILWU labor

Respondents argue that contrary to the belief of Petitioners 

Revised Agreement relates directly to amandatory subject ofbarga

ing Moreover Respondents point out that there has been a lo

bargaining history of nonmember participation in both the PM

ILWU hiring hall and fringe benefit systems 13

The Revised Agreement insofar as it changes the treatment 

steady men and requires all direct hiring to be in accordance w

PMA procedures obviously affects hours or working conditions T

question is however whether the agreement is directed to the la

relations ofthe contracting employer vis a vis his own employees 

think not Since the primary purpose of the Revised Agreement is 

bring nonmembers into the PMA camp that it affects the hours 

working conditions of some oHhe members of the ILWU would 

pear to beonly incidental to the main purpose ofthe agreement Th

we can only conclude that the matter ofthe Revised Agreement is 

amandatory subject ofbargaining While this finding may besuffici

to consider withholding a labor exemption our ultimate conclus

that the Revised Agreement is not entitled to a labor exemption re

on additional grounds

Respondents have devoted much argument in their memorand

to support their contention that the Re0sed Agreement does not 

Petitioners have insisted impose such terms upon persons or entit

outside the bargaining group as would justify the denial of a la

exemption In fact Respondents in furtherance of their argum

that there are a number of significant differences between SM

and the Revised Agreement advise that one ofthe changes incor

liThis conclusion is primarUy founded upon the remarks of Mr Flynn President of PMA to wit

Anonmember share is measured by all the obligations included In the nonmember participation agreemen

just amonetary contribution p 9 of Mr Flynn saffidavit

laSee Fibreboard Paper Products Corp v NLRB 319 US 203 211 1964 wherein the Court held th

determining whether ornot a matter is a mandatary subject of bargaining it isappropriate to consider barga

history

18 F M 
PACIFIC MARITIME ASSOCIATION 205

ratedin the Revised Agreement wasintended to allay any fears on the

part ofPetitioners that the Agreement imposed terms on outsiders

Notwithstanding such assurances and for reasons stated below we

agree with Hearing Counsel and Petitioners that the Agreement is

specifically designed to compel nonmember entities to join PMA

underthreat ofexclusion from the ILWU work force As such it clearly

imposes terms and conditions upon persons outside the bargaining

group

To remove any doubt that the agreement between PMA and

ILWU restricted the latter in its bargaining with nonmembers Re

spondents explain that the note after Paragraph 3b of SMU 4 was

deleted from the Revised Agreement This note provided that

If a

prospective nonmember participant has an agreement with the ILWU which

provides for utilization of the joint work force at terms and conditions of employment

more favorable to the nonmember than those provided under the PCLCA including

the CFSS Container Freight Station Supplement such nonmember must alter the

agreement to conform to the PCLCA including the CFSS in order to become a non

member participant

Seattle and Petitioners view this deletion as being cosmetic only and

in no way altering the effects of the agreement In support of its

position that PMA is still utilizing the joint work force as a means of

controlling the labor policies ofnonmember ports specific reliance is

placed onParagraphs 2 3 6and 12 ofthe Revised Agreement to wit

2 The nonmember participants separate ILWU contract must conform with the

provisions hereof and the provisions of the PCLCA governing the selection of menfor

inclusion inthe joint work force

3 A nonmember participant will share in the use of the joint work force upon the

same terms as apply to members of PMA For example a the nonmember participant

shall obtain menon the same basis as a PMA member from the dispatch hall operated

by ILWU and PMA through the allocation system operated by PMA

b if a work stoppage by ILWU shuts off the dispatch of men from the dispatch hall

to PMA members nonmember participants shall notobtain menfrom the dispatch hall

c if during a work stoppage by ILWU PMA and ILWU agree onlimited dispatch of

menfrom the dispatch hall for PMA members such limited dispatch shall be available

to nonmember participants

The essence of b and c of this section is the acceptance by nonmember participants

of the principle that a work stoppage by ILWU against PMA members is a work stop

page against nonmember participants

6 For purposes of 153 through 157 of the Container Freight Station Supplement

CFSS of the PCLCA a nonmember participant who uses the joint work force at terms

and conditions of employment nomore favorable to the nonmember participant than

those provided under the PCLCA including the CFSS may be deemed to be a mem

ber of PMA insofar as it is so using the joint work force

12 the ILWU PMA Nonmember Participation Agreement shall be binding and con

tinue ineffectuntil terminated onsuch terms and conditions as may be mutually agreed

to bythe PMA tbe ILWU and the participant An entitythat terminates its participation

18 F MC
206 FEDERAL MARITIME COMMISSION

shall at such time no longer be eligible to employ menin the joint work force no

participate in the Pension Welfare Vacation and Pay Guarantee Plans existing 

tween ILWU and PMA

Consequently while nonmembers are allowed to negotiate separ

contracts the contracts must nevertheless conform with the pro

sions of both the Revised Agreement and the master collective b

gaining contract Paragraph 2 Moreover and notwithstanding 

further deletion by PMA of Paragraph 9 of SMU 4 from the Revi

Agreement 14Paragraph 3 of the Revised Agreement still requires 

effect that nonmembers adhere to PMA labor policies pursuant t

work stoppage by ILWU

Additionally Paragraph 6 byproviding that if nonmembers use 

ILWU work forceon terms morefavorable than toPMA members 

nonmembers will be deprived use ofthe PMA ILWUjoint work for

appears to allow for the imposition of work rules on nonmember

As a further indication that PMA is still controlling labor policies 

nonmembers we note that the substance ofthe terminationprovis

ofParagraph 12 ofthe Revised Agreement is akinto that ofParagra

13 of SMU 4 Whereas Paragraph 13 provided that a contract co

only be terminated by the joint action ofPMA and ILWU Paragra

12 requires that the nonmember be included as part of this jo

action In effect therefore under either paragraph the nonmem

is still bound to the agreement for an indefinite period of time si

the nonmember cannot unilaterally terminate the agreement but 

only do so upon such terms and conditions as may be mutua

agreed to by PMA and ILWU

The foregoing we believe makes it clear that no substantial dif

ences exist between the old SMU 4and the Revised Agreement Wh

ever revisions were made in the Revised Agreement are changes 

form only which in noway substantially alter the effect or impac

the agreement The effect of the Revised Agreement we find is 

require entities outside the bargaining group to either submit to 

terms or incurthe sanctions contained therein ie deny nonmemb

participation in PMA hiring halls and fringe benefit funds as wel

the use ofILWU labor In this regard we agreewith Hearing Coun

that the agreements at issue here bear astrikingresemblance to t

found unlawful under the antitrust laws in United Mine Workers 

Pennington 381 U S 657 1965

In the Pennington case a group of large employers in the min

Paragraph D of SMU 4 provided that ifthere were acessation ofwork at the end of the contract period o

PCLCA and related agreements the labor pollcy of PMAshall continue to apply to nonmember participants 

that nonmember partioipants shall continue to accept PMAs labor policy as their own

llParagraph 6of the Revised Agreement Is Identical In intent to Paragraph 3b ofSMU 4

18 FM
PACIFIC MARITIME ASSOCIATION 207

industry had agreed with the union to impose its wage and royalty

scale on smallernonunion operators outside the immediate bargaining

group Plaintiff there contended that this scheme was intended to

eliminate from competition the smaller mine operators who allegedly

could not withstand the costs of the particular terms and conditions

of employment which would be forced upon them The Court con

cluded that while a union may make wage agreements with amulti

employer bargaining unit and may hpursuance of its own union

interests seek to obtain the same terms from other employers it

forfeits its exemption from the antitrust laws when it is clearly shown that it has

agreed with one set of employers to impose a certain wage scale on other bargaining

units One group of employers may notconspire to eliminate competitors from the

industry and the unionis liable with the employers if itbecomes aparty to the conspir

acy This is true even though the union s part in the scheme isan undertaking to secure

the same wages hours orother conditions of employment from the remaining employ

ers in the industry 381 U S at pages 6656

We believe that the Courts rationale in Pennington which is

clearly not limited to the imposition ofa wage scale but could involve

any other labor standard such as labor relations policy is applicable

to the agreements before us Instead of a system ofcomputing wages

which because of difference in methods ofproduction would be more

costly to one set ofemployers than another the PMA and ILWU here

have devised a scheme whereby the elimination of all local agree

ments between nonmembers and the ILWU would result in higher

costs to one set ofemployers the nonmembers than to another PMA

members particularly since the differences inmethods ofoperation

and locality are ignored 16

Respondents read Pennington as establishing only the principle

that aunion may notby agreement with one employer restrict its right

to bargain with other employers Such a reading ofPennington is far

too restrictive and totally ignores the real issue in the case Le the

imposition ofterms on persons outside the bargaining group The fact

that the scheme employed in Pennington required the UMW to sur

render its freedom of action is only incidental to the Courts ultimate

holding that a union and employers in one bargaining unit are not

free to bargain about the wages hours and working conditions ofother

bargaining units or to attempt to settle these matters for the entire

industry 381 U S at 666

16PetiHoners cite asan example thePortof Olympia Under its agreement w th LocalNo 4 7 in theOlympia area

the local provides among others checkers If the Port were required to abrogate its local agreement and adhere to

the requirements of the Coast Agreement members of the ILWU Checkers Union in Seattle would have to be

employed thus increasing the cost tothePort of Olympia by the amount of payments for travel time to and from

Seattle The same situation prevails at the Porl of Port Angeles This shift in costs directly affects the Ports costs

of providing terminal services and thereby the rates paid by the shipping public

18 FM G
208 FEDERAL MARITIME COMMISSION

I

i

Even assuming that Respondents interpretation of Pennington 

correct the Revised Agreement is still clearly inconsistent therew

as clearly indicated byParagraphs 2 3 6and 12 ofthe aforemention

agreement delineated earlier Under Respondents own interpre

tion of Pennington the Revised Agreement restricts nonmembe

right to bargain and thereby imposes suchterms upon entities outs

the collective bargaining unit as to preclude the granting of a la

exemption

Addressing themselves to the fourth labor exemption criteri

Petitioners challenge PMA s contention that no conspiracy exis

between PMA and ILWU PMA argues that there is nothing in 

RevisedAgreement that precludes the ILWU from making whate

arrangements it and the nonmembers can negotiate Seattle on 

other hand refers to the ILWU s chief negotiator s remarks dur

negotiations overSMU 4 that the ILWU would cooperate with PM

and provide PMA with insurance against legal entanglements 

PMA would be cooperative in other areas Inview ofour findinghe

that the Revised Agreement is not entitled to a labor exemption 

virtue of the fact that it imposes terms on parties outside the barga

ing unit and is not a subject of mandatory bargaining we find 

unnecessary to resolve the merits of the conspiracy issue

In the final analysis our assertion of jurisdiction over a lab

related agreement requires as we noted in Boston Shipping a con

eration ofthe impact ofsuch agreement onthe competitive conditio

in the industry vis a vis its impact on the collective bargaining p

cess On this basis and taking into consideration several past co

decisions 17 involvinglabor related agreements we find thatwhile 

Revised Agreement has aminimal effect on the collective bargain

process it has such a potentially severe and adverse effect upon co

petition under the Shipping Act as would justify our consideration 

its approvability under the standards thereof Without passing on 

individual merits of each of their contentions we believe that P

tioners have generally demonstrated the possible adverse impac

the Revised Agreement and the effect its implementation could ha

on their ability to compete with PMA members As Petitioners ha

pointed out their failure to sign the Revised Agreement could w

result in the closing of their facilities and the cessation of operatio

because 1 they will be denied ILWU personnel from the joint hir

hall 2 if they employ non ILWU personnel ILWU personnel utiliz

by PMAstevedoring companies to load and unload cargo to and fr

I

I

Il See AlleR Bradlell Co v Local31nternationaJ Brotherhood of Electrical Workers 325 US 797 1945 

Cutters Union v Jewel TeaCo wpm Untt8d Mlm Workers v Penntngton supra Volkswagenwerk Q FMC 

and NYSA and LA v FMC 8upra

18 F M 
PACIFIC MARITIME ASSOCIATION 209

ships will refuse to work the cargo and 3 the ILWU would undoubt

edly put up picket lines at the entrances of all ports terminals thus

effectively stopping the movement ofall cargo being delivered to or

taken from such terminals by other union personnel IS It follows

therefore that the implementation of the Revised Agreement as it

may affect the receiving handling storing and delivery of cargo at

petitioner ports may involve violations of sections 16 and 17 of the

Shipping Act 1916

On the other hand we find that the Revised Agreement has little

if any effect on the collective bargaining process With or without the

Revised Agreement the provisions for fringe benefits which are the

main concern of the ILWU remain unchanged

Further ifpetitioner ports contracted with PMA stevedoring com

panies employing ILWU personnel to perform all the terminaling

services now directly performed by the ports themselves the ports

would be precluded from any decision making power with respect to

the performance of services at their terminals Consequently as a

practical matter Petitioners would be delegating to such stevedoring

companies all ratemaking decisions and thus being profit motivated

these companies would have discretion and incentive to divert cargo

from one port to another by simply granting different rates for each

area

Finally we should like to point out that we donot view our exercise

ofjurisdiction over the Revised Agreement as interfering with the

collective bargaining process within the maritime industry Such an

assertion ofjurisdiction does not violate the right of employees to

bargain collectively through representatives oftheir choice Further

we disagree with Respondents that ourjurisdiction over the Revised

Agreement willpreclude the remaining sections ofthe master collec

tive bargaining agreement from being implemented At issue here is

only the Revised Agreement which we consider severable from other

provisions of the master collective bargaining agreement ie the

amount and kind of fringe benefits to be paid the union The obliga

tion of PMA to pay those benefits remainsunimpaired Consequently

the Commission s assertion ofjurisdiction will have no effect upon

PMA s obligations under the labor contract

Therefore weighing the various Shipping Act and labor interests

raised by the Revised Agreement we conclude consistent with the

courts holding and directives in NYSA and LA v FMG supra that

the many and potentially severe shipping problems raised by the

Although conceding that longshoremen and clerks are available outside the PMA ILWU joint work force

Petitioners submit that these types are not suitable foremployment as they are unskilled labor skilled labor canonly

be gotten from the ILWU work force

18 FM C
210 FEDERAL MARITIME COMMISSION

RevisedAgreement balanced against the minimal impact our regu

tion thereof would have on the collective bargaining process fu

warrants our denial ofa labor exemption in this proceeding Wh

the court in NYSA and lLA v FMG supra concluded that on the ba

of facts involved therein it was enough for the Commission to fi

that the shipping interests outweigh the labor interests in assert

jurisdiction over a labor related agreement we believe that our d

cussion of the Revised Agreement in light of the four exemptio

criteria is not only responsive to the pleadings ofthe parties but a

lends additional support to the conclusion reached here

Commissioner Clarence Morse dissenting

Idissent

We are in an area which involves not only the Shipping Act 191

but also the antitrust laws and the labor laws and it becomes a m

ter ofjudgment and line drawing in determining whether we shou

retain jurisdiction 19or whether we should grant labor exempti

and leave the matter for resolution by the courts and the NLR

Under our decision in Boston Shipping 16 F M C 7 it rema

within our sound discretion whether to grant labor exemption ev

when an agreement fails to meet one or more of our announc

criteria 20 It is my view that the impact of the Revised Agreeme

vis a vis the collective bargaining process outweighs the impact 

that agreement on the competitive conditions within the indust

In all events the courts in the pending antitrust cases and the NLR

have far greater expertise in this antitrust and labor law area a

more flexible tools by way of treble damages injunctive process a

otherwise than do we to assure that the rights of all interested pa

ties will be duly protected 21

IIIAs to subject matter the intra PMAagreement concerning theILWU PMA Nonmember PartiCipation Ag

ment is cleltrly asection 15 agreement Whether such agreement meets section 15 standards as to parties is 

established on this record and with due respect to NYSA v lLA v FMG supra I would have fundame

jurisdictional problems if in fact mixed membership exists within PMA Under Boston Shipping it would app

that PMA itself is primarily a collective bargaining unit and should reoeive labor exemption However that does 

resolve theproblem fartofind existenceofasection 15 agreementbetween common carriers by water and ot

persons subject to the Act wemust consider the membership ofPMA since the functions of PMA acorporat

itselfare neither that ofacommon carrier by waternoran other person subject to theAct ILWU is clearly neit

of the described type of persons

oln United Stevedoring Corp v Boston Shipping As fOC 16 F M C 7 at 15 August 24 1972 we stated In p

While we cannot here decide that everysuch collective bargaining agreement is entitled to a labor exempt

Hearing Counsel and the Department ofJustice re mmend theconsideration ofasection 35 rulemaking proceed

in order to exempt far thefuture this class of agreements from some orall of the requirements of section 15 of 

Shipping Act 1916 thereby not jeopardizing collective bargatning by any threat of pre approval implementa

penalty This weintend to do I again ask WHEN is this Commission proposing to initiate such a proceeding

211n my opinion the majority ignore thereality oflaber management retations whenthey suggest that denta

labor exemption to the Revised Agreement will have no effect uponPMA s

obligations under the labor contra

This is anotherindication of our lackof expertise in this labor management Beld An earHerexample is theCou

reaction stated in its Opinion an Motion toRemand in Boston Shipping Assoc v

USA CA l No 72 1004 May 

1972 whencommentJng on ourearUer report In United Stevedoring Corp vBoston Shtpplng Assoc 15 F M C

1971

III FM 
Iwould grant labor exemption and stay our proceedings without

prejudice pending resolution of the pending court cases and if the

involved agreements are found lawful by the courts and the parties

carry out specific practices in amannerwhich may violate sections 16

or 17 of the Shipping Act then Shipping Act concern may become

substantial and the obligations of members of the PMA under the

Shipping Act and also the ILWU as any otherperson under section

16 may have to be determined by the Commission

SEAL S FRANCIS C HURNEY

Secretary
1

FEDERA MARITIME COMMISSION

DOCKET No 7248

PACIFIC MA ITIME AsSOCIATION COOPERATIVE

WORKING A RANGEMENTS POSSIBLE VIOLATIONS

OF SECTION 15 16 AND 17 SHIPPING ACT 1916

1

The Federal Maritim Commission instituted this proceeding to d

termine interalia wether the master collective bargaining contra

entered into by the P cHic MaritimeAssociation PMA and the Inte

national Longshorem ns and Warehousemen s Union embody a

agreements between and among members of PMA which agre

ments are subject to s ction 15 ofthe ShippingAct 1916 and wheth

there were any labor policy considerations which would operate 

exempt such agreem ts orpractices from section 15 of the Shippi

Act 1916 The Co ission having this date made and entered 

report stating its findi gs and conclusions with respect thereto whi

report is made a part hereof by reference

Therefore it is orde ed That pursuant to section 22 ofthe Shippi

Act 1916 46 U S C 8 1 and consistent with the Commission s Ord

ofSeptember 6 1972 as amended by its Orders of October 19 19

and January 30 1974 the investigation in this docket shall proceed 

determine

1 Whether the LWU PMA Nonmember Participation Agre

ment Revised Agre ment which is embodied in the ILWU PM

master collective bar aining contract and which we have found to 

subject to and must e med in accordance with the requirements 

section 15 of the Shi ping Act 1916 46 U S C 814 should be 

proved disapproved or modified pursuant to that section

2 Whether the im ementation byPMA and the ILWU ofthe pro

sions of the Revised greement and orthe master collective barga

ing agreement will esult in any practices which will subject 

person locality orde cription oftraffic to undue orunreasonable p

udice or disadvantag in violation of section 16 of the Shipping A

1916 46 U S C 815

ORDER
PACIFIC MARITIME ASSOCIATION 213

3 Whether the implementation by PMA and ILWU of the provi

sions ofthe Revised Agreement and or the master collective bargain

ing agreement willresult in any practice which is unjust or unreason

able in violation ofsection 17 oftheShipping Act 1916 46 U S c816

4 Whether any labor policy considerations would operate to ex

empt these agreements or practices resulting therefrom from any

provision of sections 16 or 17 of the Shipping Act 1916 and

Itis further ordered That the Pacific MaritimeAssociation and the

International Longshoremen s and Warehousemen s Union and their

respective members are hereby made respondents in thisproceeding

and

Itis further ordered That a public hearing be held before an Ad

ministrative Law Judge of the Commission s Office of Administrative

Law Judges at a date and place to be determined and aimounced by

the Administrative Law Judge and

Itis further ordered That notice ofthis order be published in the

Federal Register and that a

copy thereof and notice of hearing be

served upon Petitioners and both the Pacific MaritimeAssociation and

the International Longshoremen s and Warehousemen s Union indi

vidually and on behalf of their respective members and

Itis furtherordered That notice ofthis order and notice ofhearing

be mailed directly to the Department ofJustice the Department of

Labor and the National Labor Relations Board and

Itis further ordered That all future notices issued by or on behalf

ofthe Commission in this proceeding including notice of time and

place ofhearing orprehearing conference shall be mailed to Petition

ers the Pacific MaritimeAssociation and the International Longshore

mens and Warehousemen s Union individually and on behalf oftheir

members and any other person made a party ofrecord to this pro

ceeding and

It is further ordered That any person other than those named

herein who desires to become a partyto this proceedingand to partici

pate herein shall file a petition to intervene in accordance with Rule

5 1 46 CFR 502 72 ofthe Commission s Rules ofPractice and Pro

cedure

Finally it is ordered That Seattle s Petition for Severance hereby

is denied

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 7346

PACIFIC ISLANDS TRANSPORT LINEPROPOSED GENERAL

RATE INCREASES BETWEEN PACIFIC COAST AND HAWAII

PORTS OF CALL AND PAGO PAGO AMERICAN SAMOA

NOTICE OF ADOPTION OF INITIAL DECISION

Jan 30 1975

No exceptions having been filed to the initial decision in this pro

ceeding and the Commission having determined not to review same

notice is hereby given that the initial decision became the decision

the Commission on January 30 1975

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

214
FEDERAL MARITIME COMMISSION

No 7346

PACIFIC ISLANDS TRANSPORT LINE PROPOSED GENERAL

RATE INCREASES BETWEEN PACIFIC COAST AND HAWAII

PORTS OF CALL AND PAGO PAGO AMERICAN SAMOA

Respondent Pacific Islands Transport Line found to have shown aneed for additional

revenueand to have sustained its burdenof proving that its rate increases arejust

and reasonablewithin the meaningof section 18 a of the Shipping Act 1916 and

sections 3 and 4 of the Intercoastal Shipping Act 1933

In view ofcontinued and expected losses by respondent and lack of substantial evidence

on point suggestions by parties representing American Samoa that the subject

general rate increases should be modified by alteringindividual commodityrates

orby changing the outbound inbound rate levels cannot be implemented under

applicable principles of law

F Conger Fawcett for respondent

C Brewster Champman Jr for complainant U S Department of

the Interior and intervener Government ofAmerican Samoa

George A Wray for complainant American Samoa Chamber of

Commerce

DonaldJBrunner and C Douglass Miller Hearing Counsel

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE 1

This proceeding wasinstituted by order ofthe Commission served

August 3 1973 to determine whether certain rate increases filed by

respondent Pacific Islands Transport Line PITL are just and reason

able withinthe meaning ofsection 18 a oftheShipping Act 1916 and

sections 3 and 4 ofthe Intercoastal Shipping Act 1933 The subject

rate increases applied to cargo moving outbound from the U S Pacific

Coast to American Samoa with certain exceptions in the amount of

23 percent and to cargo moving inbound from AmericanSamoa in the

amount of 12 percent The rate changes were scheduled to become

effective on June 15 1973 but were postponed by PITL untilAugust

This decision became the decision of the Commission 1 30 75

lRFMr

215
216 FEDERAL MARITIME COMMISSION

j

I

I

13 1973 in order to comply with the then currentPresidential orde

freezing prices The Commission however suspended the effectiv

date until December 1 1973

Protests to the subject increases were filed by a number ofpartie

representing American Samoan interests who were named as com

plainants in the Commission s Order Only two protestants active

participated throughout the entire proceeding namely the Depar

ment of the Interior and the Government of American Samoa bo

represented by the Assistant Solicitor Territories Department ofth

Interior The American Samoa Chamber of Commerce appeared 

the hearing representedby counsel and furnished awitnessbut cease

thereafter to respond to pertinent pleadings and rulings issued subs

quent to the hearing and filed no brief

Hearing was held in San Francisco California on April 2 and 

1974 Inview ofthe unique nature of this case involving a foreign fla

carrier headquartered in Norway provision wasmade for a post hea

ing analysis offinancial data by Hearing Counsel obtained throughth

cooperation ofrespondent from its overseas location and opportuni

for presentation of further evideIlce was afforded if necessary A

discussed below this necessity did not arise a

General Description ofthe Trade the Service and the Line

PITL is a Norwegian owned steamship operation based in Sande

jord Norway It is owned by A S Thor Dahl which also operate

vessels inother trades not connected with the United States ofAme

ica PITLis its only U S connected service which operates in the U 

Pacific Coast American Samoa trade by virtue of a special statuto

exemption as noted previously General Steamship Corporation Lt

GenSteam acts as the Line s general agents responsible for solicitin

and booking cargo and in conjunction with the vessel s Master for th

day to day operations of the Line Overall policy and planning mea

ning and provisioning the vessel executing bunker contracts and pu

chases as opposed to merely arranging for the physical bunkerin

itself and insurance are functions of the owner in Sandefjord

1

The unique statusofthis case relates to thefact that although regulated under section 18 aof theShipping 

1916 and the Intercoastal Shipping Act 1933 as regards the West Coast American Samoan trade FITL 

foreign flag operator which by special statute ispermitted to serve thi domestic offshore trade which would 

otherwise restricted to vessels registered underthelaws of the United States See 48 US C 1664 46 U S C 8

In recognition of the peculiar difficultiesarising out of this situation withreaard to the flUng of financial rep

pursuant totheCommission sGeneral Order ll an accord as apparently been reached withtheCommission s 

permitting certain modifications to the reports In another proceeding in which it is proposed that General O

11 be modifiedin anumberof respects it has been found by Administrative Law JudgeLevy that foreJgn flag carr

such as PlTL operating in domestic offshore trades be exempt from theflUng requirements altogether See D

lk

No 675 Significant Ver rel Operating Common Carriers In theDomestic Offshore Trades Etc Initial Decis

October 10 1974 pp 457

18 FM
PACIFIC ISLANDS TRANSPORT LINE 217

PITL commenced serving the U S Pacific Coast American Samoa

trade on a

regular basis inJuly of1955 At that time the only carrier

serving the trade was Matson Navigation Company through its Oce

anic Steamship Company In 1966 a third carrier operated by Marine

Chartering Co Inc like PITL of foreign Hag status joined Matson

and PITL In January 1971 Matson withdrew its operations in the

trade and sold the assets of Oceanic to another U S Hag operator

Pacific Far East Line PFEL which continues to operate inthe trade

Meanwhile inthe latter part of1967 the identity ofthe Marine Chart

ering Co operation underwent a change with the result that its opera

tions wereassumed by Polynesia Line Ltd Presently therefore there

are three carriers serving the trade namely PITL Polynesia Line

Ltd and PFEL the first two carriers operated by foreign corpora

tions

American Samoa is a territory ofthe United States consisting ofsix

inhabited islands isolated in the middle of the South Pacific Ocean

approximately 2300 miles southwest ofHonolulu The distance be

tween the U S Pacific Coast and Pago Pago the capital is some 4 163

miles

Until mid 1973 PITL served a full range ofSouth Sea Islands desti

nations including Tahiti Papeete Western Samoa Apia Fiji Suva

New Caledonia Noumea inaddition to American Samoa Pago Pago

Occasionally through 1972 PITL served the additional Fiji port of

Lautoka two ports in the New Hebrides and evenNew Guinea The

round trip steaming distance for a typical voyage ofthis sort is approxi

mately 14 200 nautical miles and encompasses some 80 days

In mid 1973 PITL instituted a pared down and anticipatedly

more economical service serving only the three major island ports

of Pago Pago Apia and Papeete reducing the round trip steaming

distance to 11 450 nautical miles and the turn around time to some

48 days Although in the recent past PITL had operated at least

three vessels in the trade under the reduced service pattern de

scribed the line operated and continues to operate one vessel the

M V Thorsisle and breaks the 48 day round trip voyage into seg

ments of two thirds 33 days for the outbound leg and one third

15 days for the inbound

Because of the nature of the trade and the revenues to be derived

from it PITL has not utilized modern highly mechanized expensive

ships but rather has relied on older conventional break bulk vessels

The single ship presently employed the M VThorsisle built in 1953

however has a substantially larger deadweight tonnage capacity than

her two predecessors at 9530 long tons Her bale cubic capacity is also

larger at 527 445 cubic feet including 25 695 cubic feet of space for

18 F MC
218 FEDERAL MARITIME COMMISSION

1

refrigerated cargo

3

This ship is also equipped with two side p

gaining entnmce to her tween deck spaces Side port operatio

which are faster than the conventional and for which the stevedo

have allowed aratediscounted by about one half have provedfeas

only for the relatively large quantities of uniform unitized ca

represented by the canned fish moving inbound from one por

loading to one port ofdischarge They are utilized for that movem

wherever possible Occasionally however because of additio

cargoes on board considerations of vessel stability hamper such 

Neither the Thorsisle nor its predecessors are or have been c

tainerized inthe customarily accepted sense ofthat term The ves

are not especially designed to carry containers and have problem

accommodating any great number of them As a result by far 

greatest percentage of PITLs cargo complement is loaded in bre

bulk unitized parcels Containerized movement is not entirely 

sent however At the present time PITLroutinely carries between 

and 30 20 foot containers as well as some 8 foot containers The 

bound canned fish movement is rapidly approaching the poin

being suitable for a fully containerized service and PITL is explo

the possibilities The unsuitability ofthe many portspreviously ser

by PITLunderits former multi island schedule had inhibited deve

ment of such an operation

Interms ofcargo characteristics the outbound movement toAm

can Samoa and the other South Sea Islands is essentially a groc

store type oftrade One commodity knocked down cans for the 

large fish canners locatedin American Samoa VanCamp and Star

provides the single dominant outbound cargo amounting in reve

tonnage to between 17 and 25 percent ofPITLs total outbound ca

in the fouryears immediately prior to the currentrate increase 19

72 With the sole exception of vegetable oil in 1970 no other o

bound cargo has reached even 10 percent

Inbound from all of the South Sea Islands there are essentially 

two commodities both moving from the two large canners in P

Pago overwhelmingly canned fish and considerably less fishmeal 

pet food offish derivation almost all discharged at LosAngeles T

essential difference in the cargo characteristics between the outbou

and inbound movements as well as the multiplicity of loading 

dischargingports on theoutbound movement accounts for the 2 1 ti

differentialbetween the outbound and inbound legs mentioned abo

3The two predecessor ships were the MIS ThorSllll4rd built in 1952 renovated in 19 6 withcapacity of 

deadweight tons and 423 090 cubic feet and the MIS Thor 1 built In 1986 having 7850 deadweight tonnage 

432 r510 cubic feet

18 F M 
PACIFIC ISLANDS TRANSPORT LINE

ABriefDescription ofAmericanSamoa

The Department of the Interior and Government of American

Samoa hereinafter the Samoan interests have furnished descrip

tiveevidence relating to the islands As mentioned American Samoa

is a territory of the United States lying in geographic isolation in the

South Pacific Its population approximates 30 000 people essentially of

Polynesian heritage all of whom are either U S citizens or U S

nationals United States sovereignty results from two treaties of ces

sionwith the chiefs ofthe various islands entered into at the beginning

ofthis century and ratified by the U S Congress See 48 U S G 1661

In 1951 administration of the civil government ofAmerican Samoa

was assigned to the Secretary of the Interior where it has remained

ever since See Executive Order 10264 In time however a central

American Samoan government was created with executive legisla

tive and judicial branches See Revised Constitution of American

Samoa 1967 American Samoan Code pp 1940 The executive

branch of government is headed by a Governor and Lt Governor

appointed by the Department ofthe Interior Top and middle man

agement come primarily from overseas contract employees hired for

two year periods but increasing numbers of Samoans are assuming

positions of responsibility The United States contributes approxi

mately 14 million annually in general grant money and 5million in

categorical grants for the operation ofthe Government ofAmerican

Samoa and its programs Approximately 19 million is also derived

from local revenue sources

4

An Office of Economic Development and Planning was created

withinthe Government ofAmerican Samoa several years ago whose

purpose is to foster and implement a plan to effectuate economic

stability under an era of controlled gorwth and change The Assistant

Director ofthe Office testified as to the economic situation prevailing

on the islands He indicated that although some growth had been

achieved at least in the visual sense ie more cars better homes

better health inflationary problems had worsened the economic situa

tion and nullified progress that had been made He was accordingly

apprehensive about the possible adverse effects on the Samoan econ

omy flowing from the subject rate increases Not only are the islands

geographically isolated but they are extremely dependent upon ship

ping for the importation of goods In fiscal 1973 for example 97

percent of the value of imports from the U S Pacific Coast or

219

This information is derived from u S Department of the InteriorBudget Justifications FY 1975 Although not

technically offered into evidence by the Samoaninterests it has not been disputedand official noticemay be taken

of thedocuments cited Rule 13 f

46 CFR 502 226

18 FMC
220 FEDERAL MARITIME COMMISSION

22 300 000 out of 23 000 000 were brought into American Sa

by the three ocean carriers operating in the trade PITL Polyne

and PFEL Although there are outside sourcesofsupply accordin

Commerce Department statistics furthermore approximately 

thirds of the imports into the islands have in recent years come f

the United States

The Samoan interests contend that the cost of living onAmer

Samoa is extremely high Two exhibits prepared on two diffe

occasions the former in December 1973 the latter in late Marc

1974 indicate that for those times shelf prices ina leading retail s

appeared to be on the high side There is no evidence of re

comparing each item with prices prevailing in the United States 

ing similar times nor evidence measuring the effect ofthe subject 

increases on retail prices in American Samoa The witness prese

by the American Samoa Chamber of Commerce an operator 

wholesale import business did testify that the subject increases 

caused some loss or slowdown in sales to American Samoan retai

This witness also testified however that he bases his markup to re

ers on landed CIF cost in Samoa This would enable him to pass 

increases ontoretailers but he also indicated that in some instance

may have reduced his customarypercentage markup follOwing the 

percent rateincrease Interestingly the second study ofthe retail s

prices prepared in late March 1974 almost four full months after 

effective date of the subject rate increases shows no pattern ofp

increases overthose prevailing at the time ofthe first study inDec

ber 1973 some items increasing some decreasing some remai

unchanged 6

These facts do not refute the contentions of the American Sam

interests regarding the dependence ofthe islands on ocean shipp

the rather high cost of living on the islands or the economically 

pressed nature of the islands especially in view of further statis

evidence demonstrating that the islands are indeed economically 

pressed For example data pertaining to the years 197273 show 

average salary per Samoan employee to be 3 000 per year and 

800 per capita Ifhigher salaried stahl side workers are elimina

from consideration moreover average salary drops to 2 600 

annum and 650 per capita The average minimum wage is 1 20 

For example theexhjbJt prepared In December 1973 Ex 200 showed hamburger at 1 S4 1b T bon

at 320 1b hot dogs at 149Ilb tomatoes at SO lb sugar at 112 Slb cooking oil at 6 20 gal and co

l54Jlb

liAs PITL points out the second shelf pricestudy Ex 29 prepared about four months after the effectiv

of the rate Increase was not offered as evidenoe shOWing the effect of the increase Even ifit were howev

reaults are inconclusive since no pattern of increases ls established Far example although aT bone steak ros

320 to 4 16 1b canned beef actually dropped from 1 56 to 1 46 12 oz and reconstituted milk rema

40 quart

18 F
PACIFIC ISLANDS TRANSPORT LINE 221

hour and the average Samoan family consists of seven people Some

60 to 80 percent of the Samoan wage earner s salary furthermore is

spent on food alone These factors have caused the Samoan household

to have two three or four workers per household in order to afford

what they need

Of further significance since it becomes an issue in relation to the

subject rate increases is the effort of the U S Congress to assist

American Samoan as well as other insular possessions of the United

States to export their manufactured products to the United States

free of tariff duty This assistance is provided in the General Head

notes to the TariffSchedules of the United States 19 U S c 1202 at

Headnote 3 a and provides duty exemptions to any goods manufac

tured in American Samoa provided that they do not contain foreign

materials to the value of more than 50 percent To put it simply

American Samoan manufacturers can import materials from foreign

sources of supply double their value on the islands and export the

finished products to the United States duty free Although the Sa

moan interests acknowledge that this system is a significant conces

sion by the United States Congress to benefit the economies of our

island territories through the development of light industries they

express some apprehension over the effect which increases in ship

ping costs may have on the program As discussed later however

there is no substantial evidence that these apprehensions will ripen

into reality

DISCUSSION AND CONCLUSIONS

The ultimate issue for decision is whether the subject rate increases

are just and reasonable within the meaning of section 18 a of the

Shipping Act 1916 and sections 3and 4 ofthe Intercoastal Shipping

Act 1933 Respondent is required by law to sustain the burden of

proving that its proposed increases comport with the standards enun

ciated in the cited statutes Section 3 Intercoastal Shipping Act 1933

46 U S c 845 Cf also The Commonwealth ofPuerto Rico v Federal

Maritime Commission 468 F 2d 872 D C Cir 1972

Subsidiary issues raised by the Samoan interests concern 1 whether

there is a possibility of such adverse effect on the economy ofAmeri

can Samoa resulting from the subject rate increases that they cannot

be found to be justified and 2 whether in lieu of the proposed in

creases some alternative rate changes should be ordered which simi

larly satisfy the financial needs ofthe carrier such as selectively in

creasing rates on luxury items while holding down rates on

necessities or imposing a greater share of the increases on the in

18 F MC
222 FEDERAL MARITIME COMMISSION

bound movement to the United States consequently diminishing 

increase on the outbound movement

PITL contends that it has amply demonstrated the need for 

subject increases and that standing alone there is no way the 

increases here involved can be held to be unjust unreasonable a

or unlawful PITL bases its argument on the fact that incontrov

ible evidence of record demonstrates that at least since 1970 

year ofPITLs last general increase 10 percent the trade has ne

turned a profit for the carrier and that no matter how much ad

ment is made to the financial exhibits or disallowance of expen

which is made because of inability to verify some expense items 

one reason or another there is no way to show that PITLwill m

any profit whatsoever from this particular operation We thus ne

reach the question of reasonable return to the carrier argues P

and are compelled absent any other considerations to conclude 

the rate increases cannot be found to be unjust or unreason

under the law Increases in the U S GulfPuerto Rican Trade 

F M C 212 213 1971 Transamerican Trailer Transport Incre

in U S Atlantic Puerto Rico Trade 14 SRR 645 658 Initial D

sion proceeding discontinued by the Commission as moot Ma

21 1974

PITL observes that it has demonstrated over the years afirm c

mitment to serve the American Samoan trade but that it is fre

leave and that it enjoys no outside subsidy to offset its losses in 

trade which presumably must be made up from other operations 

which its owners engage PITLfurthermore observes that the rec

shows no evidence of gross mismanagement or inefficiencies of 

type which could justify the Commission in disallowing the propo

rate increases See e gMatsonNavigation Co Increased Rates 

waiian Trade 16 F MC 96 99 100 117 1973 On the contr

PITL has taken steps to economize as noted above by reducing 

number of vessels employed in the trade as well as the lengthy it

raries while maintaining an equivalent number ofcalls without red

tion in carrying capacity

The 23 percent increase on the outbound movement PITLasse

is the first general increase since 1970 and on an annualized basi

actually lower than the overall cost of livingincrease as shown in 

Department of Labor s Consumer Price Index While not insensi

to the concern of the Samoan shippers and economists PITL po

out that the record does not contain hard evidence or evenproj

tion of economic impact at all Nor was there any persuasive 

dence showing that the Headnote 3 a program designed to as

and stimulate light industry on the islands and promote exports to 

18 FM 
PACIFIC ISLANDS TRANSPORT LINE 223

United States would be significantly hampered by PITL s proposed

rate increases

Finally PITL provides reasons for the differential inthe percentage

increases ie 23 percent outbound 12percent inbound to the United

States interms ofadditional ports of call on the outbound leg addi

tional time consumed on the leg in steaming and loading loose non

uniform cargoes in contrast to the relatively simpleoperations on the

inbound leg with uniform cargo canned fish moving from one port

of loading to one port of discharge quicker handling and cheaper

stevedoring costs A competitive factor exists in the inbound move

ment as well according to PITL since one competing carrier main

tains a lower rate in this essentially single commodity movement

The Samoan interests as discussed previously express apprehension

Dver the possible adverse effects of the proposed rate increases on the

Samoan economy whose problems they have amply described They

donot take issuewith PITL s contentions regarding the carriers finan

cial straits and indeed acknowledge onbrief that the U S Govern

ment cannot ask PITL or any other carrier for that matter to subsi

dize the local economy by operating at a loss They furthermore

acknowledge that PITL is expected to be allowed to make a reason

able profit in this trade but the amount of this profit must be kept at

a minimum to lessen the obvious impact any rate increase will have

on the people and economy ofAmerican Samoa Theseinterests state

that they are relying on this Commission to prevent excessive profits

and further request the Commission to examine alternatives to the

proposed increases discussed above which would alter the rate pro

file in the tariffs for example by allowing increases only on luxury

items and not necessities

Hearing Counsel agree that PITL has shown a need for the pro

posed rate increases and therefore urge that they be approved They

are not insensitive to the possible adverse effect which any rate in

crease may have on the people of American Samoa but argue that

without the increase PITL would be forced to curtail its service an

event with more harmful consequences to the people of American

Samoa than those which may How from the proposed rate increases

Hearing Counsel do notagreewith every item ofexpense shown on

PITL s exhibits but after conducting a post hearing audit and verifica

tion procedure and making appropriate adjustments acknowledge

that despite the rate increase PITLwill still operate at a loss Hearing

Counsel do not suggest as do the Samoan interests that PITL s rate

profiles be restructured as between luxury items and necessitiesnor

do they recommend that the inbound rates ought to be increased

further with a consequent reduction in the outbound rate increase

18 F MC
224 FEDERAL MARITIME COMMISSION

Hearing Counsel furthermore do not agree with all ofPITL s ju

cations for the lower 12 percent level of increase in the inbo

movement and doubt that the inbound rates recoverfully distrib

costs but because of competitive factors and under applicable pr

ples oflaw contend that it wasproperly within the managerial di

tion ofPITLto hold the inbound increase on canned fish to 12 per

As to the ultimateissue in this proceeding regarding thejustness 

reasonableness of PITL s rate increases and its need for incre

revenue there can be no question but that PITL has sustaine

burden ofproof While theremay besome question as to methodo

employed in allocating certain expenses or in determining cost d

ences between the outbound and inbound leg these questions do 

affect the inevitable ultimate conclusion stated above Furtherm

with regard to the issues raised by the Samoan interests concer

alteration ofthe rate profile or adjustment of the outbound inbo

percentages ofincrease this record simply does not contain evid

sufficient to offset the fundamental conclusion that PITLs fina

needsjustify its proposed rateincreases nor to enable this judge o

Commission to devise specific alternative rate changes which w

satisfy what no partycan disputeis the right ofPITL to operate wit

incurring losses In virtually every respect PITL s contentions w

are summarized above as they pertain to the ultimate determin

issuesinthis case are supportedby the record as Inow discuss

In earlier years PITL s exhibits prepared generally in accord

with the Commission s General Order 11 format showed cont

sizeable losses For example in calendar year 1970 the loss amou

to 198 091 in 1971 730 463 in 1972 435 646 despite the re

ment ofthe line s oldest and least efficient vessel and an upsurg

volume ofcargo Two projections made by PITL and entered into 

record continued to show losses the first covering the period De

ber 1 1973 December 1 1974 in the amount of 838 893 and 

second based uponadditional experience for the calendar year 

in the amount of 371 812

The preparation ofprofit and loss exhibits by PITL was not ac

plished without difficulty owing to the peculiar nature ofPITLs o

ation and location Certain items were available from the line s a

in San Francisco GenSteam such as revenue and port cargo 

brokerage expense but data relating to other critical items su

vessel expense depreCiation administrative and general and o

voyage expense are located in Norway In some instances alloc

methods such as those used to derive administrative and ge

expense were not only based upon data located in Norway but 

a basis other than the conventional General Order methodo

18 F 
PACIFIC ISLANDS TRANSPORT LINE 225

which in this instance is the so called vessel operating expense ratio

At the hearing PITLprovided explanations as to how its exhibits were

formulated Furthermore as mentioned above after the hearing at

the invitation of the Presiding Judge and with the concurrence ofall

parties and the commendable cooperation of PITL special efforts

were made to obtain further data from Norway in order to assist

Hearing Counsel and the Commission s staff to attempt to verify as

much ofPITL s financial evidence as possible This unusualprocedure

was adopted to meet the unusual nature ofthis case to which Ihave

alluded previously to wit the practical problem ofauditing and veri

fying financial statements of foreign flag carriers with overseas loca

tions and worldwide operations who attempt to conform their report

ing requirements to the format ofthe Commission s General Order 11

which was designed with domestic carriers in mind

In a continuing effort to project operating results more accurately

PITL revised its earlier calculations and prepared its final statement

Exhibit 3 approximately one month prior to the hearing held in early

April 1974 The results while showing a considerable reduction in

losses from the earlier projection from 838 893 to 371 812 still

show a substantial loss despite further experience with the lines newly

reduced operating pattern and utilization ofrevenue figures and other

data from the line s most successful voyage in 1973 No 219 Expense

data from that voyage furthermore were averaged in with two other

voyages to arrive at final figures Vessel and other expenses allocated

to the trade on the revenue ton mile relationship basis as currently

prescribed by the Commission s General Order 11 by utilizing data

from the last three voyages in 1973 Nos 217 218 and 219 had the

result of reducing these expenses to be allocated to the trade The

post hearing audit indicated some differences between PITL and

Hearing Counsel on some of the data and certain methodologies em

ployed but PITL s revised computations reducing expenses and in

creasing revenues substantially as they did tend to establish greater

credibility since they run contrary to PITL s own interests which in

a normal rate case would be to project greater expenses and fewer

revenues PITL s final estimates are shown in the table below in sum

marized fashion

GrossProfit 218 656

PACIFIC ISLANDS TRANSPORT LINE

UNITED STATES PAGO PAGO

INCOME ACCOUNT

ESTIMATED YEAR

1974

OperatingRevenue 2 554 500

Vessel Operating Expense 2 773 156

18 F M C
226 FEDERAL MARITIME COMMISSION

Deduct

Administrative and General Elrpense

7

Depreciation and Amortization

7

Other

Total Lo 371 

As a result ofthe post hearing audit conducted by the Commissio

staff Hearing Counsel advised on brief that certain expense ite

could not be verified because of certain discrepancies which Hear

Counsel contend exist between PITLs exhibits and underly

materials furnished by PITL Since Hearing Counsel acknowled

that evenwith adjustments made to conform with their recommen

tions PITL may still expect a loss albeit smaller in the trade des

the proposed rate increase there is little point inpursuing the ma

ofthese discrepancies 7

It must therefore be found and concluded that PITL has sho

the need for additional revenue since by anybody s calculat

PITL s Qr Hearing Counsels the line will still suffer losses in 

trade despite PITLs efforts to reduce itineraries and to employ 

most efficient ship in the trade Absent any evidence of ser

mismanagement or inefficiencies 8

and putting aside for the 

ment considerations raised by the Samoan interests concern

PITLs rate profile this financial evidence becomes determinat

Seatrain Lines California General Increases in Rates in the 

Pacific Coast Hawaiian Trade 14 SRR 209 1973 Increases in 

us GulfPuerto Rican Trade 14 F M C 212 1971 Transam

can Trailer Transport Increase in U S Atlantic Puerto R

Trade 14 SRR 645 658 Initial Decision proceeding discontin

as moot March 21 1974

Inow turn to a discussion of the issues raised by the Samoan in

Technically Hearing Counsel s summarizing statementshowing asignificant lossappears on brief and isn

of theevidentiary record Ifthe matter were to be pursued therecord couldbe reopened to allow Hearing C

to present witnesses for cross examination and to pennit PITL topresent rebuttal evidence ifthelineso chose 

the circumstances this would be awaste of time

One further matter bears mentioRing t e administrative and general expense Hearing Counsel 

disallow this item entirely since It was partially allocated on a ship basis rather than theVessel Operating E

ratio method prescribed in General Order 11 General Order 11 while prescribing the VOE ratio also pe

carrier to present additional material by way of alternative methods of allocation or other approaches 

problems inherent in this type of reporting if they are explained and fully reported 46 CFR 512 3 

Commission furthermorespecifically allowedfor poss Jble departures from the prescribed allocation methods 

in its opinionthe application of such rules and regulations create unreasonable results 46 CFR 1512 3 g and 

a claim that General Order 11 is inflexible Docket No 1152 Report on Adoption of Rule 3 SRR 1083 1

Since the parties have waived flUng of reply briefs this particular issue has not been fully argued norw

detailed exploration of PITL s ship basis allocation change the outcome of the proceeding as explained 

regard Hearing Counsel on brief specifically state However we submit that it is unnecessary to decide w

Administrative andGeneral Expenses as reportedby PITL shouldbe disallowed OpeningBrief of Hearing C

p 5

See eg

Matson NavtgatftJn Co Increased Rates Hawattan Trade cited above at p 117 and cas

thereini also DC Tranatt 51s Inc v Washington Met ATrantitCom n 466 F 2d 394 DC Cir 1972 cert

93 S ct 688

18 F 
PACIFIC ISLANDS TRANSPORT LINE 227

ests Although they express concern overthe impact ofthe proposed

rate increases on the economy ofAmerican Samoa as discussed previ

ously they acknowledge that PITL cannot be expected to continue

operating at a loss They therefore urge that the Commission examine

alternative rate changes that may perhaps minimize any possible im

pact

Every party to thisproceeding in myopinion has shown respect for

the concernofthe Samoan interests But if the Commission is to devise

alternative rate changes it can only do so on the basis of substantial

evidence in any formal proceeding conducted under the Administra

tive Procedure Act Yet neither the limited evidence of record on

point nor applicable principles oflaw as discussed below enable the

Commission to find that the rate increases considering the overall loss

position of the carrier and other evidence should be adjusted in a

particular fashion either as among individual commodities or by

changing the outbound inbound levels

Itis contended that theproposed rate increases will have an adverse

impact on the economy ofAmerican Samoa As PITLpoints out while

American Samoa is dependent on ocean shipping without question

the evidence submitted by these interests does not gauge the extent

of such impact and indeed their witness acknowledged on cross

examination that the effect was incapable of being measured As

mentioned previously two exhibits showing retail shelfprices in Pago

Pago in early December 1973 and late March 1974 while indicating

relatively high prices are not conclusive and it was not even estab

lished that the second study reflected the effect of the subject rate

increases

There is scant evidence in the record exploring the distribution

system in American Samoa for example the role of the importer

wholesaler and the markup system which might shed some light

on the ultimate effect of any rate increase on retail prices A lead

ing importer wholesaler who testified indicated that his business

suffered some loss or slowdown in sales to retailers but that in some

instances he would curtail his customary markup as a result ofthe rate

increases This would indicate that to some extent the effect ofrate

increases can be softened as far as the ultimate consumer is con

cerned As far as the inbound rate increase is concerned a matter

more fully discussed below this amounts to approximately one

half the percentage increase applicable to outbound cargoes

to wit 12 percent and there is similarly a dearth of evidence

showing that canned fish exports from American Samoa would

be significantly hindered in the American market In fact the

Samoan interests suggest that the inbound rates might even be

18 F MC
228 FEDERAL MARITIME COMMISSION

raised with corresponding reduction of the opposite rate increas

On the basis ofthis record therefore and the quite proper conc

sion by the American Samoan interests that PITL cannot be expec

to operate at a loss PITL cannot be found to have acted contrary 

law in seeking additional revenue despite possible adverse impact 

the economy of American Samoa The situation here in this resp

resembles somewhat that in Transamerican Trailer Transport 

Increase in Rates in US Atlantic Puerto Rico Trade cited abo

where Administrative Law Judge Marshall stated

There is no denying the fact that increased freight rates increase cost to shippers 

thereafter consumers But it is equally undeniable that after a point increased fre

rates are unavoidable if the carriers are to stay in business and the trade is to cont

to receive necessary transportation services However it is worthy of passing note 

the severity of the impact of rate increases sometimes goes beyond the reach of 

Commission This is trueto the extent that it concerns the actual increases paid by 

consumerand notsimply the freight increases paid by the shipper Footnote omit

The carriers are under no obligation to subsidize the trade The Commission s prim

concern under the law is withthe satisfaction of the islands requirement for transp

tion services at rates which arejust reasonable and otherwise lawful To be lawfu

rates must be compensatory 14 SRR at pp 658 6159

There remain the questions raised by the Samoan interests of 

reasonableness ofPITL s decision to assess the increases on comm

ties uniformly 10 and to hold down the inbound increases to 12 p

cent Hearing Counsel it shouldbe noted donot challenge the law

ness ofthese decisions and find support for the latter decision on 

basis of competitive factors

As mentioned above however there is insufficient evidence of

ord to enable the Commission to devise alternative rate changes o

alter the uniform nature of the rate increases as suggested by 

Samoan interests even if applicable principles of law permitted 

Commission to do so Itis true that in appropriate cases the Com

sion out ofconcern for the economy ofcertain areas e g

Puerto R

has applied the principle that some commodities may have to be

higher rate than other basic subsistence commodities See e g 

duced Rates onAutosN Atl Coast to Puerto Rico 8 F M C 4

40810 1965 Reduced Rates on Machinery and Tractors to Pu

This suggestion that the inbound rates might be raised appears to be somewhat inconsistent with a

contention of the Samoan interests namelyI that the proposed increases in their present amounts would in 

fashion interfere withthe purposes of the Headnote 3 a program which as discussed above exempts Am

Samoanproducts from U S tariff duties and applies to the inbound movement tathe United States unless th

materials in the products are more than 50 percent of foreign origin Even at thepresent 12 percent level 

correctly points out deficiencies in or the absence of evidence showjng how or to what extent the cann

movement which is the prime inbound cargo would be hampered or for that matter to what extent other 

movements inbound would be hindered by PITL s propo ed rate increases

lOfhere were three exceptions to theuniform 23 percentoutbound increase to wit refrigerated cargo lu

and bulk vegetable aU which were increased by 6 6 and 10 percent respectively No party contested 

particular increases and PITL furnished explanations based upon reasonable ratemaking factors affecting 

items Exhibit 7
PACIFIC ISLANDS TRANSPORT LINE 229

Rico 9 F M C 465 480 81 1966 But as noted previously exports

to American Samoa consist essentially of grocery store items ie

foodstuffs Exhibit 20 A Furthermore the record does not identify

and the Samoan interests do not specify which commodities are not

essentials and should bear higher rates if any such items exist Even

if this were done however there is a serious impediment as a matter

oflaw to such tampering with PITL s rate profile In addition to the

fact thatthe principle under discussion wasapplied incommodity rate

cases rather than general revenue proceedings 11 the problem is that

the principle stems from the Supreme Courts decision in B 0R R

v United States 345 U S 146 1953 which the Commission cited in

Reduced Rates onAutos N Atl Coast to Puerto Rico cited above at

p

408 Inthe B 0case the Court indicated that the principle applies

only ifthe carrier is permitted an adequate return from its traffic as

a whole In this regard the Court stated

So long as a railroad is not caused by such regulations to lose money on its overall

business it ishard to think that it could successfully charge that its property was being

taken for public use without just compensation 345 U S at p 148

And so long as rates as a whole afford railroads just compensation for their overall

services to the public the Due Process Clause should notbe construed as a bar to the

fixing of noncompensatory rates for carrying some commodities when the public inter

est is thereby served 345 U S at p 150

See also Increased Rates on Sugar 1962 7 F MC 404 412 1962

Pan American World Airways v Civil Aeronautics Board 256 F 2d

711 71213 D C Cir 1958 cert denied 358 U S 836 1958

With a history ofcontinued losses and expectation ofthe same situa

tion for the at least immediate future it is obvious on this record that

the principle of adjusting rate profiles as between subsistence and

luxury non essential items cannot be applied by the Commission

The final suggestion of the Samoan interests that perhaps PITL s

inbound rate increases from American Samoa to the United States

might be raised somewhat with a corresponding reduction of the

outbound increases is similarly too unspecific and lacking in support

either on the record or under applicable principles oflaw Inmaking

this suggestion furthermore eventhe Samoan interests indicate that

there may be a risk here referring presumably to their earlier con

tentions that rate increases inbound from American Samoa to the

IISince this proceeding isaso called general revenue investigation into an across the board revenueincrease

the Commission sOrder of Investigation and Suspension does not specify any issues pertaining toindividual com

modity rates Under these circumstances as the Commission has stated in acomparable situation it is doubtful

whether such an exercise i e taking evidence on inclivuclual rates would be proper in ageneral revenueproceeding

where the issue is not raised by the Order of Investigation Docket No 74 36 Matson Navigation Company

Increase in Rateson Motor Vehicles Order on Investigation and Suspension servedAugust 29 1974 p

2 39 Federal

Register 32057

1 g 14 lf ro
230 FEDERAL MARITIME COMMISSION

United States may reduce the competitive advantages enjoyed 

American Samoan exports under the Headnote 3 a program a

jeopardize the continued operation ofthe tunaindustry onthe islan

The Samoan interests do not challenge the 23 percent outbou

rate increases in any specifics nor do they show that this particu

level was unnecessary or unreasonable Their contention essentia

consists ofa suggestion that it may well be that the outbound frei

from American Samoa could bear a greater share of the increase th

is presently proposed Although not spelled out in detail presuma

a larger inbound increase would enable PITL to reduce the outbou

increases to some figure below 23 percent

The record contains detailed explanations by PITL as to how 

derived the 23 percent figure for the outbound increases which w

not challenged or disputed on brief Very briefly the particular 

crease is due to increases in expense principally in U S longsh

wages amounting to just under 40 percent inthe three years since 

previous rate increase in 1970 and an estimated annual 10 perc

increase in vessel operating expense Since the last general rate 

crease in the trade occurred on June 1 1970 this percentage appr

mates 7 percent per annum measured from the previous increase 

to less than 65 percent if we consider that the proposed increa

were delayed another halfyear until December 1 1973 PITL sub

ted further evidence showing that from January 1 1966 to Janu

1974 a period covering the earlier 1970 increase as well as the p

sent PITLs rates increased only some 35 percent a figure lower t

the corresponding rise in the Consumer Price Index in the Un

States occurring between January 1 1966 and September 30 19

which was 419 percent

Since the Samoan interests have not shown or contended that 

23 percent level ofincrease orthe particular calculationsemployed 

PITL to derive this figure are unreasonable or that the increase 

even enable PITL to turn a profit in the trade I cannot find 

violation of law in connection with this particular figure 12 Nor c

find on this record and under applicable principles of law that 

inbound rate increase should be raised above the 12 percent leve

the hopes that this might result in a reduction in the outbound 

creases

Under applicable principles of law a carrier may hold down 

creases on certain commodities provided that the resulting rates 

duce revenues sufficient to cover at least out of pocket costs so tha

liAs discussed below Hearing Counsel also do not contend that the 23 percent increase is unreasonablealt

disputing PITL s statements that vessel expense for theoutbound leg is twice that for the inbound and 

consideration of vessel days on each leg as a factor in comparing vessel expense for each leg

18 F
PACIFIC ISLANDS TRANSPORT LINE 231

other rate payers are burdened with direct costs attributable to the

lower rated cargoes In fixing rate levels between direct costs ie the

extra expenses incurred as a result ofcarrying the particular commod

ity and fully distributed costs including overhead depreciation and a

reasonable profit a carrier may consider competitive factors and the

possibility that further increases may result in cessation of movement

or loss ofthe commodity to a

competing carrier These principles have

been followed by the Commission in a number of cases

13

A recent case in which these principles were applied is Matson

Navigation Company Genera Increase in Rates in the U S Pacific

IHawaiian Trade 16 F M C 96 1973 In that case the carrier in

creased outbound rates by 121 2 percent but filed no increase at all

on inbound containerized cargoes principally canned pineapple The

Commission specifically rejected the idea that the carrier should have

imposed an increase on the inbound cargoesso as to reduce the 121 2

percent level of the outbound increase since the carrier had shown

that the increased revenue would notresult inan excessivereturn and

the record did not show that the lower inbound rates fellbelow out of

pocket costs so as to burden outbound rate payers 16 F MC at pp

100103 Furthermore the Commission found that the holddown on

the inbound pineapple rate wasa reasonable business judgment based

upon competitive factors principally a strong possibility ofdiversion

to other carriers with consequent loss of revenue illld increased up

ward pressure on outbound rates

In the present case PITL did not like Matson exempt inbound

commodities principally canned fish from any rate increase As we

have seen these rates were increased by 12 percent Furthermore

PITLjustified the decision on several grounds namely costs llnd com

petition PITL cites the fact that one competing carrier maintains a

lower rate and that further increases imposed on thePITL rate would

lead to erosion of traffic to the lower rate competition As PITL points

out and as the Commission noted in the Matson case the loss of

revenue could lead to further increases in the outbound rates This

contention is supported by the fact that PITL estimates for the year

1974 that canned fish moving inbound will produce roughly one half

of PITL s total revenue tons moving in both directions and over 40

percent of total revenue

14

13See eg Matson NavigatioTt Company Reduced Roleson FlOUT 10 F M C145 148 149 153 l966l lnvesti

gation a Increased Rateson Sugar PuertoRico Trade 7 F M C404 411 13 1952 Aleutian MQrine Transport Co

Rates Between Seattle and Ports in Alaska 7 F M C 592 596 1963

14The figures as shown on Exhibit 3 Schedule v are as follows

Canned Fish inbound 25 538 revenue tons 1 042 500

All other outbound 25 867 revenue tons 1512 000

51 405 2 554 500

18 F M C
232 FEDERAL MARITIME COMMISSION

Like the situation in the Matson case furthermore competition 

the inbound movement from American Samoa seems to be inte

There are two large canneries that control virtually all of the can

fish moving inbound and two other carriers with whom PITL m

compete one of whom maintains a lower rate as mentioned 15

PITL also offered cost increases to justify the 12 percent inbo

rate increase Itwas explainedthat increased labor costs on the Pa

Coast and increases in vessel expense which together totalled slig

over 4 00 per revenue ton justified the increase in the subject 

from 33 to 37 per ton or 12 percent Hearing Counsel take no i

with PITL s need for additional revenue on the inbound leg beca

ofthese cost increases Furthermore Hearing Counsel submit tha

rate for canned fish appears to cover loading and unloading expe

and makes some contribution to vessel expense although doub

that the rate recovers fully distributed costs If so the rate is 

unlawfully depressed under applicable principles of law expla

above There is some record support for Hearing Counsels s

ments although no fully distributed cost study was entered into 

record 16 PITLsubmitted evidence moreover tending to explain 

lower inbound percentage increase on the grounds of the unif

nature of inbound cargo and consequent efficiencies in loading 

unloading resulting in lower handling costs compared with c

moving outbound Hearing Counsel do not take issue with these 

nor with PITLs decision to limit the inbound rate increase t

percent as Ihave mentioned above 17 Therefore in consideratio

I

According to tariffs on file with the Commission the competing carrier having the lowerrate is PFE

December I 1973 whenPITL s rate increa ses went into effect PFEL maintained arateof 36 per 2000 

canned fish compared to PITL s rate of 37 Even after the imposition of bunker surcharges effective Febr

1974 12 percent forPFEL 10 percent for PITL PFELs totalcharge remains slightly below that ofPlTL a

the differential has narrowed See PFEL America Samoa Freight Tariff No 1 FMCF No 6 4threv page 

previous pages lB 5th rev page 15 PITLTariff FMCF No 2 4th rev page 17 4threv page 14A

lfhe canned fish rate with the proposed increase is 37 perton Costs of discharging at the Pacif

increased from 9 00 to 1253 Exhibit 6 Even Jfthis expense is doubled to cover loading costs in pag

although costs there are cheaper so as to produce stevedoring costs of approximately 25 the rate isobviou

above that level

I1Hearing Counsel do take issue however withPlTLs

statements that vessel expenses on theoutbound 

twice as much as those on the inbound owing to greater numberof ports covered more vessel days overt

Hearing Counsel dispute furthermorethat consideration of vessel days rather than ton mdes is proper citin

Steamship Co Inc Generallncrease in Rates In theAtlantic Gulf PuertoRico Trade 9 F M C 220 1966 

of the overwhelming showing of need for additional revenue by PITL Hearing Counsel s support for 

increases both inbound and outbound on other grounds the lack of showing that PITLsmethodology res

high rate increases not otherwise justified and the further fact that this allocation issue has not been full

since theparties waived theflUng of reply briefs this partJcular issue as was thecase with theissue regardin

allocation of administrative and general expense need not be resolved Since even with a23 percent 

outbound PITL still stands to suffer losses and has justified its holddown on inbound increases on other gr

12 percent it ispointless to pursuethis particular allocation issue further Had there been aviable rateof ret

in this proceeding and lack of Jndependent justification for the inbound holddown theissue of allOcation 

expense betweenoutbound and inbound legs might have become critical PITL acknowledges that its meth

in deriving these rate increases may not be perfect butcorrectly points out that exactitude is not required 

cases Sea Land Service Inc Increases In Rates In thePacific Coast Puerto Rico Trade 15 F M C4 9 1

18 
PACIFIC ISLANDS TRANSPORT LINE 233

the facts and applicable principles of law as discussed above Ifind

nothing unlawful inPITL s decision to limit the inbound rate increase

to 12 percent

ULTIMATE CONCLUSIONS

Respondent PITLhas shown a need for its general rate increases on

the basis of increased costs and continued losses in the subject trade

Even with the benefit of such increases furthermore the record

shows that PlTL will still suffer losses Accordingly respondent has

sustained its burden ofproving the subject increases to be just and

reasonable as required by law

The economy of American Samoa is highly dependent on ocean

shipping and suffers from economic problems relating among other

things to low income and rather high retail prices This situation of

course is of concern to the Commission but standing alone is insuffi

cient to offset PITL s right to seek additional revenue the need for

which PITL has shown Since PlTL continues to be in an overall loss

position furthermore and since the record is lacking in specific evi

dence on the point the Commission cannot invoke the doctrine as it

sometimes does of altering the nature ofPITL s rate profile as the

Samoan interests suggest e g by raising rates on non essential items

and holding down rates on subsistence items Nor is there sufficient

support in the record or under applicable principles of law for the

Commission to order PITL s inbound rate increase to be raised above

the 12 percent level which level PITL has justified on the basis of

competitive factors

PITL a foreign Rag operator serving anisolated Americanterritory

cannot be compelled to continue serving that area or to continue

operating at a loss On the present record denying the proposed rate

increase or otherwise attempting to modify it without providing the

carrier with compensating revenue might remove any incentive for

the carrier to continue to serve the trade or possibly cause a curtail

ment of service as Hearing Counsel suggest It might well be as

Hearing Counsel further suggest that withdrawal of PITL from the

trade would do far more harmto the people ofAmerican Samoa than

the requested rate increases In any event PITL has proven its case

and there is no need to take the gamble

S NORMAN D KLINE

Administrative LawJudge

WASHINGTON D C

January 7 1975

I8 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 73 78

DELAWARE RIVER PORT AUTHORITY ET AL

v

TRANSAMERICAN TRAILER TRANSPORT INC

ADOPTION OF INITIAL DECISION

Feb 3 1975

j

1

This case was instituted by complaint of eight Philadelphia 

parties 1

alleging that Transamerican Trailer Transport Inc TIT 

soliciting and encouraging shippers locatedin the PortofPhiladelp

the Port area to move their cargo throughother ports ofexit oren

specifically Baltimore and New York has in the past and is continu

to divert cargo illegally from the Port

Specifically Complainants allege that such actions of diversio

attempted diversion of naturally tributary cargo are unlawful 

illegal under sections 16 and 17 ofthe Shipping Act 1916 the A

and section 8 of the Merchant Marine Act of 1920 the MMA C

plainants further contendthat any cargo diversions on the part ofT

are detrimental to commerce and the general public interest 

unfair unjust discriminatory and unduly prejudicial to the Port 

to the individuals and business concerns which are interested in 

dependent upon said Port

This proceeding is now before the Commission on exceptions to 

Initial Decision of Administrative Law Judge John Marsball in wh

he found that solicitation byTlT without m6re dh dPhiladelp

area cargo is not in violation of the Actor the MMA

Exceptions to the Initial Decision filed by GQmplaints gene

constitute nothing more than a reargument of contentions alre

lCOmplainlnts arethe DeJaware l erPort Authority theComrnonwealth of Pennsy vania the City of PM

phia the PJ 1iladelphJf ortCorpqration the International Longshor erilen sAssociation PhiladelphiaOistrict 

d t ie Phjlad pWa Maiine Traae Association the Port of Phlladelphil Marine Terminal Association a

Grearer Philadelphia Chamber of Commerce

234 Q 
DELAWARE RIVER PORT AUTHOIDTY 235

briefed by Complainants and considered by the Administrative Law

Judge Upon thorough consideration of the entire record in this pro

ceeding we are of the opinion that Judge MarshaU s findings and

conclusions with respect thereto were proper and well founded and

we adopt them as our own However without disturbing any ofthese

findings and conclusions there are certain procedural matters raised

by Complainants in their exceptions which we believe warrant some

further discussion

The overridingissue in this proceeding is whether the Administra

tive Law Judge was correct in deciding as a matter of law that the

mere solicitation of cargo without more was not violative of the

shipping statutes for from this challenge raised by Complainants

flowed virtually all other exceptions We believe thatJudge Marshall s

assessment waslegally correct and accordingly we also agreewith his

decision to forego an evidentiary hearing To find otherwise would be

stretching both the naturally tributary concept and arguments ofdis

crimination and prejudice to an intolerable extreme and wreak havoc

on the shipping industry

We are convinced that throughout the course of this proceeding

Complainants were offeredevery procedural safeguard as required by

both our own rules and the Administrative Procedure Act Upon ad

mission by Respondent ofthe facts in dispute at the prehearing confer

ence Judge Marshall wasmost solicitous in offering Complainants the

opportunity to amend their Complaint to address additional issues

related to absorption and equalization not addressed inthe Complaint

as filed Complainants after requesting time to do so chose not to

amend the Complaint In granting oral argument we offered Com

plainants even further opportunity to present any legal arguments in

their own behalf and upon conclusion of argument even took the

extraordinary if not unprecedented step of granting Complainants

fifteen days to supply us with additional affidavits of fact and memo

randa oflaw in support of their position as delineated in the original

Complaint Instead Complainants submitted a

response which failed

to address itself in any way to the issue of law at hand and instead

requested consolidation with either oftwo otherongoing Commission

proceedings Docket Nos 7335 lntermodal Service of Containers

and Barges at the Port of Philadelphia Possible Violations of the

Shipping Act 1916 and the Intercoastal Shipping Act 1933 and

744 Agreement Between Puerto Rico Maritime Shipping Authority

and Puerto Rico Marine Management Inc lPuerto Rico Marine Oper

ating Company Inc

We address ourselves now to one other area ofexception raised by

Complainants Their contention that Judge Marshall somehow erred

18 FMC
236 FEDERAL MARITIME COMMISSION

in mentioning the decision of the Court of Appeals for the Th

Circuit in the injunction proceeding inDelaware River PortAuthor

etal v TIT U S C A 3d Cir No 741214 7 30 74 carries noweig

when viewed in the context of its inclusion in the Initial Decisi

Complainants suggest that any reliance by the Administrative L

Judge on that Court of Appeals decision is improper because 

Commission s General Counsel submitted an amicus briefin that p

ceeding This argument is totally without merit Complainants s

gestion that the General Counsel s limited intervention in the inju

tion appeal proceeding was clearly improper and demonstra

that he had prejudged the merits of this proceeding thereby ta

ing it is wholly unwarranted and unsupported

First the amicus brief filed by the General Counsel addressed its

solely to the propriety ofan injunction in view of the probable Co

mission resolution ofthe mere solicitation issue on the basis ofits p

decisions in the general field of cargo diversion Second we wo

remind Complainants that such briefs filed in court proceedings 

the General Counsel are filed on behalf of the Commission and 

recognize no prejudice to any party s case in pending or subsequ

proceedings before the Commission Itis our duty as Commission

to render a fair decision and we accept that duty in this case a

others brought before us

In conclusion we would emphasize that the Commission has m

every effort to insure that due process requirements were 

throughout this proceeding There was no need for evidentiary h

ing as Respondent stipulated and admitted the facts and allegat

that it does solicit cargo in Philadelphia and that it does not inten

call therefor cargo Quite simply Complainants failed to meet t

burden of proof on the legal issue at hand Their attempt at this t

to again raise the issue ofconsolidation which waspreviously caref

and definitively denied at all stages of the proceeding strikes u

nothing less than an attempt to forestall a decision on the main is

raised here and to illegitimately marry the issues ofmere solicita

and overland cost absorption through consolidation

The time has long since passed for this case to be put to rest 

therefore adopt the Initial Decision in full as the decision of the C

mission and dismiss the Complaint

By the Commission

SEAL S FRANCIS C HURNEY

Secretar

18 F
FEDERAL MARITIME COMMISSION

No 73 78

DELAWARE RIVER PORT AUTHORITY ET AL

V

TRANSAMERICAN TRAILER TRANSPORT INC

Transamerican TrailerTransport Inc solicitation without more of Philadelphia area

cargo for movement through ports of Baltimore and New York found not in

violation of the Shipping Act 1916 or the Merchant Marine Act of 1920

10 l ro 237

MartinA Heckscher for complainant Delaware River Port Author

ity

Israel Packel and Gordon MacDougall for complainant Common

wealth ofPennsylvania

Martin Weinberg and HerbertSmolen for complainant City ofPhil

adelphia

M Carton Dittmann Jr for complainant Philadelphia Port Corpo

ration

Abraham E Freedman for complainant International Longshore

mens Association Philadelphia District Council

Francis A Scanlan for complainants Philadelphia Marine Trade

Association and Port ofPhiladelphia Marine Terminal Association

Thomas V Lefevre for complainant Greater Philadelphia Chamber

ofCommerce

Amy Klein and Olga Boikess for respondent TransamericanTrailer

Transport Inc

Eldered N Bell Jr for intervenor Maryland Port Administration

INITIAL DECISION OFJOHN MARSHALL ADMINISTRATIVE

LAW JUDGE 1

Complainants consist of six parties concerned with the welfare of

the Port of Philadelphia Respondent Transamerican Trailer Trans

port Inc TIT operates a common carrier steamship service twice

IThis decision became the decision of the Commission 2 375
238 FEDERAL MARITIME COMMISSION

j

weekly between New York and San Juan and onceweekly betw

Baltimore and San Juan Itdoes not call at the Port ofPhiladelp

There are no disputed issues of fact TTT agrees to complaina

only substantive allegation which is that TTT has by means ofad

tising and personal visits successfully solicited Puerto Rican ca

bothinbound and outbound in the Port ofPhiladelphiaarea for m

ment through the ports of Baltimore and New Yorka

This ac

complainants allege constitutes illegal diversionary solicitati

illegal because they consider it to be detrimental to commerce 

the general public interest unfair unjust discriminatory and und

prejudicial to the Port ofPhiladelphia and toindividual business 

oems They further urge thatitpermits TIT solely for its own ben

unlawfully to encourage and persuade shippers and consignees no

move their cargo viathe normal port of exit or entry results in

disruption of long established patterns of commerce by diver

cargo away from the natural direction of its Row through the Po

Philadelphia enables respondent to draw away from the Port ofP

delphia traffic which originates or terminates in areasnaturally tr

tary to its port and that it will unduly concentrate shipping serv

in one or two areas in the NorthAtlantic range ofports contrary to 

policies ofCongress as set forth inits various acts including intera

the Shipping Act of 1916 and the Merchant Marine Act of 1920 a

which they emphasize are intended to encourage the developm

ofports and transportation facilities adequate to handle interstate 

foreign commerce in peace time and to enhance the security of 

United States in times of national emergency

Complainants do not suggest that Tn has engaged in absorpt

equalization or other means of olfsetting or payment of inl

charges 3

Under trucking tariffs onBle with the Interstate Comme

Commission it appears that all such charges are payable by the s

per Therefore the only issue in this case is an issue of law Ma

common carrier offshore steamship service while offering no mo

tary or otheradded inducement lawfully solicit cargo for movem

through ports in adjacent areas Data sought by complainants to 

Rect tonnages and revenuesof cargo carried the availability of o

See order entitled Briefing Schedule dated AprU 9 1974 and CommissIon order dated May 3 1974 de

appeal In view of the specific findings and repeated rulings that this proceeding is limited toan issue of la

the mattws oflaw asserted In thecomplaint the request for findings of fact contained ill complainants b

pateritly out of order and reqUires no response

3Complainants were grantedbutlaterrejected leaveto amend the complaint to Include whatever charges 

might be ifany bearing on such practices

4See Oe awore River Port Authoritv v TTT No 73 2830 DW Court for the Eastern Dist of Pa 

opinion Findings of Fact Discussions and Conclusions of Law dated February 4 197 Finding of Fact No 

lBcord ofthi proceeding iscited in thebriefofCOOlplainants herein For subsequent decJsfon on appeal rev

theDb Court se slip decision No 74 1214 USCA 3d Cir July 30 1974

18 F
DELAWARE RIVER PORT AUTHORITY 239

services the coverage ofrespondent s solicitation and the impact on

the Port ofPhiladelphia would be without relevancy On this record 5

the solicitation in question is either illegal as a matter oflaw or it is

not illegal As noted above complainants charge that it violates sec

tions 16 and 17 of the Shipping Act 1916 and section 8of the Mer

chant Marine Act of 1920

The portions of these acts as cited in the complaint and referenced

by complainants on brief are as follows 6

Section 16 46 use 815

It shall be unlawful for any common carrier by water or other person subject to this

chapter either alone or in conjunction with any other person directly orindirectly

First To make or give any undue or unreasonable preference or advantage to any

particular person locality or description of traffic in any respect whatsoever or to

subject any particular person locality ordescription of traffic to any undueor unreason

able prejudice ordisadvantage in any respect whatsoever

Section 17 46 use 816

No common carrier by water in foreign commerce 7

shall demand charge or collect

any rate fare or charge which is unjustly discriminatory between shippers orports or

unjustly prejudicial to exporters of the United States as compared with their foreign

competitors

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

observe and enforce just and reasonable regulations and practices relating to orcon

nected with the receiving handling storing ordelivering of property Whenever the

Board finds that any such regulation orpractice is unjust orunreasonable itmay deter

mine prescribe and order enforced a just and reasonable regulation or practice

Section 8 46 use 867

It shall be the duty of the Secretary of Commerce in cooperation with the Secretary

of the Army with the object of promoting encouraging and developing ports and

transportation facilities inconnection with water commerceoverwhich he has jurisdic

tion to investigate territorial regions and zones tributary to such ports taking into

consideration the economies of transportation by rail water and highway and the

natural direction of the flow of commerce to investigate the causes of the congestion

of commerce at ports and the remedies applicable thereto and to investigate any

other matter that may tend to promote and encourage the use by vessels of ports

adequate to care for the freight which would naturally pass through suchports

In briefer statutory language complainants charge is that TTTs

solicitation alters the natural direction ofthe flow of commerce by

diverting cargo which is naturally tributary to the Port of Philadel

phia thus violating the promotional mandate ofsection 8 ofthe 1920

5Consisting of the complaint answers thereto opening briefsand reply briefs Complainants however did not

choose to file a

reply brief

6Complainants brief also refers to sections 15 and 18 of the Shipping Act 1916 46 USC 814 and 17 but the

complaint makes no mention of either

7TITs mainland Puerto Rico service is actually in so called domestic offshore commerce rather thanforeign

commerce

18 F MC
240 FEDERAL MARITIME COMMISSION

Act requiring consideration of the natural direction of the flow 

commerce and the prohibitionsofsections 16 and 17 ofthe 1916 

outlawing discriminatory and otherwise unjust Or unreasonable pr

tices by common carriers by water

While section 8 is not specifically administered by the Commiss

the policies therein set forth have been given weight in apply

relevant sections of the 1916 Act s

In Reduced Rates on Machin

and Tractors to PuertoRico 9 F M C 465 476 1966 the Commiss

summed up its treatment of section 8 as follows

This right the right of a port or carrier serving that port to cargo from natu

tributary areas is codilled in section 8 of the Merchant Marine Act 1920 which 

statement of congressional policy although notonespecillcally appearing inthe stat

we administer should be and has been followed by this Commission whenever p

ble

Port ofNew York Authority v FMG 429 F 2d 663 668 5th 

1970 is cited by complainants in support of their reliance on 

natural tributary rule

Section 8 of the Merchant Marine Act supra is a policy statementdesigned to prom

and encourage the use of ports by vessels for the handling of freight which w

naturally pass through such ports This is the basis of the natural tributary argum

Complainants then seek to draw upon the Commission s rec

decision in lntermodal Service to Portland Oregon Docket No 

19 14 SRR 107 1973 to support their contention that it is 

fundamental federal policy to protect the right of a

port to all ca

which would naturally flow throughit and that any action by any

contrary to that policy including solicitation in any form constitu

illegal diversion This is the real heart of complainants case A

clear cut issue it is without precedent

Under the above quoted statutes the diversionary solicitatio

here in question may be found tobe illegal only if under the circ

stances it subjects the port ofPhiladelphia to undue unjust or unr

sonable prejudice or disadvantage in some respect And so the ri

ofthe port ofPhiladelphiato cargo from otherwise naturally tribut

areas is violated only if the means of diversion can be found to con

tute an undue unjust or unreasonable practice No basis is foulld 

this record orelsewhere for concludingthat advertisingand or dir

customer solicitation without concessions Or other added inducem

of some kind is illegal

Service to Portland supra involved the carriers serving Portla

Functions under section 8 are nowvested in the MarWme AdmJnJstration Department of Commerce

IISee also PaCIfic Far East Line Inc v US 6t a 246 F 2d 711 716 D C elr 1957 and lntmnoda S

toPorlland egon Dock No 7019 14 8RR 107 11011973

18 FM
DELAWARE RIVER PORT AUTHORITY 241

indirectly through Seattle under a conference agreement provision

whereby the carriers absorbed the inland transportation costs The

issue there which is cited by complainants as relevant to this case

actually went not to the lawfulness ofthe indirect service as such but

rather to the indirect service as induced by the absorption of the

inland costs 10 Absent the issue ofabsorption which is not in this case

there might not have been a Service to Portland case At the outset

ofits decision in that case the Commission emphasized the restricted

scope of the proceeding as having to do with the establishment

ofregular service to Portland Oregon from Far Eastern ports under

which cargo destined to Portland is dischargedfrom a vessel at Seattle

Washington and transported by inland carrier to Portland Oregon

at ocean carriers expense d at 109

The remaining decisions relied on by complainants are also misap

plied as in each instance the diversion was accompanied by and pre

sumably encouraged by monetary inducements termed absorptions

or equalizations 11 Complainants contention that the cargo being

naturally tributary to Philadelphia any effort ordevice called solicita

tion or anything else and whether ornot accompanied by monetary

inducement is a clear violation ofthe statutes is without merit

This case does not involve questions relating to the present ade

quacy or any foreseeable reduction ofdirect service to Philadelphia

TTTdoes not call at Philadelphia and has indicated no intention to do

so In urging the use of the Port of Philadelphia by local shippers

complainants contend that presently available direct service between

Philadelphia and Puerto Rico is adequate There is no suggestion to

the contrary

TTT inoffering indirect routings merely makes known its services

As noted above it does so through conventional means of advertising

and personal visits No record is found to indicate that the Commission

has evereven considered imposing a ban on this form ofsoliciting by

carriers All carriers everywhere solicit cargo They endeavor by ad

vertising and talking to shippers to encourage the use of their ser

vices whether direct or indirect Unless there are improper conces

sions rules or practices there are no grounds for charges of illegal

conduct Solicitation by itself is not illegal Shippers in the Philadel

lOAs this is not a section 15 agreement case policies and standards sometimes lookedtoin disapproving agree

ments found to be detrimental to the commerce of the United States or contrary to the public interest are not

applicable

IIPort of New York Authority v FMC 429F 2d 663 5thCir 1970 absorption of inlanddifferentials Pacific

Far East Line Inc v us et 01 246 F 2d 711 D CCir 1957 equalization practices Beaumont Port Commission

vSeatrain Lines Inc 2 US M C500 1941 equalization by absorption Sea Land Service Inc v S Atlantic

Caribbean Line 9 F M C 338 1936 portequalization City ofPortlandvPacific Westbound Conference 4F M C

664 1955 equalization practices and City of Mobilev BaltimoreInsular Line 2 US M C474 1941 equaliza

tion rates

18 F MC
242 FEDERAL MARITIME COMMISSION

phia area who choose to ship via TIT out of Baltimore or New York

undoubtedly do so for valid business reasons other than comparative

costs Such reasons may include schedule frequencies overall transit

times or the configuration of a particular vessel

This is not to say that the offering of indirect services aCMmpanied

by monetary inducements is intrinsically unlawful Each case of this

nature must bejudged in its entirety The Commission must take into

consi ileration all of the material facts In Beaumont Port Commission

v Seatrain Lines Inc 2 U S M C 500 504 1941 the Commission

stated that the practice of equalization is not condemned as a general

principle but that it is condemned when it creates an undue advan

tage Along the same line the Commission in Service to Portland

supra at 130 stated in substance that it is not indirect service which

may be unlawful but ratherabsorption and that only to the extent that

it subjects a port to undue prejudice or unjust discrimination

Complainants contention that a water carrier may not handle a

port s local cargo by any means other than direct water service to that

port brief fu at 18 is not accurate

TIT argues that to grant the relief requested by complainants

would be to Balkanize the shipping industry and bestow feifdom rights

to Philadelphia portinterests thereby foreclosing competition among

ports and carriers and needlessly restricting shippers access to ship

ping services all clearly contrary to anyone s definition of individual

rights and the public intereSt The principle if adopted could equally

wellsupportlitigation by the Ports ofNew Yorkand Baltimoreseeking

to expel Philadelphia solicitors from their claimed tributary areas

Many ports maintain trade solicitation offices throughout the world

CONCLUSION

Neither the naturally tributary concept of section 8 ofthe 1920

Merchant Marine Act nor the proscriptions of sections 16 and 17 of

the 1916 Shipping Act relatingto unjust unreasonable ordiscrimina

tory actions vest a

port with a monopoly over local cargo These

provisions simply mean that improper rate making devices may not

be employed to channel the How ofcargo elsewhere Unless barred by

restrictions not here in issue all carriers and all ports have a

right to

fairly compete for all cargo

12

Itis accordingly found and concluded that there is no basis in law

for reStricting TITfrom soliciting cargo by means ofadvertising and

UThere are ofeourse basjc constitutianal freedoms which are rcS1evant butneed nat be given detailed Mnsidera

tian In this instance Shlppers have 8

right to transport their property by whatever lawful means they rpay choose

Article I section B Regulation of Commerce No prefere ce may be givento ports of any sta a rticle I section

g Carriers aud ports have a

right to informshippers oHawful se vices offered First AmendIhent

f8 FM C
DELAWARE RIVER PORT AUTHORITY 243

personal visits from shippers in the Philadelphia area even though

TIT does not bring its ships into the Port of Philadelphia

The relief requested is denied and the complaint dismissed

5 JOHN MARSHALL

Administrative Law Judge

WASHINGTON D c

August 28 1974

18 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET Nos 303 F AND 304 F

JOHNSON JOHNSON INTERNATIONAL

v

PRUDENTIAL GRACE LINES INC

Reparation granted

Axel O Velden for Complainant

Anthony R Maio for Respondent

REPORT

Decided Feb 3 1975

BY THE COMMISSION Helen Delich Bentley Chairman and James 

Day Vice Chairman

The complaints in these consolidated proceedings were filed by Jo

son Johnson International J J alleging overcharges on shipme

of products via vessels of Respondent Prudential Grace Lines 

Grace Administrative Law Judge Norman D Kline has issued 

Initial Decision awarding reparation in the amount of 397 01 Exc

tions to that decision have been filed by J J to which Grace 

replied

FACTS

Grace transported the shipments involved here pursuant to 

terms ofthe United States Atlantic and Gulf Venezuela and Net

lands Antilles Conference Freight Tariff F M C No 2 and the 

Coast Colombia Conference Freight Tariff F M C No 1 Both ta

contain a rule which provides as follows

Bills of lading describing articles by trade name are notacceptable for the comm

rating Bills of lading relecting only trade names will be automatically subje

application of the rate specified herein for Cargo N O S as minimum

244 18 F
JOHNSON JOHNSON v PRUDENTIAL GRACE LINES 245

On September 29 and October 27 1972 J J shipped cargoes of

its product ALIPAL from New York New York to Puerto Cabello

Venezuela on Grace s vessels and subject to the terms conditions and

rates of the Venezuela and Netherlands Antilles tariff In the case of

each shipment the cargo was described on the bill oflading merely

as ALIPAL To one ofthese shipments Grace applied the Cargo

N O S rate of 93 50 per 40 cubic feet To the second ofthese ship

ments Grace applied the Chemical N O S rate of 77 00 per 40

cubic feet As to both of these shipments Complainant alleges that

the proper rate to be applied was Detergent N O S at 43 50 per

40 cubic feet Since this lower commodity rate was not applied Com

plainant alleges that ithas been overcharged in the amount of 286 74

on these shipments of ALIPAL

On September 19 1972 Complainant also made a shipment ofthe

product Compound T L from New York New York to Barran

quilla Colombia aboard Grace s vessel This cargo was shipped sub

ject to the terms conditions and rates ofthe East Coast Colombia tariff

described above To this cargo described as Compound T L on the

bill of lading Grace applied the Chemical N Os rate of 96 80

W M

2

Complainant alleges that the correct rate to have been applied

was 61 80 W Mapplicable to Detergents washing Liquid and that

Grace s failure to apply this rate resulted in an overcharge of 110 27

on the shipment of Compound TL

In defense ofits application of the Cargo N O S and Chemical

N O S rates Grace relied upon its adherence to its tariffrule quoted

above and maintains that it applied the provisions of its tariffs prop

erly based upon the cargo description information supplied by Com

plainant

THE INITIAL DECISION

In his Initial Decision Judge Kline stated

There are essentially two issues raised 1 whether a claim based upon alleged

misclassification by a carrier can be valid despite the fact that claimant furnished the

carrier an improper or incomplete description of the commodity shipped on a bill of

lading at the time ofshipment inapparentnoncompliance with the carrier s tariffrules

on which description the carrier relied in determining the applicable rate and 2 if

such aclaim is valid whether claimant has shown that the commodities involved inthe

shipment inquestion described as Alipal and Compound T L on the pertinent bills

of lading are in fact detergents thereby qualifying for the rates published in respon

litis not clear why Crace applied the Chemical N DS rate to the second cargo rather thanan automatic

application of the Cargo N DS rate as provided in its tariffs

2Again it is unclear why the Cargo N Q S rate was not applied here However in the case of this shipment at

the timeofshipment the Cargo N D S ratewas 87 00 per40 cubic feet while the Chemical NDS rate was 96 80

W M

18 F M C
246 FEDERAL MARITIME COMMISSION

dentstariffs under the designations Detergent N O S and Detergents Was

Liquid respectively

As to the first issue Judge Kline concluded that numerous previ

Commission decisions hold that such a claim is valid provided 

appropriate burden ofproof is sustained by the Complainant

As to the second issue Judge Kline concluded that Complain

had sustained its burden of proving that the commodities actu

transported were detergents and should have been assessed the t

rates applicable to detergents 3

Further citing Abbott Laboratorie

Prudential Grace Lines Informal Docket No 262 1 Order on 

view ofInitial Decision November 12 1973 Judge Kline conclu

that Complainant s failure to comply with Respondents tariff 

could not bar recovery for an overcharge should Complainant sus

its burden of proof regarding the character of the commodity Ju

Kline therefore awarded reparation as requested by Complainan

the amount of 397 01

In its exceptions Respondent argues that Judge Kline s

find

was improper as Complainant did not comply with the provision

a mandatory tariffregulation Further Respondent contends tha

sustain the holding ofJudge Kline would be discriminatory sinc

imposes no responsibility upon the shipper to describe his goods ac

rately while leaving the carrier open to later claims against which 

may be unable to defend

DISCUSSION AND CONCLUSION

We have reviewed this proceeding in light of our recent decisi

in Kraft Foods v Moore McCormack Lines Inc Docket No 7

4

report served March 26 1974 and Ocean Freight Consultant

Royal Netherlands Steamship Company Docket No 7239 rep

served January 30 1975 In this instance we wish to reiterate th

claim such ashere under consideration may not beshown to fall wit

the ambit ofKraft Foods We emphasize that we are constrained 

limit the Kraft Foods holding strictly within its purposely narrow

limits

In the case before us we conclude that the ultimate holding of 

Administrative Law Judge allowing reparation must be permitted 

stand in light ofour decision in Docket No 7239 supra Inthat ca

while we indicated our favorable disposition toward a mandat

trade name rule we disallowed reliance by the carrier on a r

3The record as to thecharacter ofthe commodity shipped consists primarUy of definitional materials which 

ALIPALand Compound T L to be in fact detergents In its material offered to establish the identity of 

pound TL Complainant also furnished a statement from the manufacturer which corroborates its characte

as a

detergent

18 F M 
JOHNSON JOHNSON v PRUDENTIAL GRACE LINES 247

which allowed discretion in the application of rates and which there

fore opened a door to discriminatory treatment of shippers by carri

ers

The rule sought to be relied on here contains the same discretionary

deficiency we found in Docket No 7239

Weare ofthe opinion that the case before us is indistinguishable in

any material way from the facts of Docket 72 39 That being so we

hold as we did there that reparation is warranted and is hereby

granted

Commissioner George H Hearn concurring and dissenting

I concur in the grant ofreparation in this case but Idissent from

the reasoning of Chairman Bentley and Commissioner Day

The reasons for my decision are sufficiently set forth inmy separate

opinion inKraft Foods v Moore McCormack Lines Inc 14 SRR 603

606 1974 and OFC v Royal Netherlands SS Co Docket No 7239

report served January 30 1975 which I

incorporate herein by refer

ence

SEAL S FRANCIS C HURNEY

Secretary

Commissioners Ashton C Barrett and Clarence Morse dissenting

We would deny the granting ofreparations in these cases for the

same reasons expressed in detail earlier in our opinion in Ocean

Freight Consultants Inc v Royal Netherlands Steamship Company

Docket No 7239 Report served January 30 1975 The legal issue

is indistinguishable in each of these cases and should be resolved

similarly

18 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 74 37

AMF INCORPORATED

v

AMERICAN PRESIDENT LINES

NOTICE OF ADOPTION OF INITIAL DECISION

Feb 4 1975

The Initial Decision of the Administrative Law Judge in this p

ceeding was served January 10 1975 No exceptions have been fi

to the Initial Decision Inview ofthe ultimate decision reached by 

Administrative Law Judge the Commission has determined not 

review the Initial Decision denying reparations Accordingly not

is hereby given that such Initial Decision became the decision of 

Commission on February 10 1975

Therefore it is ordered That the proceeding is discontinued

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

248 18 F 
FEDERAL MARITIME COMMISSION

No 74 37

AMF INCORPORATED

v

AMERICAN PRESIDENT LINES

18 F MC

249

Reparation denied

RaulBessolt and Cesar Garcia Export Traffic Manager and Man

ager Purchasing and Transportation International respectively of

AMF Incorporated for the complainant

James H Seymour for respondent W H Williams Vice President

ofrespondent filed Request for Extension ofTime to Reply to Com

plaint

INITIAL DECISION ON COMPLAINT FOR REPARATION OF

WILLIAM BEASLEY HARRIS ADMINISTRATIVE LAW JUDGE 1

This proceeding was conducted under the Shortened Procedure

provided for in Rule ll a ofthe Commission s Rules ofPractice and

Procedure 46 CFR 502 181 AMF Incorporated AMF in its com

plaint served September 5 1974 had requested the conducting ofthe

proceeding under the Shortened Procedure The respondent Ameri

can President Lines Ltd APL in its answer filed October 24 1974

the time to reply having been extended to October 25 1974 by

Notice served September 25 1974 did not respond to the request for

use of the shortened procedure The Presiding Administrative Law

Judge onOctober 25 1974 served notice ofa prehearing conference

to be held December 3 1974 However onNovember 22 1974 APL

filed a letter dated November 15 1974 in which it stated agreeable

ness to the Shortened Procedure and requested dismissal ofthe pre

hearing conference The parties having agreed to the Shortened Pro

cedure the Presiding Administrative Law Judge in a notice served

November 25 1974 granted approval of the use of the Shortened

IThis decision became thedecision of the Commission 2 4 75
250 FEDERAL MARITIME COMMISSION

Procedure cancelled the prehearing conference and issued the f

lowing procedural schedule

AMF to present facts and arguments within 10 days of the date 

the notice APL to present facts and arguments within 10 days 

AMF s service above and AMF to reply within 10 days of AP

service above

In an affirmative defense attached to its answer to the complai

APL stated it had corrected the freight charges payable in the sh

ments to 29 862 71 and in support attached as Exhibit A a c

rected copy ofthe aforesaid bill oflading dated August 31 1972 a

as Exhibit B a

copy ofthe record ofthe deposit onOctober 10 19

ofthose sums in the bank attributable to the shipments in theamou

of 23 16172 for item bill of lading No 0053 and 6 700 99 for ite

bill oflading No 0023 a total of 29 862 71 On December 11 19

AMF filed a letter dated December 3 1974 signed by its Manager 

Purchasing and Transportation International in which AMF adm

that the figure of 29 862 71 is the correct amount paid rather th

the 33 352 68 listedbyoversight in the complaint Thus AMF revis

the amount sought on reparation from 11 015 37 to 7 525 40 T

said letter also contains AMF s contention that Rule Ie of the tariff 

question is discriminatory and that APL s defense is unreasonable a

self serving Therefore hereinafter the above corrected figures o

are used Besides the above letter the pleadings filed herein are t

complaint containing arguments and the answer ofAPL containi

its affirmative defense on which the record is closed for decision

FACTS

AMF a New Jersey corporation whose principal business is t

marketing ofvarious types ofsporting goods machinery and bowli

alley flooring etc shipped 15 containers and 10 skids ofbowling al

flooring bowling machines and pins measuring 8 635 cubic feet a

37 912 MBM weighing 228 1291bs on board APL s vessel Presid

Hayes The port ofloading wasBaltimore New York The single b

oflading was numbered for Baltimore as 0053 and for New York 

0023 dated at New York August 31 1972 The shipments destinati

wasNaha Okinawa The total charged and collectedby APL for tran

portation of the freight was 29 862 71 APL a common carrier 

water engaged in transportation of cargo between the United Sta

Atlantic and Gulf Ports and Far East ports operated under the F

East Conference Tariff No 25 FMC No 5 and APL is a member 

that conference AMF alleges that APL s charge of 29 862 71 

transportation ofthe freight wasgreaterthan those in effectin the s

18 FM
AMF INCORPORATED vAMERICAN PRESIDENT LINES 251

tariff in violation of section 18 b 3 ofthe Shipping Act 1916 APL

denies any such violation

AMF contends that the correct total freightfor the shipment should

have been 22 337 31 because the port of discharge was Naha

Okinawa and APL instead of applying the regular rates as it did

should have applied the special rates provided under tariff items 424

and 1625 and a differential of 6 50 should have been added in special

rate rather than regular rate provided for Nagoya Yokohama Kobe

and Osaka FurtherAMFcontends thatAPL failed to give discount for

the commodities moved in 15 House to House containers and refers

to tariff rule 2114 page 120 And it was in its argument that AMF

inserted information about APL having rejected the claim for refund

as time barred and AMF s argument that the tariffrule is self serving

and would defeat the two year statute oflimitation insection 22 ofthe

Shipping Act 1916

APL specifically denies that an overcharge in the amount of

7 525 40 or any other amount was made with respect to the ship

ments In the section ofits answer entitled Affirmative Defense APL

states that Rule Ie ofthe tariff which APL alleges to be applicable to

the shipments provides in effectthat special rates applyonly to the

port for which the special rate is named and that the rates which

AMF claims to be applicable to the shipments are special rates

which are notnamed for the destination ofshipments Naha Okinawa

and that waiver ofthe Cargo Administration Charge of 3 00 per ton

as provided in Rule 21 B 14 ofthe tariffis not permitted because the

waiver waspermitted only to Japan ports and at the time Okinawa

the destination of the shipment was in control of the United States

and was not a Japan port

AMF in its December 3 1974 letter contending that Rule Ie ofthe

tariff is discriminatory also states that it would be unfair that the

carrier charges 118 additional freight on item 1625 just for moving

the cargo from aJapanese base port to Okinawa AMF would also have

a

comparison of Rule 1 and rates in question applicable at the time

the shipment moved with Pacific Westbound Conference in support

of its contention that port differential rate of 6 50 for Okinawa be

added in special rates

DISCUSSION

AMF granted the opportunity to present facts and arguments re

sorted to comparing Rule 1 ofthe tariff and rates in question applica

ble at the time the shipment moved with Pacific Westbound Confer

encetariff but notindicating thereby thatAPL violated any provision

18 FMC
252 FEDERAL MARITIME COMMISSION

ofthe applicabletarifforofthe Shipping Act 1916 Further AMF cit

no authority permitting or requiring that any action be taken by th

Commission because ofthe comparison lacking any proof ofviolati

of tariff or law by APL

As to the conflict between the two year statute of limitations p

vided in section 22 of the Shipping Act 1916 and a lesser period

time providedin a tariff it is rather obvious that the Act prevails b

since no violation ofthe tariffor law has been shown it is notnecessa

to pursue the matter

Despite AMF s claim that the defense by APL is unreasonable a

self serving and since there is no apparent need to deal herein w

time limitations in a tariff versus the time limitations of the Act or 

act after comparing the tariff with that of another conference and 

view ofAPL s reference to the specific applicable section ofthe ta

used herein there is no reason given that would preclude the use 

the specific tariff section and having those sections prevail over g

eral arguments as to fairness in the absence of proof of any violat

of tariff or law by the carrier

Upon consideration of the record herein the pleadings and 

arguments it is concluded that AMF has not proved that APL 

violated the provisions of the applicable tariff or ofthe Shipping A

1916 Therefore in addition to the findings and conclusions heretof

stated it is found and concluded that AMF is not entitled to repa

tion and the claim should be denied

Wherefore it is ordered that the claim ofAMF for reparation 

and hereby is denied

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

WASHINGTON D C

January 10 1975

18 F
FEDERAL MARITIME COMMISSION

No 7452

McDoNNELL DOUGLAS CORPORATION

253

v

THE HAPAG LLOYD NORTH ATLANTIC

SERVICE STEAMSHIP COMPANY

NOTICE OF ADOPTION OF INITIAL DECISION

Feb 19 1975

No exceptions having been filed to the initial decision in this pro

ceeding and the Commission having determined not to review same

notice is hereby given that the initial decision became the decision of

the Commission on February 19 1975 with the modification noted

hereafter

On page five ofthe initial decision the rate ofinterest to be added

in the event of untimely payment of reparation is reduced to six

percent the rate traditionally awarded by this agency

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

18 F M C
FEDERAL MARITIME COMMISSION

No 74 52

McDoNNELL DOUGLAS CORPORATION

v

THE HAPAG LLOYD NORTH ATLANTIC

SERVICE STEAMSHIP COMPANY

Reparation awarded

Melvin D McKinney Complainant s Manager Traffic and Tra

portation for the complainant

Francis J Barry Senior Vice President Traffic United States Na

gation Inc Agents ofthe Respondent for the Respondent

INITIAL DECISION OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE ON CLAIM FOR

REPARATION

This proceeding was conducted under theShortened Procedure 

provided in Rule l1 a of the Commission s Rules of Practice a

Procedure 46 CFR 502 181 The respondent Hapag Lloyd No

Atlantic Service Steamship Company Hapag Lloyd by and throu

its Agent United States Navigation Inc first sought to have t

matter adjudicated under Subpart S 46 CFR 502 301 Small Claim

However the claim herein exceeds the 1 000 jurisdictional amo

under Small Claims and the request was denied by notice serv

December 12 1974 Hapag Lloyd on December 20 1974 filed 

answer to the complaint and requested the use ofthe Shortened P

cedure The complainant onJanuary 6 1975 filed its consent there

Approval so to proceed was served January 7 1975 including 

procedural schedule granting the parties the right to submit within 

days of that date any other facts and arguments each may wish 

present In a notice served December 27 1974 on the request 

Hapag Lloyd to proceed under the shortened procedure each pa

IThis decision became the decision of the Commission 2 1975

254

18 FM
MCDONNELL DOUGLAS CORP v THE HAPAG LLOYD S S CO 255

also had been given 10 days to present any other facts and arguments

No one has presented under either ofthe above sections any other

facts and arguments so the facts and arguments are as hereinafter

indicated

FACTS

McDonnell Douglas Corporation McDonnell aMaryland Corpora

tion with its principal office in St Louis Missouri in its complaint

herein served December 3 1974 seeks reparationfrom Hapag Lloyd

in the amount of 2 303 83 its request for refund of which having

been rejected by the respondent Hapag Lloyd in a letter dated De

cember 9 1974 filed December 11 1974 confirmed that the declina

tion of the claims was based on North Atlantic Continental Freight

Conference No 29 FMC 4 Rule 8 which requires inter alia the

claims for freight charges to be presented within 6months after date

of shipment adding that similar claims presented within the six

month period had been honored Hapag Lloyd in its reply filed De

cember 20 1974 to the complaint also admits having received

McDonnell s claim for 2303 83 for substantiated overcharges of

freight and again Hapag Lloyd says the claims were submitted more

than six 6 months after shipment and Hapag Lloyd could not honor

such claims as to have done so would have been a violation of the

Tarilfs 29 FMC 4 Rule 8 Hapag Lloyd s reply also states that

McDonnell s statement of the facts are not disputed and the facts

include that Hapag Lloyd is a common carrier by water engaged in

transportation between New York New York and Bremerhaven West

Germany and is subject to the provisions of the Shipping Act 1916

as amended

By bill oflading No C0015 dated March 30 1973 issued by Cope

land Shipping Inc McDonnell shipped onApril 2 1973 on board the

vessel A ster Express from New York to Bremen West Germany 1

container HLCU4250386 containing 15 skids pallets platforms or

skids knocked down iron or steel 1 3116 cubic feet 9500 pounds

Rated from item 6989112001 of North Atlantic Continental Freight

Conference Tariff Number 29 FMC 4 at factor of32 8000 rate 62 25

charge 204180 Corrected description furnished was Shipping

Rates Iron or Steel Used Returned Rate should be from item

6922101755 ofTariff at factor of18 75 rate 42 50 charge 796 87 On

January 4 1974 McDonnell filed claim 74 7 claimants number with

Hapag Lloyd for refund of 1 244 93 overcharge

Bill oflading number C0003 dated May 25 1973 issued by Cope

land Shipping Inc McDonnell shipped on May 31 1973 on board

18 FMC
256 FEDERAL MARITIME COMMISSION

vessell Alster Express from New York to Bremer West Germany 

container HLCU 2107000 containing 6 units pallets platform 

skids knocked down iron or steel 935 8 cubic feet 4000 poun

Rated from item 6989112001 of Tariff at factor 234000 rate 62 

charge 1 456 65 Corrected description furnished was Shipp

Racks Iron or Steel Used Returned Rate should be from It

6922101755 of Tariff at factor of 12 053 rate 33 00 charge 397 

On January 4 1974 McDonnell filed claim 748claimants numb

with Hapag Lloyd for refund of 1 058 90 overcharge McDon

alleges that Copeland Shipping Inc has subjected McDonnell to 

payment of rates which were when exacted and still are unjust 

unreasonable in violation of Section 18 ofthe Shipping Act 191

Reparation of 2303 83 is sought

DISCUSSION

It is clear and also admitted that the requests for refunds 

2 303 83 first made of the respondent on January 4 1974 for o

charges on shipments of freight onApril 2 1973 and May 31 19

were made later than six 6 months after shipment Itis admitted 

the overcharges are substantiated but payment of the refund 

denied by the respondent who claims that to honor such claims wo

have been a violation ofthe North Atlantic Continental Freight C

ference Tariff 29 FMC 4 Rule 8 s six 6 months statute of lim

tions McDonnellfiled its complaint herein December 2 1974 ser

December 3 1974 well within the two 2 year statute oflimitati

provided in Section 22 of the Shipping Act 1916

Under the circumstances of the instant case the Commission s 

ing must prevail that a conference rule providing that claims 

adjustment offreight charges must be presented within six 6 mon

after shipment date cannot bar recovery in a complaint case brou

under Section 22 of the Act Minnesota Mining and Manufactu

Company v American Export lsbrandtsen Lines Inc 12 FMC 

1968 United States of America v American Export Isbrandt

Lines Inc 11 FMC 298 1968 Kraft Foods v Prudential G

Lines 16 FMC 405 1973

Upon consideration of the record herein the pleadings and 

arguments it is concluded that McDonnell is entitled to an awar

reparation in the amount of 2303 83 Therefore in addition to 

findings and conclusions heretofore stated it is found and conclud

1 Reparation should be awarded to McDonnell

2 Hapag Lloyd collected from McDonnell the sum of 2 303 

more than wasproperly due for the services rendered in the transp

18 F 
MCDONNELL DOUGLAS CORP v

THE HAPAG LLOYD S S CO 257

tation ofcomplainants

freight and in violation ofSection 18 b 3 of

the Shipping Act 1916

3 McDonnell is entitled to and is hereby awarded as fullreparation

the amount of 2303 83 with interest at the rate of seven 7

percent

per annum to be added if the reparation is not paid within 30 days

Wherefore it is ordered

A McDonnell be and hereby is awarded reparation in the amount

of 2 303 83 from Hapag Lloyd

B Hapag Lloyd is hereby directed to make such payment within

30 days after the Commission s final decision herein To the said

amount the respondent shall add interest at seven 7 percent per

annum for the time if any elapsing between the date hereinabove set

for payment and payment of the actual sum of 2 303 83

S WILLIAM BEASLEY HARRIS

Administrative LawJudge

WASHINGTON D C

January 20 1975

18 FM C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 314 1

WILLIAM K MAK

d b a GENERAL COMMODITIES COMPANY

v

THoR ECKERT Co INC GENERAL AGENT

FOR ORIENTAL OVERSEAS LINES

NOTICE OF DETERMINATION NOT TO REVIEW

Mar 6 1975

Notice is hereby given that the Commission onMarch 7 1975 det

mined not to review the decision of the Settlement Officer in t

proceeding served February 25 1975 By the Commission

SEAL 5 FRANCIS C HURNEY

Secretary

258

18 F M
FEDERAL MARITIME COMMISSION

WASHINGTON D C

INFORMAL DOCKET No 314 1

WILLIAM K MAK

d b a GENERAL COMMODITIES COMPANY

v

THOR ECKERT CO INC GENERAL AGENT

FOR ORIENTAL OVERSEAS LINES

lR1i 1fr 259

Reparation denied

DECISION OF JAMES S ONETO SETTLEMENT OFFICER 1

This informal complaint alleges that unwarranted storage charges

were assessed against the complainant because ofrespondent s delay

in sending an arrival notice Violations of sections 17 18 a and

18 b 2 ofthe Shipping Act 1916 are alleged and reparation in the

amount of 80 28 plus 6 interestfrom the date ofpayment is sought

Complainant is an importer offoodstuffs from the Far East to the

United States Respondent is a common carrierby water between Far

East and United States Atlantic ports Involved is a shipment ofthree

hundred cartons ofbamboo shoots loaded at Keelung Taiwan and

carried to Baltimore on the respondent s vessel the Oriental Warrior

Thebill oflading dated September 24 1971 is marked freight collect

at destination The shipment was scheduled to arrive at Baltimore in

November However due to a dock strike in Baltimore at that time

the cargo was diverted to Charleston South Carolina The Oriental

Warrior arrived there November 8 The respondent it is alleged

delayed giving notice of the ship s arrival to the complainant until

January 5 1972 a lapse of fifty seven days The January 5 notice

which is erroneously dated 1971 is the only one that appears in the

attachments to the complaint However the statement As pernotifi

I Both parties having consented to theinformal procedure of Rule 19 ofthe Commission sRules ofPractice and

Procedure 46 CFR 502 301 304 this decisionwill be final unless the Commission elects toreview it within 15 days

from the date of service thereof
260 FEDERAL MARITIME COMMISSION

cation originally dispatched the vessel discharged at Columbus Stre

Terminal appears in that notice Respondent countersthat arri

notices were sent seasonably by regular mail to all consignees a

offers as evidence thereof a printed copy of the arrival notice T

notice states the Oriental Warrior arrived at CharlestononNovem

8 1971 was discharged November 13 and is dated November 1

Procedurally section 22 of the Shipping Act 1916 46 U S C 8

requires that complaints must be filed within two years from the ti

the cause of action accrues in order to enter an award ofreparatio

The cause of action accrues only when the freight is paid3

Acause 

action accrues at the time of shipment or payment of the freig

whichever is later The complaint states the freight waspaidJanu

14 1972 and this is not disputed by the respondent Hence the co

plaint filed January 2 1974 was within limitations

Substantively the only precedent appears to be Joseph and S

James v SouthAtlantic Caribbean Line Inc Informal Docket 

99 1 14 F MC 300 1970 There the consignee complainants 

ceived both the bill oflading and an invoice The invoice inEngl

had no entry after arrival date Thebill oflading which also wa

English bore an arrival notice inSpanish stamped faintly on the b

tom cornerand barely legible This wasdetermined to be anunreas

able practice in violation of section 18 a of the Shipping Act in t

it failed to give adequate notice to consignee complainants of 

arrival of their shipment Adequacy of notice therefore depends 

reasonableness under the circumstances The circumstances 

roundingthe tender of the arrival notice in this instance are supp

iveof a finding ofits adequacy or reasonableness As noted before 

Oriental Warrior arrived at Charleston on November 8 1971 

discharged November 13 and the arrival notice was sent Novem

18 Complainant contends the January 5 1972 letteris the first no

it received Again as noted before that notice referred to notif

tion originally dispatched This is corroborative of the respond

contention that notice was mailed onNovember 18 1971 There

there is no showing ofunjustness or unreasonableness in any reg

tion orpractice ofthe respondent which would be violative ofsec

17 of the Shipping Act 1916

Section 18 a of the Shipping Act 1916 is inapplicable as it app

to interstate commerce

There is no showing of a change in charges in violation of sec

18 b 2 ofthe Shipping Act 1916 because the bill oflading expre

Reliance MoCar Co CLTc 1 US M C 794 797 1938

SA euttan Homes Inc v Coastwlatl Ltne et al 5 F M B 602 611 1959

Rohm Haa Co v Seatraln LltUlS Inc Docket No 73S1 Order 106 73

18 F
WILLIAM MAK v THOR ECKERT CO 261

provides for the assessment ofadditional costs where a deviation from

an anticipated route is required5

Accordingly the request for reparation is denied

S JAMES S ONETO

Settlement Officer

5C HLeavell Company vHellenic Lirles Limited 13 F M C 76 85 1969 See also Overseas Freight and

Tenninai Corp All Cargo Lite Extra Charges Due to Delay in Unloading Caused by Longshoremen Strike 8

F M C435 445 1965

18 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 7336

ABBOTT LABORATORIES

v

UNITED STATES LINES INC

Respondent s adherence to a tarriffrule which precludes its considerationof a claim 

adjustment of freight charges notpresented in writing to respondent within 

months of date of shipment does not foreclose complainant s remedy before 

Commission

Reparation denied on the basis of complainants failure to sustain its burden of p

to substantiate its claim

R lV Puder for complainant Abbott Laboratories

Russel Weil and James P Moore for respondent United States Lin

Inc

REPORT

Decided Mar 18 1975

By THE COMMISSION Helen Delich Bentley Chairman James 

Day Vice Chairman

This proceeding was initiated by complaint of Abbott Laborato

Abbott against United States Lines Inc USL alleging that on 

separate shipments of complainant s cargo on respondent s ves

from Baltimore Maryland to London England respondent had 

sessed improper freight rates in violation of section 18b3 of 

Shipping Act 1916 the Act As a result of these alleged errone

assessments complainant seeks reparation in a total sum of 402 

Administrative Law Judge James Francis Reilly issued his In

Decision in which he concluded that complainant had substantia

its claim and was accordingly entitled to reparation in the amo

sought The proceeding is now before us on ourown motion to rev

Judge Reilly s Initial Decision

262

18 F 
ABBOTT LABORATORIES v UNITED STATES LINES INC 263

FACTS

Complainant Abbott Laboratoriesis an Illinois corporation engaged

in the manufacture and distribution ofcertain chemicals drugs medi

cines pharmaceuticals and related products

Respondent USL is a common carrier by water operating a liner

service between North Atlantic ports of the United States and ports

in England Scotland Wales Northern Ireland and the Republic of

Ireland USL serves this trade as a member of the North Atlantic

United Kingdom Freight Conference Conference and is therefore

bound to observe the provisions of that conference tariff Tariff

No 47 FMC 2 in effect and on file with the Commission

As noted above Abbott filed its complaint alleging that USL had

assessed a rate on certain cargoes higher than that properly applicable

More specifically Abbott claimed that USL had erroneously applied

its Cargo N O S rate to six shipments of IntravenousSolution Sets l

all transported during the period June 23 1971 through September

18 1971 Abbott claimed that the proper rate to have been applied

was rather that applicable to Sets Parenteral Administration

Empty 2

and that by its failure to assess this latter rate USL had

overcharged Abbott by 402 74

Abbott initially filed these claims with USL through Abbott s agent

Ocean Freight Consultants Inc on November 1 1972 five claims

and November 3 1972 one claim These claims were all rejected by

USL on the basis ofits Tariff Rule 22 That rule provides in pertinent

part

18 F MC

All claims other than those based on alleged errors in weight or measurement for

adjustment of freight charges must be presented to the Carrier inwriting within six 6

months after date of shipment 3

In its argument before the Administrative Law Judge however

USL did not rely merely on the six month limitation on claims In its

memorandum USL raisedtwo further issues inits defense USL stated

that the weight and measure entries on the various bills of lading

involved here disclose widely varying weights and measures although

the cargoes are uniformly described as intravenous solution sets

While USL admits that some werecartons and others bundles even

similarly packaged items varied considerably in their characteristics

Cartons varied from an average weight of 17 5 pounds per carton

to 25 8pounds per carton Cubic foot measures wereequally diverse

The description appearing uniformly on all applicable bills of lading

2Item No 8060 2nd rev page 174 effective date 2 11 71 and 3rdrev page 174 effective date911 71 North

Atlantic United Kingdom Freight Conference Tariff No 47 FMC 2

3North Atlantic United Kingdom Freight ConferenceTariff No 47 FMC2 Rule 22 8 page 21
264 FEDERAL MARITIME COMMISSION

USL cites this lack ofcorrelation as to weights and measuresas a fa

which

makes one wonder whether they were in fact empty as now claimed wh

they included solution bottles whether they might be covered by another 

item etc

USL maintains that these inconsistencies must be resolved by c

plainant in order to sustain its contention that these items werein 

Sets Parenteral Administration Empty emphasis added In 

ther support of this position USL relies on its Tariff Rule 12 and 

this Commission s own rules USL maintains that since the descrip

ofthe goods on the bill oflading does not match any published c

modity rate its Rule 12 ofthe tariff must apply That rule states

All cargo notspecifically listed in the tariff and which is not dangerous w

assessed the General Cargo rate

Additionally the Commission s own General Order 13 46 

536 5 i is cited for its provision that

When commodity rates are established the description of the commodity mu

specillc Rates may not be applied to analogous articles

DISCUSSION AND CONCLUSION

In his initial decision Judge Reilly awarded reparation conclu

that Abbott had sustained its case by showing that what it descr

as Intravenous Solution Sets were in fact Empty Parenteral Adm

tration Sets This conclusion was based apparently upon the Ran

House dictionary definition of parenteral as

1 Taken into the body ina manner otherthanthrough the digestive canal 2 Not w

the intestine not intestinal

We are not completely persuaded by complainants proffered p

that the cargo was in fact empty parenteral administration sets 

therefore should have been rated as such While we may concede 

in general a parenteral administration set is the same device a

intravenous solution set we are not willing to concede that the se

question here have been proven to have been empty The variat

in weight measurement and other packing characteristics do in 

raise serious questions as to the actual contents ofthese shipme

These questions have notbeen satisfactorily resolved by complain

it wasincumbent upon complainant to have resolved such questi

It seemsapparent to us that any given quantities of an identical 

would be of uniform average weight Deviations of the sort 

shown on the various bills of lading raise serious doubts that t

18 F
ABBOTI LABORATORIES v UNITED STATES LINES INC 265

items shipped were all identicalthat is empty parenteral adminis

tration sets We have consistently demanded in cases such as this that

complainant meet a heavy burden of proof Complainant here has

failed to do so

We are constrained to emphasize that this case does not fallwithin

the scope ofour recent decisions inKraft Foods v Moore McCormack

Lines Docket No 7344 decision served March 24 1974 and its

progeny Cases such as Kraft involve sustaining a carrier s reliance on

a reasonable well grounded tariff rule which would preclude consid

eration of overcharge claims based on alleged errors in weights or

measurements filed after the cargo has left the custody ofthe carrier

This case does not involve such a claim This case involves a misde

scription ofgoods only or rather an inadequate description ofgoods

We do not here permit the carrier to rely on a six month time limit

imposed by its applicable tariff on such claims We here decide only

that complainant on the record has not adequately resolved our

doubts as to the nature of the cargo and therefore respondent was

justified in applying the general cargo rate to the inadequately de

scribed commodities Reparation denied

18 F M G

Commissioner George H Hearn concurring

Iconcur in the denial ofreparation on the basis that the complainant

failed to meet the burden of proof

There is need for further comment however because of the rela

tionship of this case to Kraft Foods v Moore McCormack Lines Inc

14 SRR 603 1974 Petition for Reconsideration denied December 13

1974 and OFC v Royal Netherlands 88 Co Docket No 72 39 Deci

sion Served January 30 1975

In this case the majority fails to adhere to the guidelines it set forth

in those cases Here USLbasedits defense inparton a tariffrule which

meets the standard of the majority Kraft decision and although the

present rule does not involve a trade name description it is indistin

guishable from the type ofrule considered acceptable by the majority

in Royal Netherlands 4

The separate opinions of the Chairman and Vice Chairman Day

and of Commissioner Barrett and Commissioner Morse through diff

erent reasoning both base their conclusion on the failure of com

plainant to meet the burden ofproving what was actually shipped

and the majority therein constituted is inconsistent with its views

in Kraft and Royal Netherlands The reasoning of the combined

Commissioners Barrett and Morse differed with Chairman Bentley and Commissioner Dayonly as totheclarity

of the rule but they all agreed as to the substantive effect of the rule
266 FEDERAL MARITIME COMMISSION

majority view in those cases is not carried to its logical conclusi

Given the cargo description in the bill of lading USL should 

bound to implement its rule requiring application of the Gene

Cargo rate The majority view in Kraft and Royal Netherlands d

not require the carrier to look further than the bill of lading for 

proper cargo description and the tariff rule here applies to 

cargo notspecifically listed in the tariff Itdoes notprovidean exc

tion for some cargo almost exactly listed inthe tariff as the majo

applies the rule

With this distinction now being createdby the majority among ta

rules the result ofthe line ofdecisions beginning with Kraft is con

sion as to when certain tariff rules will be allowed as a comp

defense The situation regarding overcharge claims will now certa

be clouded by the difficl1lties uncertainties and inconsistencies wh

Ifound to be the outgrowth of the majority Kraft decision S

Consequently I concur in the denial of reparation and find 

result consistent with my views in Kraft and Royal Netherlands

Commissioners Ashton C Barrett and Clarence Morse concurr

and dissenting

In his Initial Decision Administrative Law Judge Reilly awar

reparation concluding that Abbott had sustained its case by show

that what it described as Intravenous Solution Sets wasin fact S

ParenteralAdministration Empty This conclusion wasbased ap

ently upon the Random House dictionary definition of parente

as

1 Taken into the body in a manner other than through the digestive canal

2 Not within the intestine notintestinal

We view this matter differently

TariffRule 12 states that All cargo notspecifically listed inthe t

and which is not dangerous will be assessed the General Ca

rate Hence under the principles announced inKraft Foods v Mo

McCormack Lines Inc Docket No 7344 served March 26 1974 

SRR 603 rehearing denied December 13 1974 the General Ca

rate must be applied unless the bill of lading description of the c

modity shipped fits the commodity rate description 6

Here there is no tariff commodity description for Intraven

14 SRR 603 606

6Thb isnotaclaim based on a

controlling tariffrule such as that discussed in Kraft covering claims fora

freight overcharge based on alleged errors in weight or measurement Rather this is acaSe where ther

controlling tariffrule butone which Involves only thequestion whether the shipper s

description of the com

adequately conformed to the tariff commodity description

18 F 
ABBOTf LABORATORIES v UNITED STATES LINES INC 267

Solution Sets Therefore the issue is whether the bill of lading de

scription Intravenous Solution Sets meets the tariff commodity de

scription Sets Parenteral Administration Empty We conclude it

does not The bill oflading description is deficient not only in failing

to indicate that the shipment consisted of empty sets 7

but it was

deficient in failing to describe the shipment as Sets Parenteral Ad

ministration as well We need look no further

As indicated in Kraft and subsequent cases Tariff Rule 12 is the

legal rule applicable to this matter and may not be ignored nor may

it be held to be unlawful absent a

finding ofunlawfulness in a proper

proceeding 5 U S c 551 et seq The rule is not inherently or pat

ently unlawful8 The rule constitutes a reasonable and lawful attempt

on the part of common carriers to assure that shippers declare their

shipments with such degree ofparticularity as necessary to enable a

rating clerk to properly rate the shipments according to tariff com

modity description and without need to resort to specialists technical

dictionaries or the like The shipperis the expert in terminology with

regard to this product and is charged with knowledge of the tariff

rates rules and regulations Itshould be a simple task for the shipper

or its ocean freight forwarder knowing the tariff commodity descrip

tions and the true nature of the commodity shipped to align its de

scription ofthe commodity to the tariff commodity description We do

not require thatonly the verbatim tariffcommodity description with

out any deviation or omission is acceptable to avoid application ofthe

General Cargo rate under Tariff Rule 12 We do require however

that withina zone ofreasonableness the commodity description given

by the shipper be sufficiently precise and synonymous with the tariff

commodity description as to clearly and unqualifiedly disclose to the

rating clerk that the shipper given description can only be read to

mean a commodity item as defined in the tariff without necessity of

resorting to specialists technical dictionaries or the like Our views

are fortified by our own General Order 13 46 CFR 536 5 i which

provides

i When commodity rates are established the description of the commodity must be

specific Rates may not be applied to analogous articles

We conclude therefore that the shipper failed to describe the

shipment in the particularity required by the tariff and the carrier

Even if we accepted complainants contentions which we do not the variations in weight measurement and

other packing characteristics raise serious doubts that these items shipped were all identical empty parenteral

administration sets

See Municipal Light Board of Reading Wakefield Mass v

Federal Power Commission 450F 2d 1341 D C

Cir 1971 See also our concurring and dissenting opinion in Economics Laboratory Inc vPrudential GraceLines

Informal Docket No 301 F served March 20 1975

18 FM C
268 FEDERAL MARITIME COMMISSION

was obligated to assess the General Cargo rate under Tariff Rule 1

Because of our resolution of this matter we find it unnecessary 

discuss the issue raised by Answer whether in a freight collect b

oflading the properparties complainant have been named See Sou

ern Pac Co v Darnell Taenzer Co 245 U S 531 1918Colga

Palmolive Co v Grace Line Inc FMC Informal Docket No 127 

11 8RR 982 1970

SEAL 8 FRANCIS C HURNEY

Secretary

llJhis case is bpt one example of inadequacy in the shipper sdocumentation Since a

large proportion of 

exports are handled by ocean freight forwarders who profato be perts in this Geld webelieve such insta

ofIn deQ llIClesmlghl be reduned or ellmi ted If frel htforwarde were tobe held re ponilblefm thepr 

preparation of documents to theend that the shipper receives the proper andlowest tariffrate inEqualftvPla

Inc et 01 FMCDocket No 71 94 November 29 1973 14 SIlB 17 228 we lated

We are persuaded that an inveftigatlon shouldbeJnstJtuted to detennlnetl1e feuJbUlty ofestabllsbJng age

standard of conduct for persons in the situation of Leadl a tandard heretofore 18cking

This th6CommfSlJon hat failed to do and werenew our requellt that such Investigation be initiated

IS FM
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 301 F

ECONOMICS LABORATORY INCORPORATED

v

18 F MC 269

PRUDENTIAL GRACE LINES

Reparation denied

M E Parker for Complainant

A R Maio for Respondent

ADOPTION OF INITIAL DECISION

Mar 18 1975

By THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman

This proceeding was initiated as a result of a

complaint 6led by Eco

nomics Laboratory Inc ELI alleging that Prudential Grace Line

Grace subjected it to the payment ofan overcharge with respect to

a shipment ofchemical products from New York New York to Santo

Domingo Dominican Republic for which ELI seeks reparation in the

amount of 227 59 plus interest While this proceeding was originally

assigned to a settlement officer pursuant to the Commission s informal

procedure Grace subsequently notified the Commission that it did

not consent to such procedure butrather elected to have this proceed

ing adjudicated under the formal procedure for small claims Adminis

trative LawJudge Norman D Kline issued his Initial Decision denying

reparation The proceeding is now before the Commission upon its

own motion to review
270 FEDERAL MARITIME COMMISSION

FACTS

Respondent Grace transported the cargo at issue from New Yo

New York to Santo Domingo on its vessel SANTA MARIANA und

bill oflading dated September 23 1971 and in accordance with t

terms of United States Atlantic and Gulf Santo Domingo Conferen

Freight Tariff FMC No 1 The shipment involved was described 

the bill of lading as 75 drums Industrial Chemical Products 

which Grace applied its tariff rate of 49 00 per 40 cubicfeet the ra

applicable to Chemicals N D S

1

Complainant alleges that the cargo actually shipped was a prod

known as Briteklenz allegedly not a trade name which is a ty

of detergent alkylate Therefore ELI contends that the rate wh

should have been applied was that applicable to Detergent 

kylate which is 38 00 per 2 000 pounds 2

As a result ofthis alleg

overcharge ELI seeks reparation in the amount of 227 59

In denying that an improper rate wascharged Respondent argu

that the rate applicable to the goods as described on the bill oflad

was that assessed Without providing any further description of 

goods shipped Grace also contends that itwould be an undue burd

uponthe carrier to force it to inquire oneach shipment whether or 

the billoflading description wereaccurate Gracemaintainsthatin a

event it had no reason to believe the shipper had not correctly 

scribed the goods involved Finally Grace insists that the action tak

wasfully consistentwith its conference tariffrulewhichprovides

Bills of lading describing articles by trade names are not acceptable for commo

rating Shippers are required to describe their merchandise by its common name 

conform to merchandise description appearing herein Bills of lading reflecting 

trade name will be automatically subject to the application of the rate specified he

for Cargo NOS as minimum

Notwithstanding the defenses provided by Grace Complainant 

sought to show the actual character ofthe product shipped by subm

ting documents describing itIn support ELI has submitted its con

lar declaration in which the product was described as Britekle

HC 20 and an advertisement describing HC 20 Briteklenz a

heavy duty alkaline cleaner compounded with sodium hydroxi

an alkaline stable defoamer and water conditioning agents ELI f

ther refers to chemical dictionary definitions of Alkylate 4and 

United States Atlantic and Gulf Santo Domingo ConferenceFreight Tariff FMCNo I 6threv page45 

rev page 36 Class No B

lId lith rev page 49 2nd rev page 36 Class No llw applicable at the time of shipment

lId page7 Item 3 m

Alkylate Ceneric term particularly in the oU Industry applied to the product of an alkylation process 

Alkylatlon Process HFalkylation process sulfuric acid Alkylate generally isblended in varying proportions 

other hydrocarbon mixtures also boiling in the gasoUne boiling ranges to produce military and civilian av

gasolines and motor fuels of commerce See also detergent alkylate
ECONOMICS LABORATORY INC v PRUDENTIAL GRACE LINES 271

tergent alkylate 5

alleging that these show the character of Britekl

enz as detergent alkylate to which there should have been assessed

the tariff rate applicable to detergent alkylate

THE INITIAL DECISION

In his Initial Decision Judge Kline denied reparation on the

grounds that Complainant failed to sustain its heavy burden ofproving

that

A commodity described on respondent s billoflading as Industrial Chemical Products

was in fact Detergent Alkylate which should have been rated as such instead of

Chemicals N O S

Characterizing the principal issue herein as

whether the Chemical product which comprised the shipment inquestion consisted

infact of DetergentAlkylate so as to qualify for the specific commodity rate published

in respondent s tariff under that designation

Judge Kline first discusses the documents offered by ELI to support its

claim Inso doing henotes that the manufacturer s advertising claims

describe this product as an alkaline cleaner while ELI attempted

to show this as a detergent alkylate While conceding that this product

may well be shown to be an alkaline cleaner Judge Kline finds that

alkaline bears no resemblance to alkylates citing Van Nos

trands Chemists Dictionary 6

As a result Judge Kline holds that if

Briteklenz were in fact a product of the alkylation process see

footnotes 4 and 5 the fact is nowhere shown in the supporting docu

ments ofELI and therefore concludes that even if it is assumed that

Briteklenz is in fact a detergent there is nothing to show that it is a

detergent alkylate ie a detergent made through an alkylation pro

cess

In denying ELIs claim for reparation Judge Kline further explains

that

Even if complainant had clearly proved its case thereareother factors which cast doubt

on the validity of the claim The rate which complainant was assessed 49 per 40 cubic

feet was published in respondent s tariff applicable to Chemicals viz N O S Non

Hazardous actual value notover 300 per freight ton United States Atlantic Gulf

Santo Domingo Conference FreightTariffF M C No I 6th rev page 45 2nd rev page

36 Class No 8 That item however contained a rule requiring the shipper to furnish

S

Detergent alkylate Ceneric term particularly inthe soap industry applied tothe reaction product of benzene

orits homologs with along chain olefin such as propylene trimer or tetramer toproduce an intermediate see for

example dodecylbenzene used in the manufacture of detergents Alsorefers to an alkylatemade from along chain

normal paraffin which is treated by chlorination topermitcombination with the benzene toproduce abiodegrada

ble or soft alkylate

6Van Nostrand sChemist sDictionary 1953 Ed defines alkalineas Exhibiting some or all of the properties of

an alkali It further defines alkali as

A term that was originally applied to the hydroxides and carbonates of sodium and potassium butsince has been

extended to include the hydroxides and carbonates of other alkali metals and ammonium

1 Q Af r
272 FEDERAL MARITIME COMMISSION

a specific description of the chemicals being shipped on the bill of lading failing wh

a Cargo N OS rate 15 W1M was supposed to be assessed For some reason resp

dent failed to apply its own rule It would appear therefore that complainant wh

now asking for a rate of 38 per 2 000 Ibs was actually assessed a rate of 49 pe

cubic feet but probably should have paid 15 W1M according to the tariff rule

DISCUSSION AND CONCLUSION

We have undertaken to review the Initial Decision in this p

ceeding in order to ascertain what impact if any our recent de

sion in Kraft Foods v Moore McCormack Lines Inc Docket 

7344 report issued March 26 1974 may have upon its outcom

We conclude that this is not a case which falls within the purpos

limited scope ofKraft Foods InKraft we determined that in ca

of disputed weights or measurements brought to the attention 

the carrier after the cargo had left his possession the carrier w

justified in refusing to honor areparation claim provided his eff

tive tariff contained a rule so stating As can be seen clearly 

instant proceeding does not fall within that narrow range As a 

sult we take this opportunity to restrict Kraft to those limits a

to make clear that the Kraft rule does not extend to cases s

as this presently before us

The decision of the Administrative LawJudge is hereby adopted 

our decision in this case

Commissioner George H Hearn concurring and dissenting

Iconcur in the denial ofreparation in this case but I dissent fr

the reasoning of Chairman Bentley and Commissioner Day

The reasons therefore are set forth in my separate opinion inKr

Foods v Moore McCormack Lines Inc 14 SRR 603 606 1974 a

OFC v Royal Netherlands SS Co Docket No 7239 report serv

January 30 1975 which I

incorporate herein by reference

Inthis case however Imust make some further comment as a res

of the apparent failure ofPrudential Grace to follow its tariff and 

response to the opinion of Commissioners Barrett and Morse

Iam somewhat ofa mind to agreewith Commissioners Barrett a

Morse in their recommendation to remand this proceeding Ia

however pursuaded otherwise by seveml factors

First they would remand the issue whether Tariff Item 

is lawful under the Shipping Act 1916This should be unnec

sary not only for Commissioners Barrett and Morse but also for Ch

manBentley and Vice Chairman Day The Barrett Morse opin

cites Proposed RuleTime Limit on Filing Overcharge Claims 

18 FM
ECONOMICS LABORATORY INC v PRUDENTIAL GRACE LINES 273

F M C298 1969 Ibelieve the majority decision 7

there goes further

than the Barrett Morse opinion admits That decision should support

their view not only as to weight measurement claims but also as to

cargo description claims

The majority view there taken with that in Kraft should lead the

majority to conclude in this proceeding thatTariffItem 105 b is valid

putting aside for the moment the use ofthe word may Otherwise

the majority is not being consistent

Second the Barrett Morse opinion relies on PPG Industries Inc

v Royal Netherlands 55 Co Informal Docket No 290 1 Order on

Remand May 16 1974 for a remand here on use of the word may

in Tariff Item 105 b In Docket No 290 1 Iconcurred in the remand

but did not accept the majority s reasoning Since then however the

Commission has issued its decision in Docket No 7239 the Royal

Netherlands case supra and it appears that there is no real dispute

among my fellow Commissioners as to the effect of the tariff rules

involved but only as to acceptable wording whether or not to accept

as minimum 10or to accept may

Consequently in view ofmy position as stated inKraft and Docket

No 7239 I see no point in further delaying the outcome of this

proceeding No matter which way this matter might be resolved on

remand reparation will be denied because Tariff Item 105 b is

proper here or because as minimum is or is not acceptable or

because claimant has not met its burden of proof

Furthermore in the Order of Remand in Docket No 290 1 the

majority said as to the use of the word may

we will not in the future permit reliance upon such discretionary rules as here

presented

Ibelieve it is best to deny reparation here on the present record and

wait for a better case to test the real but underlying issue ie

whetheran overcharge claim should be denied ipsofacto based upon

a trade name tariff rule acceptable to all my fellow Commissioners

The result in this case will not be altered by further evidence gained

onremand and thereis sufficient precedent established by the major

ity to apply their views to the tariff rules involved here u

11 dissented from thatdecision concurring only in the lawfulness of the 6 manth rule tothe extentit is not used

toprevent the shipper from availing itself of the2 yearperiod provided in section 22

12 F M C298 313 314 1969

9See Minutes of Commission Special Meeting May 15 1974

Ofhese words were at issue in Docket No 7239 and also appear in the tariff involved in this proceeding

liThe Barrett Morse opinion would remand also todetermine whether claimantsubmitted its claimtothecarrier

in accordance with Tariff Item 105 b This is also unnecessary because as have shown the majority should to he

consistent uphold that tariff item and 8

determination that it was not complied with is not requisite toa denial of

reparation

18 F MC
274 FEDERAL MARITIME COMMISSION

J

I

InKraft Imade the following comment in my dissenting opini

Further If the carrier wishes to collect an undercharge from the shipper for c

allegedly under measured the mlliority decision provides no answerto the questio

whether the shipper may plead the same defense as the carrier in overcharge ca

There apparently is now an answer No

I

agree that Prudential Grace erroneously charged the Chem

N O S rate rather than the higher Cargo N O S rate in the first 

stance

The majority would apparently say however that the carrier m

comply with section 18b 3 bycollecting undercharges but need 

comply with section 18b 3 to refund overcharges Tbus in this c

even if the cargo was in fact a Detergent Alkylate as alleged 

claimant overcharges could not be recovered because of the fai

of claimant to properly follow the tariff rules relative to prepara

of bills of lading or perhaps to submission of claims but the car

could collect undercharges although it failed to follow its tariff r

concerning application ofthe Cargo N O S rate This hardly seem

be an equal application ofthe law The cartier can recover despite 

own failure to adhere to its tariff but the shipper cannot reco

despiteits ability to prove that the carriercollected morethan the 

specified for the cargo proven to have been shipped If that was 

intention of Congress in enacting section 18b 3 then the often 

peated legislative regulatory and judicial affirmations of the fairn

permeating ourshipping laws are a sham Eitherboththe shipper 

carrier should be able to recover or neither and in my view b

should

In this case I would affirm the decision of the Administrative L

Judgebased uponmy dissent inKraft andCogal Netherlands Dae

No 7239 I conclude thQthe claim l1t has not met the burde

proving his case and in fact was undercharged Under the law p

to the Kmft case the carrier would therefore be bound to s

collection of the underchalges and concomitantly the shipper w

he able to meet the burden of proof required could be awar

reparation

I ease the arriershould pur ue collection ofundercharges 

should be held accountable in the event ora failure to doso

i

I

Commissioners Ashton C Barrett and Clarence Morse concurr

and dissenting

Inreachin his conclusions the Administrative LawJudge relied 

decisionaissued prior to our issuance ofKraft supra which dec

we incorPorate by reference

18 F 
ECONOMICS LABORATORY ING vPRUDENTIAL GRACE LINES 275

Because of our resolution of the proceeding infra we find it un

necessary to resolve either the factual issue in the trade name area

apparently relied onby Prudential Grace or the burden ofproof issue

relied on by the majority

United States Atlantic Gulf Santo Domingo Conference s Freight

Tariff F M C No 1 Item 105 b 10th revised page 13 effective Octo

ber 5 1970 provides in pertinent part

Adjustment of freight based onalleged errorinweight measurement ordescription

may be declined unless application is submitted in writing sufficiently in advance to

permit reweighing remeasuring or verification of description before the cargo leaves

the carrier s possession any expense incurred to be borne by the party responsible for

the error orby tbe applicant if no error is found

18 F MC

Neither the parties nor the Administrative Law Judge nor the

other Commissioners referred to Tariff Item 105 b We believe how

ever that the Commission must take official notice of duly filed

tariffs 2 Tariffs have the force of law and must be strictly adhered

to by carriers and shippers alike unless the Commission determines

in an appropriate proceeding that the tariffs violate the Shipping

Act

A tariff rule similar to Item 105 b was discussed and approved on

March 16 1974 in Kraft supra with reference to a claim alleging

errors in measurements And substantially identical rules were also

discussed in Proposed Rule TimeLimitonFiling Overcharge Claims

12 F M C 298 313314 1969 a rulemaking proceeding where we

said

The carriers efforts to protect themselves against such claims cannot on the basis

of the record in this proceeding be said to be unreasonable

We have not had here an appropriate proceeding to test the law

fulness of Tariff Item 105 b

4

Appropriate proceeding requires no

tice opportunity to be heard and evidence which supports a

finding of unlawfulness Administrative Procedure Act 5 UsC

551 et seq We would remand to the Administrative Law Judge

the specific issue whether Tariff Item 105 b which restricts adjust

ments of freight based on alleged error in description unless ap

I

It is our duty in all proceedings to develop afull and complete record sbmndtsen Co Inc oUnited States

98 F Supp 883 at892 1951 affd p curiam 342 US 950

I3Lowden v Slmonds Shields Lonsdale Grain Co 306 US 516 520 1939 Louisville Nashville Ry Co v

Maxwell 237US 94 97 1915 Chicago B oR Co vReady MixedConcrete 487 F 2d 1263 1268 8Cir 1973

Cincinnati NO TP Ry Co v Chesapeake o Ry Co 441 F 2d 483 488 4 Cir 1971 Silent Sioux Corp v

Chicago NW Ry Co 262 F2d 474 475 8 Cl 1959

14We disapprove ofthe useof the word may instead of the word shall in this tariffitem In PPG Industries

Inc vRoyal NetherlandsSteamship Co Informal DocketNo 290 1 under similar tarifflanguage on May 16 1974

wereferred the matter back to the Settlement Officerto determinewhether the carriers treated all claimants alike

under such an imprecise phrasing We wouLd do the same here
276 FEDERAL MARITIME COMMISSION

I

plication is submitted in writing in the manner and time specified

in Tariff Item 105 b is lawful under the Shipping Act 1916 We

would also remand to the Administrative Law Judge the issue

whether in fact applicant submitted a written claim within the

time frame specified in said tariff item Unless we find a tariff rule

unlawful we are obliged to require compliance with it Louisville

Nashville Ry Co v Maxwell supra Kraft Foods v Royal Neth

erlands Steamship Co supra

The tariff herein was med pursuant to an agreement approved

under section 15 of the Shipping Act 1916 15 A literal reading of

section 15 as it provided prior to 1961 would have required that an

agreement among members of a conference adopting tariff rates

rules and regulations receive section 15 approval Having early real

ized that approval of every tariff change would be administratively

unworkable the Commission interpreted section 15 not to include

routine tariff changes in the requirements ofthat section Ex Parte

4 Section 151nquiry 1 U S S B 121 125 1927 The Ex Parte 4

interpretation received court approval in Empire State Highway v

FMB 291 F 2d 336 339 CA DC 19 1 and Congressional approval

in 1961 when the Congress in amending section 15 specifically incor

porated an exemption 16

Nevertheless the basic principles still apply and unless patently

unlawful tariff rates rules and regulations filed under an approved

section 15 agreement may not be disapproved or rejected without a

hearing 46 UsC 814 and 5 U S C 551et seq

Whether a tariffrate rule or regulation is in Violation of any provi

sion of the Shipping Act 1916 is a question of fact which requires

proper notice an opportunity to be heard and evidence which sup

ports a finding of unlawfulness The Bentley IDay opinion appears to

bypass these requirements

We agree with the view of the Administrative Law Judge shared

in by the other Commissioners that the rate which complainant

was assessed 49 per 40 cubic feet was published in respondent s

tariff applicable to Chemicals viz N Os Non Hazardous Actual

value not over 300 per freight ton United States Atlantic

Gulf Santo Domingo Conference s Freight Tariff F M C No 1 6th

revised page 45 Class No 8 That item however contained a rule

requiring the shipper to furnish a specific description of the chemi

cals being shipped on the bill of lading failing which a Cargo

N O S Class 1 rate 75 W M Tariffpage 36 2nd rev effective

May 31 1971 must be assessed For some reason respondent failed

IIAgreement No 6080 approved December 14 1937 as amended

PL 81346 15 Stat 162 81th Cong lots October 3 1961

18 F MC
ECONOMICS LABORATORY INC v PRUDENTIALGRACE LINES 277

to apply its own rule Complainant was actually assessed a rate of

49 per 40 cubic feet and should have paid 75 W1M according to

the tariff rule Section 18b 3 Shipping Act 1916 mandates that

respondent must assess and collect the proper and full freight charge

SEAL S FRANCIS C HURNEY

Secretary

18 FMC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 301 F

1

ECONOMICS LABORATORY INC

v

PRUDENTIAL GRACE LINE

Complainant found not to have sustained its burden of proving with reasonable 

tainty and definiteness that a commodity described onrespondent s bill of lad

as Industrial Chemical Products was in fact DetergentAlkylate which sho

have been rated as such instead of Chemicals N O S

Reparation denied

M E Parker for complainant

John J Purcell for respondent

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE 2

Complainant Economics Laboratory Inc is a corporation engag

in the business of manufacturing and distributing chemicals a

chemical products Respondent Prudential Grace Line is a comm

carrier by water engaged in transportation from U S Atlantic a

Gulf ports to Santo Domingo Dominican Republic and as suc

subject to the provisions of the Shipping Act 1916 the Act

Complainant alleges that itpaid to respondent charges in excess 

those lawfully applicable for the transportation of a shipment 

scribed on respondent s bill of lading as Industrial Chemical P

ducts which shipment was carried on respondents vessel Sa

Mariana from New York N Y to Santo Domingo bill oflading da

September 23 1971 Complainant alleges that the shipment actu

1 As respondent has refused to consent to theinformal procedure thedocket numberhas been renumbered 3

provided by Rul 200

46 CFR 302 311

This decision is issued pursuant to Rule 20 h of the Commission s Rules of Practice and Procedure 46 

502 318 and is final unless within five days from the date of service of the decislon either party requests re

by the Commis ion asserting as grounds therefor that amaterial finding of fact oranecessary legal conclus

erroneousorthat prejudicial error has occurred or unless within US days from the date of service theComm

exercises its discretionary right toreview the decision

278

18 FM 
ECONOMICS LABORATORY INC v PRUDENTIAL GRACE LINES 279

consisted ofa product known as Briteklenz which is a type ofdeter

gent known as an alkylate and that respondent should have assessed

the rate published in its tariff applicable to Detergent Alkylate

Complainant seeks reparation in the amount of 227 59 plus 6percent

interest from date of payment

Respondent denies that the shipment in question was incorrectly

rated and contends that it applied the provisions ofits tariff properly

in accordance with the information furnished by the complainant at

the time ofthe shipment Respondent contends furthermore that no

carrier should have to inquire of a shipper as to the true nature of a

shipment but should be able to rely on the description furnished by

the shipper especially when as here the shipper attempts to rede

scribe the shipment almost two years after the shipment took place

The shipment in question consisted of 75 drums of a product de

scribed on the bill oflading as Industrial Chemical Products mea

suring 669 cubicfeet and weighing 31 725Ibs Respondent apparently

classified the shipment as Chemicals N O S and applied the rate of

49 per 40 cubic feet published in its tariff for such a classifica

Complainant contends that the correct description on the bill oflad

ing should have been Briteklenz Detergent Alkylate and that re

spondent should have assessed the rateof 38 per 2000 lbs applicable

to Detergent Alkylate as published in respondent s tariff 4

The re

sulting overcharge according to complainant amounts to 227 59

DISCUSSION AND CONCLUSIONS

The principal issue raised by the pleadings and supporting docu

mentation simply stated is whether the chemical product which com

prised the shipment in question consisted in fact of Detergent Alky

late so as to qualify for the specific commodity rate published in

respondent s tariff under that designation

Incases ofthis kindthe Commission has established the rule thatthe

determining factor is what the complainant can prove based upon all

the evidence as to what was actually shipped Informal Docket No

256 1 Union Carbide Inter America v Venezuelan Line Order on

Review ofInitial Decision November 12 1973 Western Publishing

Co Inc v Hapag LloydAG 13 SRR 16 1973 Where the shipment

has left the custody ofthe carrier however and the carrier is thereby

prevented from personally verifying the complainants contentions

the Commission has held that the complainant has a heavy burden of

3UnitedStates Atlantic GulfSanto Domingo Conference Freight Tariff F M C No I6threv page 45 2nd

rev page 36 Class No B

4Ibid lIthrev page 49 2nd rev page 36 Class No 11w

18 FMC
280 FEDERAL MARITIME COMMISSION

proof and must set forth sufficient facts to indicate with reasonab

certainty and denniteness the validity ofthe claim Western Publis

ing Co Inc v Hapag Lloyd A G cited above Johnson Johns

International v Venezuelan Lines 13 SRR 536 1973 United Stat

v Farrell Lines Inc 13 SRR 199 202 1973 Colgate Palmolive Pe

Co v United Fruit Co 11 SRR 979 981 1970 Consideration of t

evidence submitted by complainant demonstrates that complaina

has not met his heavy burden and has failed to establish with reaso

able certainty and definiteness the validity of his claim

Thematerial evidence which complainant has submitted in supp

of its contention that the subject shipment consisted of a Deterge

Alkylate basically consists ofthe relevant commercialinvoice a pro

uct description sheet published by the manufacturer and extra

from a chemical dictionary The invoice indicates that the shipme

consisted of Briteklenz HC 20 The manufacturer s descripti

sheet states that the product is a heavy duty alkaline cleaner us

for high temperature spray or recirculation cleaning and that 

removes various things such as black stains discolorations on h

temperature processing equipment and heavy cooked on 

The manufacturer also states among other things that the prod

Brite Klenz FormulaHC 20 is compounded with sodium hydroxi

an alkaline stable defoamer and water conditioning age

T

manufacturer states finally that this alkaline cleaner will penetra

and disperse heat hardened soils so they rinse olf free and c

The chemical dictionary definitions submitted by complainant re

to alkylate and to detergent alkylate Alkylate is defined 

follows

Generic term particularly in the oil industry applied to the product of an alkyla

process Alkylate generally is blended in varying proportions withother hydroca

mixtures also boiling in the gasoline boiling range to produce military and civ

aviation gasolines and motor fuelsof commerce

Detergent alkylate is defined as follows

Generic term particularly in the soap industry applied to the reaction produ

benzene or its homologs with a

long chain olenn such as propylene trimer ortetra

to produce an intermediate see for example dodecylbenzene used in the manu

ture of detergents Also refers to an alkylate made from a long chain normal par

which is treated by chlorination to permit combination with the benzene to pro

a biodegradable or soft alkylate

The basis ofthe subject claim is the contention that the produc

question is not only a detergent but a detergent alkylate for wh

respondent publishes a specific commodity rate Although as 

manufacturer s product sheet states Brite Klenz may well be a 

18 F
ECONOMICS LABORATORY INC v PRUDENTIAL GRACE LINES 281

tergent it is described not as an alkylate but as an alkaline deter

gent There is nothing to indicate from the evidence submitted that

the two terms are synonymous On the contrary the standard defini

tions for alkaline bears no resemblance to either ofthe above refer

ring to alkylates 5

If Brite Klenz is the product of an alkylation

process or is the reaction product ofbenzene or its homologs with

a

long chain olefin or is made from a long chain normal paraffin

which is treated by chlorination to permit combination with the

benzene in accordance with the various definitions quoted above

that fact is nowhere shown in the evidence submitted In short the

only evidence describing the product in any detail ie the manufac

turer s description sheet nowhere mentions alkylates or the alkyla

tion process stating merely that the product is compounded with

sodium hydroxide an alkaline stable defoamer and water condition

ing agents

The subject shipment has long since left the custody ofthe carrier

Under these circumstances as the Commission has stated complain

ant has a heavy burden ofproof and must set forth sufficient facts to

indicate with reasonable certainty and definiteness the validity ofthe

claim Even assuming that the subject shipment described only as

Industrial Chemical Products on the bill of lading was in fact a

detergent nothing in the record demonstrates with reasonable cer

tainty and definiteness that this particular detergent was manufac

turedin accordance with an alkylation process or insome other way

wasentitled to bedescribed as a detergent alkylate Considering the

Commission s insistence that complainants in cases such as these be

held to a high standard ofproof reparation on the basis ofthe present

record cannot be awarded 6

ULTIMATE CONCLUSIONS

Complainant has furnished evidence which does not establish with

reasonable certainty and definiteness that a shipment described on

liSee eg Van Nostrand sChemists Dictionary 1953 Ed which defines alkaline as follows

Exhibiting some or all of the properties of an alkali

Alkali is defined as

Aterm that was originally applied to the hydroxides and carbonates of sodium and potassiwn but since has been

extended to include the hydroxides and carbonates of the other alkali metals and ammonium

6Even ifcomplainant had clearly proved its case there are other factors which cast doubt on the validity ofthe

claim The rate which complainant was assessed 49 per40 cubic feet was published in respondent s

tariffappliea

hie to Chemicals viz NO S Non Hazardous Actual value not over 300 per freight ton United States Atlantic

Gulf Santo Domingo Conference Freight Tariff F M C No 6threv page 45 2nd rev page 36 Class No 8

That item however contained arule requiring the shipper to furnish a specific description of the chemicalsbeing

shipped on thebill of lading failing which a Cargo N Os rate 75 W M was supposed to be assessed For some

reason respondent failed toapply its own rule It would appear therefore that complainant who is nowasking for

a rate of 38 per2000 lbs was actually assessed arate of 49 per40 cubic feetbut probably shouldhave paid 75

W1M according to the tariff rule

18 FMC
282 FEDERAL MARITIME COMMISSION

respondent s bill of lading as Industrial Chemical Products wa

fact a particular type of detergent known as detergent alkyla

which would have been entitled to a lower rate thanwhat was actu

assessed There are indications furthermore that respondent mi

have failed to follow its own tariff rule regarding the furnishing 

specific descriptions and that complainant has probably enjoyed 

benefit of arate lower than the Cargo N O S rate prescribed in 

rule Accordingly the claim for reparationis denied and the compla

is dismissed

S NORMAN D KUNE

Administrative LawJudge

j

WASHINGTON D G

January 3 974

i

A

j

18 F M
FEDERAL MARITIME COMMISSION

WASHINGTON D C

INFORMAL DOCKET No 322 I

SCHEER ENTERPRISES CO INC

18 F M C

283

v

VENEZUELA LINE

NOTICE OF DETERMINATION NOT TO REVIEW

Mar 20 1975

Notice is hereby given that the Commission on March 20 1975

determined not to review the decision ofthe settlement officer inthis

proceeding served March 7 1975

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 322 1

SCHEER ENTERPRISES CO INC

v

VENEZUELA LINE

Reparation awarded

DECISION OF JUAN E PINE SETILEMENT OFFICER

Scheer Enterprises Co Inc Scheer claims 168 48 as repara

from Venezuela Line for an alleged freight overcharge on a shipm

carried from Houston Texas to La Guaira Venezuela via the 

CIUDAD DE MARACAIBO V 1 onBill of Lading No 23 dated Ma

26 1973

The parties do not disagree on the commodity description or c

rate assessed however Venezuela Line assessed non contract r

and Scheer filed a claim onOctober 12 1973 stating it wasa cont

shipper entitled to the lower contract rate The claim was de

because itwasnotsubmitted withinsix months ofthe date ofshipm

as required by Item II of the United States Atlantic and G

Venezuela and Netherlands Antilles Conference Freight Tariff F M

No 2

2

Both Venezuela Line s agent and Scheer confirm that the la

signed the dual rate contract involved on March 12 1973 The 

tract rate should have been assessed on the movement

Scheer paid 43145 for the movement of the subject shipm

based on the assessment of the non contract rate The shipment 

sisted of 50 cases of battery operated warning lights measuring 

cubic feet weighing 1 215 pounds and 9 cases of transformers m

IBoth parties having consented to the informal procedure of Rule 19 a ofthe Commission sRules of P

and Procedure 46 CPR 302 3010 this decision will be 8na1 unless theCommission elects to review it 

15 days from the date of service thereof

The Comrnislion has ruled that aclaim flied within two years from the date thecause of action arose 

consideredon its merits Colgate Palmolive Company v United Fruit Company Informal Docket No 115 1 

September 30 1970 The btll of lading here ia dated March 26 1973 and tbe claim was mad October 12 

284 18 F
SCHEER ENTERPRISES vVENEZUELA LINE 285

suring 18 cubic feet weighing 210 pounds Both commodities take a

Class 6 rate i e Battery Powered Lamps actual value not over 500

per freight ton and Electric Transformers The class rates apply per

ton of40 cubic feet or2 000 pounds whichever produces the greater

revenue As both commodities cube over 40 cubic feet per 2000

pounds the rates are assessed on a measurement basis

The following rate computations apply

50 casesof Battery Powered Lamps actual value notover 500 per freight ton measur

ing 135 cubic feet 3 375 measurement tons 67 50 227 81

9 cases of Electric Transformers measuring 18 cubic feet 45 measurement tons

67 50 30 38

Bunker surchargel53 cubic feet 3 825 measurement tons 125 4 78

Package charge 359 packages 03 177

Applicable rates and charges total 264 74 Scheer paid Venezuelan

Line 43145 Claimant was overcharged 166 71 and the claim is for

168 48 177 more than it apparently should be Itappears that in

its computations Scheer overlooked the 177 package charge re

ferred to above

Scheer is therefore awarded reparation in the amount of 166 71

with interest at the rate of 6percent per annum if not paid within 30

days of the date hereof

S JUAN E PINE

Settlement Officer

3Conference Tariff Item9 provides in addition tothe ratespublished herein aU shipments toVenezuelan

ports are subject to a charge of 03 per package orpiece

18 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 73 50

THE CAMPBELL SOUP COMPANY

v

THE UNITED STATES LINES INCORPORATED

NOTICE OF ADOPTION OF INITIAL DECISION

Mar 24 1975

This proceeding is before us on exceptions to the Initial Decisio

Administrative Law Judge Stanley M Levy in which he determi

that the Complainant Campbell Soup Company had not been 

jected to the payment of rates for transportation which were un

and unreasonable and therefore denied Complainant s claim for re

ration

Complainant excepts to this Initial Decision both generally 

specifically Respondent United States Lines excepts only to 

portion of the Initial Decision which deals with the New Jersey 

establishing highway weight limits Upon careful consideration of 

record in this proceeding we conclude that the Presiding Offic

findings and conclusions set forth in his Initial Decision are excep

hereinafter noted proper and well founded and we accordingly ad

them as our own However and without disturbing any of th

findings and conclusions there are certain matters raised onexcep

which we believe warrant some discussion Exceptions not spe

cally considered or discussed have nevertheless been reviewed 

found to either constitute reargument ofcontentionsalready prop

disposed of by Judge Levy or to be otherwise without merit

Complainant first excepts to the Administrative Law Judge s 

ance on shipment weight and measurement figures on the bill

lading to support the finding that for most of the shipments at is

the containers were loaded to 85 percent or nearly 85 percent 

their cubic whichis the minimum cubic for which the shipper ha

pay for measurement cargoes under Tariff Rule 28 11 Complain

286

18 F
CAMPBELL SOUP CO v THE U S LINES INC 287

alleges a discrepancy on the bills of lading between the number of

packages shipped in the various containers their weight and their

cubic displacement Further using an average cubic measurement

per package Complainant reconstructs the actual cubic occupied in

each container shipment at issue These latter figures Complainant

submits show that in only a few shipments in 20 foot containers and

in no shipments in 40 foot containers did its cargo occupy the 85

percent ofcubic for which it had to pay

We are not particularly impressed with this argument In the first

place it should be noted that the complaint in this proceeding was

filed some 18 months after the last shipment at issue was tendered to

the carrier It should also be noted that the reconstructed actual

cubic is based on an alleged average per case cubic not substantiated

other than by continued assertion While Complainants claim for

reparation is not based solely on bill oflading errors proving that the

shipments in question were not with respect to volume at least prop

erly described in the bills oflading is an important part ofComplain

ants claim Where a shipper s claim rests solely on alleged bill of

lading errors the Commission has held that such claims O f

necessity involve heavy burdens of proof on the part of the shipper

once the shipment has left the custody ofthe carrier 2 Whatever the

merits ofComplainants exceptions inthis respect however its claim

falls for other reasons

3

Inhis Initial Decision Judge Levy finds that Respondent offers both

20 and 40 foot containers for house to house movements and appears

to suggest that insofar as Tariff Rule 28 11 and the New Jersey law

are concerned the 20 foot container is more suitable to the carriage

ofComplainants cargo given its stowage characteristics In so doing

the Administrative Law Judge notes however that Complainant had

not introduced evidence that it was forced to take 40 foot containers

from Respondent when it requested 20 foot containers or that Re

spondent notified Complainant that 20 foot containers were unavail

able Complainant in his exceptions proposes to supply this missing

evidence by presenting a summary of the oral recollections of an

employee ofComplainant to the effect that Complainant had to take

what containers were available from Respondent regardless of size

We are not persuaded by this evidence and we have no reason not

IThe number of packages and theirweight vary on the bills of lading butthe respective cubic occupied is nearly

constant

Abbott Loborotodes v Prudential Grace Lines Docket No 73 23 Report served November 9 1973

3Likewise and because the complaint in this proceeding fails on other grounds we need not consider whether

the Commission s recent decision in Kraft Foods v Moore McCormack Lines Inc Docket No 7344 Report served

March 26 1974 reconsideration denied on December 13 1974 which relates toreparation cases involving misap

plication of rates generally is controlling here orotherwise dispositive of the issues raised

18 FM C
288 FEDERAL MARITIME COMMISSION

to believe that Complainant was only the victim ofhis own imprud

choice

In the course of his decision the Administrative Law Judge fo

that New Jersey law prohibited the movement ofa containerloa

with 45 000 pounds ofcargo overNew Jersey highways though he 

not find Respondent s Tariff Rule 28 11 unlawful Complainant i

exceptions argues that such a finding with respect to New Jersey 

ofnecessity leads to a conclusion that Tariff Rule 28 11 is unjust 

unreasonable because only by loading 45 000 pounds in a 40 foot 

tainer can a

shipper avoid having to pay for the 85 percent c

minimum in Tariff Rule 28 11 for measurement cargoes

This argument might be persuasive were it not for the fact t

notwithstanding the Administrative Law Judge s

finding to the 

trary the New Jersey law in question does not necessarily or dire

prohibit the moving of a container loaded with 45 000 pounds o

New Jersey highways Inthis regard we agree with the position ta

by Respondent in its sole exception

The New Jersey law speaks in terms ofgross weight 22 400 poun

which may be imposed on the highway by the wheels of anyone

ofa vehicle Further the law incorporates by referencecertain fed

laws on vehicle and axle weight limits Under these laws itwas perm

sible at the time this complaint was filed to have a tractor tra

combination ofgross weight of73 280 pounds 5

Thus if the combi

weight of the tractor and trailer excluding cargo was 28 280 pou

or less then 45 000 pounds or more of cargo could apparently 

legally carried on New Jersey highways

There is one final matter mentioned in the Initial Decision wh

we believe requires clarification This proceeding involves the dom

tic offshore trade of the United States and the matters raised 

argued by the parties and disposed ofin the Initial Decision all re

to provisions of section 18 a The Complainant in its complaint 

Memorandum of Fact alleges that Respondents practice complai

ofwas unjust and unreasonable in violation of section 817 and 

tion 817 46 use 817 respectively both of which refer to sec

18 a Shipping Act 1916 Correspondingly Respondent in his 

swering Memorandum of Fact states he did not violate section 18 

The Administrative LawJudge however made his findings ofa no

olation in terms of section 17 of the Shipping Act 1916 This 

understand was inadvertent and should be corrected to refer to 

tion 18 a oftheShipping Act 1916 Thus the Ultimate Conclusio

39 N J

Stat Ann 1384 1975

Feilral Aid Hlghway Amen hnents of 1974 Pub L 936U 88 Stat 21183 195 amended 23 USQU

increase overall gross weight limit to 80 000 lXlunds

18 F M 
CAMPBELL SOUP CO v THE U S LINES INC 289

in the Initial Decision should be amended to read R espondent

did not violate section 18 a of the Shipping Act 1916 and the claim

for reparations is denied

Therefore subject to the aforementioned modifications we adopt

the Initial Decision as our own and make it a part hereof and dismiss

the complaint Commissioners Ashton C Barrett and Clarence Morse

concurring

We concur in denying reparations Here respondent s tariff con

tained the following rule

SEAL S FRANCIS C HURNEY

Secretary

Claims for adjustment of freight charges if based on alleged errors in description

weight and or measurement will notbe considered unless presented to the carrier in

writing before the shipment leaves the custody of the carrier

Complainant failed to present written claim to the carrier before the

shipment left the custody ofthe carrier and such failure is dispositive

of the matter Kraft Foods supra Hence the majoritys comments

concerning heavy burden ofproof and reference to Abbott Laborato

ries supra are misleading and contrary to the principles established

in Kraft Foods supra

By the Commission

18 F M C
FEDERAL MARITIME COMMISSION

No 7350

THE CAMPBELL SOUP COMPANY

v

THE UNITED STATES LINES INCORPORATED

Re pondent charged and collected only those amounts properly due pursuant 

tariff

Respondent s tariff was just and reasonable and not otherwise unlawful

Respondent did notviolate section 17 of the Shipping Act 1916

Reparation denied

G C Snyder for complainant

Russel T Weil and James P Moore for respondent

INITIAL DECISION OF STANLEY M LEVY ADMINISTRAT

LAW JUDGE 1

By Complaint filed with the Federal Maritime Commission on 

gust 8 1973 Campbell Soup Company Campbell alleged that in 

course of shippingcanned foodstuffs and frozen food by United S

Lines Inc USL container service from East Coast ports to Ha

under the published terms conditions and rates of USL s East C

United States to Honolulu Freight Tariff No 1 FMC No 2

2

Cam

was subjected to the payment of rates for transportation which w

when exacted and still are unjust and unreasonable and in violatio

Section 17 oftheShipping Act 1916 Campbell in its complaint s

reparations in the amount of 44 632 61 3 which amount is allege

be the difference between what it considers to be ajust and reason

rate on the shipments identified in Appendices A and B to its C

plaint and the amount charged by Respondent USL in accord

with its published tariff rates rules and regulations

Pursuant to the request of complainant concurred in by res

IThis decision became the decision of the Commission 3 24175

Cancelled December HS 1973 superseded by USLFreight Tariff No 56 FMC No 56

3Apparently reduced to 42 343 00 in its memorandum of facts served December 28 1973

290 18 F
CAMPBELL SOUP CO v THE U S LINES INC 291

dent this proceeding is being determined in accordance with Rule 11

shortened procedure of the Commission s Rules of Practice and Pro

cedure Accordingly the complainant served amemorandum offacts

and arguments upon which it relies Rule llb respondent served an

answering memorandum Rule llc and complainant served a reply

memorandum Rule lId

The 81 shipments in question occurred in the period between July

28 1971 and February 7 1972 and would normally have been made

from the port ofSan Francisco to Hawaii however during the West

Coast maritime strike in late 1971 and early 1972 Campbell out of

necessity made the shipments from the East Coast Campbell resumed

West Coast routing after the strike

Shipments of canned goods were moved under the provisions of

Item 210 U S Lines Freight Tariff 1 FMC F No 2which specifies

a rate of 40 00 weight or measurement Shipments were also subject

to Rule 28 sub paragraph ll page 64P which specifies the minimum

weight or minimum cargo cube which must be loaded in each con

tainer

USL received a request from Campbell inJanuary 1972 and after

obtaining special permission from the Commission to waive the nor

mal 30 day notice period granted temporary reliefeffective February

9 1972 by publishing a rate on canned goods in Item 2063 of 4100

per shortton with a minimum of45 000 pounds for a 40 foot container

and a minimum of 41 000 pounds for a 20 foot container This rate

expired May 9 1972 Effective February 14 1972 U S Lines pub

lished a rate of 109 65 per short ton with a minimum of 41 000

pounds in Item 2064 applicable on frozen food This rate expired May

17 1972

Complainant does not challenge either

a the concept that an oceancarrier may charge the greater of the freight computed

on a weight and measurement basis or

b the concept that a carrier may require a

shipper who elects to stuff his own

container to either use or pay for a fixed percentage of the weight or space

In fact Campbell does not complain that any particular concept rule

rate or regulation is by itself unjust or unreasonable Inessence what

Campbell asks is that it be granted relief from the result which fol

lowed the application and interpretation ofUSL s tariffunder circum

stances ofconflict with the State ofNew Jersey transportation regula

tions

Ofthe 81 shipments in issue in this proceeding 40 were made in 20

foot containers and the remaining 41 in40 foot containers All but one

of the shipments was freighted on a measurement basis

18 FM C
292 FEDERAL MARITIME COMMISSION

Rule 28 11 ofUSL s East Coast to Honolulu Tariff No 1 FMC 

2 provided

Rule 28 General Application Rates Charges and Conditions

11 When a container is loaded by the Shipper or his authorized represent

freight charges shall becalculated at the applicable ratebased on the percentage o

capacity of the container as set forth below

In the case of container loaded with a single commodity rated on a measure

basis the minimum shall be calculated at 85 of the total inside cubic capacity o

container except where the weight capacity of the container has been utilized

In the case of container loaded with a single commodity rated on a weight basi

minimwn shall becalculated at 95 of thetotal weight capacity of the container e

where the cubic capacity of the container has been fully utilized

For the purpose of calculating Ocean Freight a twenty foot container shall h

cargo weight capacity of 41000 pounds and cargo cube capacity of 1093 cubic f

a

forty foot van shall have a cargo weight capacity of 45 000 pounds and cargo 

capacity of 2233 cubic feet a

refrigerated container shall have a cargo weight ca

of 41000 pounds and cargo cube eapacity of 1900 cubic feet

Out ofa total of40 shipments made in 20 foot containers Camp

exceeded the 85 cubic minimum in 18 cases stuffing them 

more than the required 929 cubicfeet ofcargo thereby paying fre

only for interior container space actually used In 19 additional 

ments the Bills of Lading and Campbell s Appendix A indicate 

Campbell met the 929 cubic foot minimum for 20 foot container

only three cases itwould appearthat Campbell did notmeet the c

minimum for 20 foot containers

Out of a total of 41 40 foot containers Campbell exceeded 

published cubic minimum with 4 containers it stuffed and tend

to USL each ofwhich were reefers In 25 additional shipments 

Bills of Lading and Campbell s Appendix A indicate that Cam

substantially used at least 85 of the interior cube of the 40 

containers and met the reqUired minimum In only seven shipm

did Campbell fall short of the 85 cubic minimum

Inone case B L 4063 Campbell loaded a 40 foot dry conta

with canned foodstuffs weighing 48 623 lbs and occupying 839 c

feet with the result that in accordance with the exception provide

Rule 28 11 Campbell was charged freight based on the actual we

ofthe cargo tendered 4

The fact that Campbell exceeded the cubic minimum in 18 o

40 20 containers it stuffed and tendered to USL indicates tha

stowage characteristics of its product did not physically preclud

from satisfying the minimum cubic load for a 20 foot house to ho

container

The 85 of cubic capacity rule applies except whenashipper fuUy utilizes the pubUshed weight ca

thecontainer in which eventthecargo israted atactual weight ormeasure whichever produces the greater

18 F
CAMPBELL SOUP CO v THE U S LINES INC 293

USL offers both 20 and 40 foot containers for house to house move

ment Campbell suggests only that the stowage characteristics of its

product are notcompatible with the cubic minimumspublished for 40

foot containers If indeed that be the case USL contends that the

suitability of 20 foot containers to carry for example 35 470 lbs of

canned foodstuffs with a cube of945 ft as per USL B L 4093 would

seem to avoid any claim ofunjust orunreasonable expense to a shipper

requesting the most suitable transportation equipment

Disputing USL s contention Campbell argues that during the west

coast strike Campbell could not request the most suitable transporta

tion equipment but wasforced to take whatever equipment wasavail

able from USL regardless of size in order to make any shipments at

all Inthis regard however Campbell has introduced no evidence that

itmade call onUSL for 20 foot containers and wasadvised byUSL that

it would have to take 40 foot containers because ofthe unavailability

of 20 foot containers

In the case of a forty foot container Campbell faced a measure

ment basis 1898 cubic feet for canned goods Under Rule 28 11

in order to avoid the full 1898 cubic ft minimum 45 000 pounds

had to be loaded in the trailer In New Jersey it is unlawful to

transport 45 000 pounds in a trailer over the public highways and

it was unlawful also to exceed 73 320 pounds on a 5 axle unit

Normal weight of a unit with driver and fuel was approximately

29 000 to 32 000 pounds This allowed about 41 000 to 44 000

pounds for product load In short to attain lawfully the minimum

weight of 45 000 pounds was impossible 5

This meant that Camp

bell was required to pay the cubic minimum of 1898 feet Other

shippers however with product weighing a few pounds greater

per case than Campbell s could take advantage of the rate on a

weight basis They would pay lower freight charges but still occupy

the same cube as Campbell s trailers

Campbell s claim for reparationis premised upon its contention that

although a weight or measurement tariff is not necessarily unjust or

unreasonable it is unjust and unreasonable when a particular commod

ity because of its specific density is precluded from fully utilizing

available space because ofNew Jersey highway weight limits

The Commission has recognized the validity of a weight measure

ment rule Rates applying to weight or measurement ofcargo which

llNevertheless one 40 foot container was freighted on a weightbasi B L 4063 Thisoccurred because

I The shipment met the published 45 000 lb weight capacity and

2 The 48 623Ibs occupied only 839 ft cube resulting in the freight based on actual weight being

greater than that based on actual cube

Three other container loads also exceeded the 45 000 lb minimum B L 4025 45 542 Ibs B L 4078

51 145 100 B L 4079 48106 lb

18 F M C
294 FEDERAL MARITIME COMMISSION

everproduces the greater revenue are customary in the ocean tra

of the United StatesOrleans Materials Equipment Co In

Matson Navigation Co 8 FMC 160 163 1964

In support ofits position Campbell attacks the containerminim

found in Rule 28 11 Is such a rule just and reasonable

USL contends that it operates full container vessels and what i

to sell is space and weight capacity in containers Ideally each 

tainer would have a cargo mix which would utilize its full capa

When a carrier loads and stuffs containers it has control ove

utilization per container and can come as close to the ideal o

utilization of cube andlor weight capacity as possible

In contrast when a shipper such as Campbell requests hous

house use ofthe container the carrier loses all control overmax

ing the actual utilization of the cube and weight capacities o

container Shipper stuffs and seals the container at his plantand d

ers it to the carrier ready for ocean transport to its B L destina

For the shipper the concern only is that this cargomove to des

tion at the lowest rate For the carrier the concern is that it ac

the highest utilization possible for all the space and weight it h

sell

A shipper has a choice He may tender his cargo for stuffin

the carrier in which case the carrier charges only for the a

weight or measure of the cargo tendered and the carrier ass

the burden of obtaining a proper per container mix of cargo 

ever when the shipper elects as did Campbell to stuff his 

container and have it move directly from his plant to a custo

the carrier assesses a minimum to insure that for the space 

weight represented by the container he achieve proper amou

revenue Rule 28 11 thus requires shipper to use or pay f

least 85 of the cubic or 95 of the weight capacity of a h

to house container whichever produces the greater revenu

the carrier

In support of its claim Campbell argues that the special relief 

the minimum cube requirements of Rule 28 11 published by 

after Campbell s

request is an admission that the prior applicat

Rule 28 11 to Campbell s shipments was unreasonable No such 

clusion can be drawn

In its reply USL points out that after receiving the request 

Campbell ULS reviewed the applicability of Rule 28 11 t

commodities to be shipped by Campbell with USLs all wate

vice to Hawaii and determined that the volume available co

with the fact that such commodities could only move by 

from the East Coast during the West Coast strike warranted s

18 
CAMPBELL SOUP CO v THE U S LINES INC 295

relief Prior to Campbell s

request USL was unaware of and had

no control over the stowage characteristics of the commodities

shipped by Campbell Campbell had not previously relied upon

USL s container service to Hawaii from East Coast and when the

strike ceased it reverted to West Coast movement The extraordi

nary relief granted upon application for the remainder of the

strike period has no bearing upon USL s obligation to collect

freight as per its previously published tariff rates rules and regula

tions 6

Contrary to Campbell s allegations the tariff modifications did

not establish new container capacities but left in effect the

45 000 lb minimum for a 40 foot container and the 41 000 lb mini

mum for a 20 foot container In this case carrier elected upon ship

per s

request to change to a weight only basis for shippers who

did in fact tender shipments weighing at least 41 000 lbs in

a 20 foot container or 45 000 lbs in a 40 foot container and

to raise that commodity rate from 40 00 to 4100 per short

ton

Campbell does not seek reparation for shipments made under this

temporary rate and poses no objection to the qualifying weight re

quirements for that rate Given Complainants favorable reference to

and acceptance ofthe temporary rate for 20 and 40 foot containers

loaded with 41 000 lbs or 45 000 lbs it should be observed that even

if this change were applied retroactively Campbell failed to meet

these weight minimums on 77 of the 81 containers for which it now

seeks reparations

When the strike terminated Campbell resumed its shipments via

the West Coast and USL s

temporary modification was no longer

necessary If Campbell is inclined to use USL s East Coast to

Hawaii service on a regular basis it is of course free to submit

a shipper s

request for such relief from tariff provisions as may

be justified by the volume of cargo it would tender the stowage

characteristics of such cargo and the competitive circumstances

presented

ULTIMATE CONCLUSIONS

For all the foregoing reasons it is determined that the Respon

dent charged and collected only those amounts properly due pur

suant to its tariff that said tariff was just and reasonable and not

otherwise unlawful that respondent did not violate section 17

6Section 18b 3 Shipping Act 1916 Section 2 Intercoastal Shipping Act 1933

18 FMC
296 FEDERAL MARITIME COMMISSION

of the Shipping Act 1916 and the claim fOT reparations is deni

Complaint dismissed

S STANLEY M LEVY

Administrative LawJudg

MAY 7 1974

Washington D C

1

18 F
18 FMG

297

FEDERAL MARITIME COMMISSION

WASHINGTON D C

SPECIAL DOCKET No 465

DIETERLE VICTORY INTL TRANSPORT CO INC

FOR THE ACCOUNT OF DRAPER DIVISION

ROCKWELL INTERNATIONAL CORPORATION

v

AMERICAN PRESIDENT LINES

NOTICE OF ADOPTION OF INITIAL DECISION

Mar 261975

Noticeis hereby given that upon review ofthe initialdecisionin this

proceeding the Commission has determined that the conclusions

therein are proper and well founded Accordingly the initialdecision

of the Administrative Law Judge is hereby adopted as the decision of

the Commission in this proceeding

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

1

SPECIAL DOCKET No 465

DIETERLE VICTORY INTL TRANSPORT CO INC

FOR THE ACCOUNT OF DRAPER DIVISION

ROCKWELL INTERNATIONAL CORPORATION

v

AMERICAN PRESIDENT LINES

Application for permission to refund a portion of the freight charges denied

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE 1

American President Lines APL has applied for permission to 

fund a portion of the freight charges on a shipment of textile mac

ery under a bill oflading dated July 3 1974 APL carried the carg

475 boxes of textile machinery from Port Elizabeth New Jersey 

Singapore The Atlantic and Gulf Singapore Malaya and Thai

Conference the Conference of which APL is amember adopt

special project rate effective January 9 1974 for another shippe

the sole shipper qualifled to receive such rate In midune comp

ant Draper Division Rockwell International Corporation for wh

account this application wasflIed received an order for machine

be shipped in connection with this project Upon the complain

inquiry the Conference informed it of the special project rate 

complainant onJune 28th requested in writing that the Confere

amend the project rate by adding the name of the complainant 

qualifled shipper Complainant failed to request prompt Confere

action by special meeting orby telephone vote Accordingly the c

plainantsrequest wastakenup at the Conference s next regular m

ing on July 11 1974 at which time the project rate was amen

deleting reference to a specmc shipper and reading instead w

shipped by Iorconsigned to OverseasTextile Company Such am

ment wasduly 6led and became effective onJuly 17 1974 Meanw

1

lThis decision became the decision of the Commission 3 26 75

298 18 F 
DIETERLE VIcrORY v AMERICAN PRESIDENT LINES 299

a letter ofcredit opened by the consignee in favor ofthe shipper on

June 26 1974 was to expire on July 15th and could not be extended

Complainant therefore was forced to utilize the only shipping oppor

tunity available prior to the expiration ofthe letter of credit Com

plainant is supplying machinery to this project on a continuing basis

and must be in a position to extend a uniform approved rate consis

tently to the consignee

The project rate in effect at the time of the shipment was the

Atlantic and GulfSingapore Malaya and Thailand Conference

Freight TariffNo 15 FMC 3 Revised First Page 195 M effective May

8 1974 98 50 W M

The application does not indicate the basis onwhich freight charges

were collected but in view of the disposition of the application no

inquiry need be made It is alleged that the charge under the project

rate would have been 202 359 09 Itis furtheralleged that the charge

under the applicable rate at the time ofshipment that is at 133 50

W1M was 263 415 72 Permission is sought to refund the difference

between the two charges that is 61 056 63

Section 18 b3 of the Shipping Act 46 USC 817 as amended by

Public Law 90 298 and as further implemented by Rule 6b Volun

tary payment of reparation Special docket applications Rules of

Practice and Procedure 46 CFR 502 92 is the applicable law Briefly

it provides that the Federal Maritime Commission may in its discre

tion and for good cause permit a common carrier by water in the

foreign commerce of the United States to refund a portion of the

freight charges collected from a shipper or waive the collection of a

portion ofthe charges from a shipper where thereis an errorina tariff

of a clerical or administrative nature and such refund will not result

in discrimination among shippers Furthermore prior to applying for

such authority the carrier must have filed a new tariff which sets forth

the rate onwhich such refund orwaiver would be based The applica

tion for refund or waiver must be filed with the Commission within

one hundred and eighty days from the date ofshipment Finally the

carrier must agree that if permission is granted an appropriate notice

will be published in its tariff or such other steps taken as may be

required to give notice of the rate on which such refund orwaiver

would be based

The legislative history of the amendment to section 18 ofthe Ship

ping Act Public Law 90 298 2specifies that carriers are authorized

House Report No 920 November 14 1967 fa accompany H B 9473J on Shipping Act 1916 Authorized

Refund a Certajll Freight Charges Stafeme ttof Purpose andNeed or theBill toAmendProvisions of theShipping

Act 1916 to Authorize the Federal Maritime Commission to Permit aCarrier to Refund aPortion of the Freight

Charges

18 F M C
300 FEDERALMARITIME COMMISSION

to make voluntary refunds and waive the collection of a portion 

their freight charges for good cause such as bona fide mistake T

nature of the mistake was particularly described

Section 18b appears to prohibit the Commission from authorizing relief wh

through bona fide mistake on the part of the carrier the shipper is charged more 

he understood the rate to be For example a carrier after advising a shipper tha

intends to ftle a reduced nlte and thereafter fails to ftle the reduced rate with 

Federal Maritime Commission must charge the shipper under the aforementio

circumstances the higher rates

The Senate Report 3

states the Purpose ofthe Bill

Voluntary refunds to shippers and waiver of the collectionofa portion of fre

charges are authorized where it appears that there is an error in a tariff of a cle

nature or where through inadvertence therehas been a failure to ftle a tariffrefle

an intended rate

This application fails to fitinto the scheme of the exemptive claus

section 18b 3 As observedbefore refund orwaiver ofthe collec

of a portion of the freight is permitted where there is an error 

tariffof a clerical or administrative nature or an errordue to inad

tence in failing to file a new tariff The inapplicability of the spe

project rate is not due to an errorin a tariff ofa clerical oradminis

tive nature or anerrordue to inadvertence infailingto file a new ta

Itis due to the failureofthe parties to act promptly to amend the t

to bring Draper under the coverage of the project rate

Since the exemptive clause is not applicable to the situation 

sented here then the general rule of Mueller v Peralta Shipp

Corp 8 F M C 361 1965 and Tilton Textile Corp v ThaiLines L

9F MC 145 1965 is dispositive ofthis application In the absenc

exemptive authority the Commission may not permit deviations f

the rates on file Accordingly waiversofcollections of undercha

may not be granted and authorizations of refunds are unnecess

The law f rbids the former and directs the latter See also Louis

N R R Co v Maxwell 4

The application to refunda portion o

freight charges is therefore denied

S JOHN E COGRAVE

Administrative Lawj1Jdg

WASHINGTON D C

November 5 1974

SenalllReport Na I078 AprilS 1968 rIoaocomponr Ha9473J nSIrWlngM1 19J Autlwrlutl 

of Certatn FreIglit Charge undor PUrpo8B ofthe Bill

237 U S 94 19IS

18 F
18 F M C

301

FEDERAL MARITIME COMMISSION

DOCKET No 7438

UPJOHN COMPANY

POLYMER CHEMICALS DIVISION

VS

SEA LAND SERVICE INC

ORDER ON REVIEW OF INITIAL DECISION

Mar 26 1975

This proceeding is before us for review on exceptions to the initial

decision ofAdministrative Law Judge William Beasley Harris In his

initial decision Judge Harris determined that complainants request

for reparation for an alleged overcharge of ocean freight should be

denied and further that respondent had in fact undercharged com

plainant and should proceed to collect amounts due

Upon consideration of the record in this proceeding we have deter

mined that the exceptions constitute reargument of contentions al

ready considered by the Administrative Law Judge and properly dis

posed ofby him We agree with the ultimate conclusions ofthe initial

decision attached hereto and hereby adopt them as ourown

Accordingly it is ordered that the complaint in this proceeding is

hereby dismissed

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

No 74 38

UPJOHN COMPANY

POLYMER CHEMICALS DIVISION

v

SEA LAND SERVICE INC

Reparation denied

Hill Betts Nash by Edwin Longcope and John P Love for 

complainant

Frank Hiljer r Commerce Manager ofrespondent for the resp

dent

INITIAL DECISION ON CLAIM FOR REPARATION OF

WILLIAM BEASLEY HARRIS ADMINISTRATIVE LAW JUDG

This proceeding wasconducted under the Shortened Procedur

provided for in Rule ll a of the Commission s Rules of Practice 

Procedure 46 CFR 502 181 After mesne telephone conversat

and letters as to a procedural schedule a Memorandum of Facts 

Law was filed October 24 1974 by the complainant to which 

respondent onNovember 19 1974 filed anAnswering Memorand

of Facts and Arguments to which the complainant on Decembe

1974 filed a Reply Memorandum These filings having been c

pleted ordinarily the recordwould have been closed for decision 

the Presiding Administrative Law Judge upon examining all of 

above filings discovered that neither the complainant nor the res

dent ever referred to the section of the applicable tariff or any b

for the respondent s original charge of 72 50 per 2240 lbs a tot

15 572 74 for transportation of the freight so that on Decembe

1974 a notice was served requiring submission by the parties w

ten 10 days ofadditional facts The respondent filed under the 

quest onDecember 20 1974 and the complainant whoonDecem

I lTbis decision became the decision of the Commission Mar 26 1975

302 18 F 
UPJOHN COMPANY v SEA LAND SERVICE INC 303

24 1974 by telephone advised the Presiding Administrative Law

Judge that complainants counsel had suffered a sprained ankle caus

ing delay in preparing the additional facts filed on December 26

1974 This closed the proceeding save for this initial decision

FACTS

The Upjohn Company Polymer Chemicals Division Upjohn a

Delaware corporation complainant herein whose principal business

is the manufacture ofchemicals between January 1 1973 and March

31 1973 shipped on board the respondent Sea Land Service Incs

Sea Land vessels S S Galloway and S S McLean three separate

shipments 2

of a chemical known as Diphenylmethane Diisocyanate

from Elizabethport New Jersey to Rotterdam Holland for which

Sea Land charged and collected from Upjohn the sum of 15 572 74

Upjohn contends that the sum charged and collected by Sea Land a

common carrier by water inforeign commerce is a greater compensa

tion for the transportation ofthe said chemical than those provided in

the North Atlantic Continental Freight Conference Tariff No 29

FMC 4 on file with this Commission ofwhich conference Sea Land

is amember and under which tariffit operated in violation of section

18 b 3 ofthe Shipping Act 1916 Upjohn seeks reparation from Sea

Land in the amount of 1 480 24 claiming that the charge for the

freight transportation should have been 60 00 per cubic foot made

under Item No 510 0001 225 Service 3 of Tariff No 29 FMC 4

entitled Chemicals N ES Not Elsewhere Specified up to includ

ing 1 500 per 2240 lbs or 14 092 50 rather than the 15 572 74

paid

Sea Land denies any overcharge asserting rather that due to its

clerks erroneously having selected the rate to apply and having over

looked completely that the shipments were moving under re

frigerated controlled temperature with 0 10 degrees F to be main

tained as specified on the bill oflading by the shipper there was an

undercharge Sea Land in asking dismissal of the complaint asserts

21 Bill of Lading No 959395 dated January 30 1973 260 steel drums of Diphenylmethane Diisocyanate

Aashpoint is 425 degrees 010 degrees to be maintained UnderRefrigeration Measurements 2 996 cubic feet

gross weight 153440 Ibs Thecharge of Sea Land for the 153 440 lbs at 72 50 per 2 240 Ibs was 4 966 25 Vessel

8 S Galloway

2 Bill of Lading No 971528 dated February 10 1973 350 steel drums Diphenylmethane Diisocyanate

8ashpoint is 425 degrees 010 degrees is to be maintained Measurements 3 745 cubic feet gross weight

191 800 lbs The charge of Sea Land for the 191800 Ibs at 72 50 per 2 240 Ibs was 6 207 81 Vessel

S S McLean

3 Bill of Lading No 980047 dated March 3 1973 248 steel drums Chemicals N E S Isonate 125M

Diphenylmethane Diisocyanate flashpoint 425 degrees F Temperature to be maintained at 0 to 10 Deg

F at all times Measurements 2 654 cubic feet gross weight 135 904 Ibs The charge of Sea Land for

the 135 904 Ibs at 72 50 per 2 240 Ibs was 4 398 68 Vessel S S McLean

18 FM C
304 FEDERAL MARITIME COMMISSION

that the erroneous application of rate on each of the involved 

ments has been corrected and balance due bills issued based on 

rate f 197 00 per ton of 240 lbs or 40 cubicfeet published in It

No 931 0001 109 of the said Tariff No 29 FMC 4

Issue

Where a claim is made against a carrier for reparation and 

carrier confesses that the rates and charges were made for the tra

portation ofthe freight but wereincorrect due to the carrier s cler

errors resulting not inan overcharge but an undercharge the issu

whether the clerical errors and action thereon by the carrier p

duced a situation amounting to an ambiguity in the applicable ta

on file with this Commission warranting the granting of the rep

tion requested

Holding

Itis held for the reasonshereinafter stated that the clerical er

involved herein do notrise to creation ofan ambiguity in a filed ta

thus reparation shouldbe denied The carrier must proceed forthw

to collect all amounts due by virtue ofundercharging for transpor

the freight in this case resorting ifnecessary to the appropriate le

forum And the carrier shall keep the Commission promptly and f

informed of the receipt or non receipt ofpayments due as well a

any and all actions taken to collect such amounts so that the Com

sion s and the carrier s on going responsibility for compliance with 

Shipping Act 1916 can be met and upheld

Disr ussion

The threshold issue in a tariffinterpretation problem is determin

whether an ambiguity in the tariff does in fact exist United Nat

Children sFund v Blue Sea Line 15 F M C 206 209 1972 In 

instant case it is not a question of ambiguity Itis as has been st

above a question of clerical errors by the carrier and whether s

errorsqualify as creating anambiguity in the applicablesections o

tariffinissue that ofthe North Atlantic Freight ConferenceTariff 

29 FMC 4 warranting reparation to the shipper for alleged o

charges by the carrier For reasons stated in the Shipping Act 1

section 18 b 3 no carrier shall charge ordemand or collect orrec

a greater or less ordifferent compensation than the rates and cha

which are specified in the tariffs on file with this Commission an

effect at the time nor rebate refund or remit in any manner orby 

18 F
UPJOHN COMPANY v SEA LAND SERVICE ING 305

device any portion of the rates or charges so specified To permit

clerical error to abrogate these strong commands of the law would

flout the law The carrier s compounded clerical errors in this case

stand corrected thus permitting application ofthe proper rates and

charges for transportation ofthe particular freight as called for by the

tariff The previous errors now corrected cannot be used to impute

an ambiguity to the filed tariff Under the circumstances ofthis case

it is held that as to the subject matter and shipper s instruction for

handling the freight no ambiguity in the tariff exists

Therefore Sea Land is required to charge what the tariff demands

And it would seem that in view ofthe admitted compounding errors

herein Sea Land should take a hard look at its management in the

concerned area However vexing may be the clerical errors such as are

exhibited in this instance there can be no equitable balancing to tilt

the filed tariff toward an estoppel from correction of the errors thus

creating an ambiguity evenif to compensate for such errors because

the Act does not permit such equitable balancing Having finally cor

rected the charges and applied the applicable section of the tariff

Sea Land is obligated to collect the proper amount Under the Act

there is no authority to order the shipper to pay to Sea Land the

amount due because ofthe carrier s undercharging nevertheless to

comply with the Act the carrier must make every effort to collect the

proper amounts and to keep the Commission fully informed as to

these efforts and collections

Sea Land admits to having applied an erroneous rate 72 50 per

ton of2240 pounds on the three shipments described as Diphenyl

menthane Diisocyanate Sea Land also gave the basic or source docu

ments upon which it determines the rate to be charged calculates the

freight charges prepares invoices for charges and other documents

for internal use and records they consist of

1 A dock receipt which accompanies delivery of the shipment to Sea Land sloading

terminal

2 The ocean bill of lading

3 Copy of the Shipper Export Declaration

Each of the documents is prepared by the shipper or his agent

The parties admit in their pleadings thatin the operative tariffthere

is no rate classification for Diphenylmethane Diisocyanate but there

is a classification entitled Chemicals NES up to f including 1 500 per

2240 lbs item No 510 0001225

Sea Land states Since there is no specific commodity provision in

Tariff No 29 FMC 4 the rate clerk erroneously selected the entry

reading Diphenyl Packed in Item No 512 1216 001 of Tariff No

1 18 F

C
306 FEDERAL MARITIME COMMISSION

29 FMC 4 for application of the rate The service 3rate in Item No

512 1216 001 was 72 50 per ton of 2240 pounds at the time th

involved shipments took place Sea Land also states that in addition t

the erroneous selection of a rate to apply its rate clerk overlooke

completely the fact that the shipments were moving under re

frigerated controlled temperature with 010 Degrees to be main

tained as specified on the bill of lading by the Shipper Sea Lan

contends therefore that the shipments were subject to Rule 13Q3 o

the tariff plus the rates and regulations applicable to shipments mov

ing under refrigerated controlled temperature According to Se

Land the erroneousapplication ofrate on each ofthe involved ship

ments has been corrected by Sea Land and balance due bills issue

based on the rate of 197 00 per ton of 2 240 lbs or 40 cubic fee

published in Item No 931 0001 109 of the tariff

Upjohn contended that Sea Land classified the shipments of D

phenylmethane Diisocyanate as Chemicals N E S Sea Land answere

that it did not and does not admit that the shipments were classifie

as Chemicals N E S under the entry in Item No 510 0001225 of th

applicable Tariff No 29 FMC 4 nor does it admit that the rate

shown for that entry are applicable to the shipments Sea Land ha

stated inits answer filed October 2 1974 that the correctly applicab

rate for the shipments was 197 00 per 2240 lbs or 40 cubic fee

whichever results in greater revenue in Item No 931 000 109 app

cable to General Cargo N ES Temperature Controlled up to inclu

ing 320 F for Service 3 and cites Rule 13Q3 of the tariff Upjoh

quarrels with any application of Rule 13Q3 of the tariff

Upjohn argued in its October 24 1974 Memorandum of Facts an

Law that itperceived no ambiguity in the tariff relying onthe Chem

cal N ES classification in making the shipments herein But Upjoh

urges that Sea Land had problems in interpreting its own tariff Se

Land contends that its implementation ofthe tariffand all of its prov

sions is correct and that there is no element of ambiguity standing 

the way

Upjohn in areply filed December 5 1974 argued that a shipper 

entitled to rely on the rate classification set forth in the rate sectio

of the tariff and is not to be required towent its way through the lon

and tortuous rules and regulations governing the handling ofcargo 

ascertain whether another and difFereJ1t rate classification may app

Itis interesting and possibly understandable that Upjohn does n

zero in at all or deal with its instructions on each bill oflading as 

the freight that temperature of 0 to 10 degrees F be maintaine

which instruction is specific and which was one errorcorrected by th

carrier nor is there any reference made to the Table of Contents 

18 FM 
WASHINGTON D C

January 9 1975

UPJOHN COMPANY v SEA LAND SERVICE INC 307

the tariffwhich shows Rule 10 Refrigeration orControlled Tempera

ture guarantees Inany event it is concluded that within the facts and

circumstances ofthis case the position ofUpjohn and its arguments

thereon cannot prevail

Findings and Conclusions

Upon consideration of the entire record in these proceedings the

pleadings the memoranda of facts and law the arguments and an

appraisal ofthe claims through consideration offacts and the applica

ble law the Presiding Administrative Law Judge finds and concludes

in addition to the findings and conclusions hereinbefore stated

1 There is no ambiguity in the tariffin question underthe facts and

circumstances herein

2 Upjohn is not entitled to an award ofreparation and its request

for reparation should be denied

Wherefore it is ordered subject to review by the Commission on

appeal orupon its own motion as provided in the Commission s Rules

of Practice and Procedure that

A Upjohn s claim for reparation be and hereby is denied

B Sea Land shall promptly and fully inform and advise the Com

mission ofthe receipt or non receipt ofpayments due to it by virtue

ofthe undercharge herein and ifnecessary shall pursue to collect the

same in the appropriate legal forum again keeping the Commission

promptly and fully advised so that Sea Land and the Commission can

meet the on going responsibility imposed by the Shipping Act 1916

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

18 F M C
i

FEDERAL MARITIME COMMISSION

DOCKET No 7154

PACIFIC WESTBOUND CONFERENCE ApPLICATION

TO ExTEND ITS EXCLUSIVE PATRONAGE DUAL RATE

CONTRACT SYSTEM TO INCLUDE ITS OCP TERRITORY

Application of PaciJlc Westbound Conference to amend its dual rate contract so a

include overland common point territory approved pursuant to section 14b of 

Shipping Act

Canadian ports are properly included within the Pacific Westbound Conference s 

ganic agreement There are nojurisdictional or policy reasons for notinclud

Canada in dual rate contracts

Section 5 of the Federal Trade Commission Act has no application to the Conferen

proposed amendment of its dual rate contract

Edward D Ransom for the Respondents Pacific Westbound C

ference and member lines

Jacob P Billig and Terrence D Jones for intervener Fesco Pac

Lines Inc

John P Meade for intervener Hoegh Ugland Auto Lines

George F Galland and William Karas for intervener Outbo

Marine Corp

Seymour H KUgler and David R Kay for intervener Americ

WestAfrican Freight Conference

Donald Brunner CharlesL Haslup III and Marilynn Goldsm

as Hearing Counsel

REPORT

Decided Mar 271975

By THE COMMISSION Helen Delich Bentley Chairman James 

Day Vice Chairman Ashton C Barrett and Clarence Mor

Commissioners

This proceeding was instituted by the Commission pursuant to 

OrderofInvestigation and Hearing to determine whether the appl

308

18 FM
PACIFIC WESTBOUND CONFERENCE 309

tion ofthe Pacific Westbound Conference PWC to amend its exclu

sive patronage dual rate contract to include the Conference s

Overland Common Point OCP territory No 57 DR 4 should be

approved disapproved or modified pursuant to section 14b of the

Shipping Act 1916

Prior to going forward with a hearing the then parties to this pro

ceeding agreed to file briefs regarding suggested issues of law Ad

ministrative LawJudgeJohn Marshall made rulings on the legal issues

The Commission in its Order onRemand stated that the issues raised

in its Order ofInvestigation could be resolved only on the basis of a

full evidentiary hearing The Commission also stated that the hearing

should encompass inter alia the issues of a inclusion of Canadian

ports within PWC s organic agreement and b the applicability of

section 5 of the Federal Trade Commission Act to the proposed

amendment ofthe Conference s dual rate system

Hearings have been held and Administrative Law Judge Charles E

Morgan issued an Initial Decision approving the application of Re

spondent Hearing Counsel and intervenor Outboard Marine Corp

OMC filed exceptions to the Initial Decision to which Respondent

Pacific Westbound Conference PWC replied While Fesco Pacific

Lines Inc Fesco Hoegh Ugland Auto Liners and the AmericanWest

African Freight Conference were granted leave to intervene and did

participate in the proceedings below they did notfileexceptions Oral

argument was granted and heard

BACKGROUND

The Pacific Westbound Conference came into being when its

Agreement No 57 wasapproved in 1923 The PWC carriers serve the

full range of Pacific Coast ports ofCanada Washington Oregon and

California and the full range ofports in the Far East The Conference

agreement also encompasses Siberia and China but these areas are

not presently served

The Far East Conference FEC operates out of the Atlantic and

Gulf Coasts ofthe United States to Far East ports There are21 mem

bers ofPWC and 17 members inFEeFourteen ofthe seventeen FEC

carriers are also members of PWe The FEC and PWC pursuant to

Commission approved Agreement No 8200 2 may confer and agree

Thenumberof parties has dwindled from time to time The original Order of Investigation listed as petitioners

Allis Chalmers International Division American Cotton Shippers Association the Port of New York Authority

Minnesota Mining and Manufacturing Company OrientOverseas Container Lines OOCL Caterpillar Tractor Co

and American Hoist Derrick Co All of these petitioners have withdrawn as parties to this proceeding

In addition certain intervenors withdrew as parties including the Maryland Port Authority the Port ofGalves

ton the Board of Commissioners of thePort of New Orleans the New Orleans Traffic and Transportation Bureau

and the New Orleans Board of Trade Ltd

18 FMC
310 FEDERAL MARITIME COMMISSION

1

on rates rules regulations and differentials affecting the PWC a

FEC local tariffs of rates By the terms of that agreement the PW

overland tariff is specifically excluded from its coverage and even 

to the covered areas each conference retains the right ofindepende

action

From its inception PWC has had both a local and overland tarif

rates the latter applying to cargo which originates at points east of

Rocky Mountains and which movesunder through export bills ofl

ing Overland tariff rates generally are lower than but never hig

than local tariff rates

PWC currently has exclusive patronage contracts with appro

mately 8000 shippers covering the local traffic area The currentPW

shipper contract is ofthe standard form approved by the Commiss

in TheDualRate Cases 8F M C 16 1964 The amendment propos

in this proceeding would eliminate language restricting the contr

to the local tariff and thereby extend the contract to include 

overland tariff No change whatever is made in the basic provisions 

the contract The proposeddual rate contract would apply to only 

PWC water rates not to the rail or motor carrier rates

Earlier in this proceeding PWC proposed to amend Article 2b 

its contract so as to make more clear the meaning of the natu

routing clause The Commission approved that amendment

The proposed PWC contract states that the noncontract rates 

higher than the contract rates by 15 percent of the contract rat

which makes the actual spread under the PWC contract to be ab

13 percent of the noncontract rates In other words ifapproved 

proposed PWC exclusive patronage contractwould make the pres

overland rates the contractrates and the new noncontract rates wo

be higher than the present overland rates by 15 percent of th

overland rates

The PWC chairman stated that he did not expect much movem

under the noncontract overland rates because his experience 

dicated that most shippers sign the exclusive patronage contract a

consequently would ship their cargo at the lower contract rates T

chairman further statedthat the reason PWC had not previously ma

its contractrate system applicable to its overland tariff was that u

recent years nonconference carriage wasofa sporadic nature cons

ing mainly oftramp or chartered vessels catering principally to b

cargoes

The fleets of the 21 regular members of the PWC are made up 

containerships semicontainer ships breakbulk ships and LASH sh

The number ofPWC vessels has been steadily increasing In additi

the PWC members have introduced new vessels to replace old vess

18 F 
PACIFIC WESTBOUND CONFERENCE 311

The new vessels include SL 7s introduced by Sea Land and LASH

vessels introduced by Pacific Far East Lines American Mail Lines and

American President Lines have converted to containers TheJapanese

carriers as a consortium have introduced new large fast container

vessels States Steamship Company which has laid up three of its

thirteen ships has contracted for modern roll on roll off vessels The

total sailings by PWC vessels from the major Pacific Coast ports served

by PWC were 1 624 in 1970 1 307 in 1971 and 1 519 in 1972 Due

to the modernization ofthe PWC Heet breakbulk sailings diminished

from 1 383 in 1970 to 970 in 1972 while containership sailings in

creased from 241 in 1970 to 549 in 1972

Nonconference competition in the Pacific westbound trade has in

creased greatly As of May 4 1972 the competition included twelve

regularly advertised nonconference carriers and sevenirregular carri

ers The principal nonconference competition in the trade includes

the Russian owned Fesco Pacific Lines Inc Orient Overseas Con

tainer Lines its affiliate Orient Overseas Lines OOL and two special

ized auto carriers Wallenius Line and Hoegh Ugland Auto Liners

Fesco is a regular liner carrier wholly owned by the government of

the USSR Between January 1971 and the middle of 1973 Fesco in

creased its Heet from seven breakbulk vessels to sixteen vessels by

adding seven containerships and two breakbulk vessels Those vessels

provide weekly service to Japan and Hong Kong

OOCL increased its service from three to seven containerships be

tween December 1969 and June 1973 and provides weekly service to

Japan Taiwan and Hong Kong

Wallenius Line is a Swedish Hag contract auto carrier which pro

vides three to four sailings per month from the Pacific Coast to Japan

and Korea

Hoegh Ugland Auto Liners is a Norwegian Hag joint service operat

ing highly specialized roll on roll offvessels designed for the carriage

of automobiles and other set up rolling stock Itentered the trade in

1970 with five vessels Ithas increased its service to eight vessels and

is about to add a ninth Those vessels each have a

carrying capacity of

between 3 000 and 4000 economy sized cars or about 2 000 fullsized

cars It offers about two sailings per month featuring quick turn

around

PWC made a

space survey ofthe periods ofJanuary through April

in both 1971 and 1972 That survey showed free space available for

cargoes on 13 ofthe 21 conference lines of599 192 measurement tons

in the 1971 period and 683 460 measurement tons in the 1972 period

lIWhen the instant application was filed Fesco had not yet entered the trade

18 FM C
312 FEDERAL MARITIME COMMISSION

In 1965 the 21 conference lines carried 14 475 revenue tons 

unboxed autos under the overland rates In 1972 that figure h

dropped to 193 5 revenue tons In comparison with the speciali

auto carriers the conference lines handle automobiles by push

theminto containers orcarrying themin the holds ofthe vessels Co

Guard safety orders prohibit the carriage offueled autos in contain

unless those containers have specialized air vents

While the PWC provides service for a full range ofcargoes inc

ing low rated items Fesco has not named rates on low rated c

modities The Fesco overland tariff contains only 25 items while 

PWC tariff lists 100 However Fesco and OOCL vigorously comp

with the Conference for traffic in the relatively high rated comm

ties

Overland cargo is generally high rated high valued containeri

cargo PWC s local cargo is generally low value Jow rated volu

bulk cargo

Fesco did not make any concerted effort to acquire overland ca

in 1971 because itwasnot until December of that year that Fesco 

up agents throughout the midwest and east to solicit such cargo 

ofFesco s overland cargo is containerized In the last quarter of 1

Fesco carried 13 191 revenue tons of containerized overland ca

which was 25 percent ofFesco s total containerized cargo For 1

Fesco anticipated a good year at least comparable to 1972

Fesco s rate policy according to a representative witness is to 

ance the needs ofits shippers against Fesco s costs while remain

competitive with the PWC and OOCL Of paramount concer

Fesco is the need to remain competitive with OOCL thus if OO

reduces the rate on a commodity Fesco does so also

One exhibit ofrecord in this proceeding compares the over

rates to Japan and Hong Kong effective August 13 1973 of P

Fesco and OOL on nine high rated commodities namely Agricult

Implements Air Conditioning Units Bowling Balls or Pins B

Fluid Cargo N O S Chemicals Non Hazardous Cigarettes F

Poultry Stock and Insecticides and indicates that nonconfere

rates are on the average 21 percent below the conference rate

For example onAgricultural Implements the PWC rates to Ja

and Hong Kong respectively are 88 25 W1M and 8186 W

Comparable rates of Fesco and OOL are 54 50 W1M and 5

W1M or 38 and 35 percent respectively below conference rates 

Air Conditioning Units PWC rates are 6243 and 70 38 Comp

ble OOL rates are 47 25 and 49 50 or 24 and 30 percent res

tively below conference rates

apwc rates include surcharges to Japan and Hong Kong

Hl
PACIFIC WESTBOUND CONFERENCE 313

In addition to its low rates Fesco entices cargo by paying 2 5 per

cent freight forwarder compensation The PWC lines pay 125 per

cent

The PWC chairman asserted that many ofthe conference lines are

experiencing financial difficulties Pacific Far East Lines is reported to

have lost 7 000 000 in the first halfof1973 American Mail Lines and

American President Lines have merged The Conference chairman

further stated that if the PWC dual rate contract is not extended to

the overland territory then the Conference members must meet the

nonconference competition head on In the view of the Conference

chairman that would result in a rate war which would ultimately

result in the demise or departure ofseveral ofthe member lines

The Commission s files disclose that a number of conferences

presently have on file contract noncontract rates applicable both to

local and overland tariffs including the Philippine North America

Conference Agreement 5600 successor to Associated Steamship

Lines Manila the Transpacific Freight Conference of Hong Kong

Agreement 14 and the Pacific Coast Australasian Tariff Bureau

Agreement 50

DISCUSSION

The Administrative Law Judge concluded that the application of

Respondent should be approved We agree with that conclusion

but not all ofthe methods used or all of the intermediate steps tra

versed to reach that conclusion The basis ofour decision is set forth

below

No exception was taken to nor was any argument made before the

Commission regarding the Initial Decision on the a Canadian ports

issue or the b question ofthe applicability ofsection 5 ofthe Federal

Trade Commission Act We adopt so much of the Initial Decision as

deals with those issues Those portions of the Initial Decision herein

which deal with the Canadian ports issue and the applicability of

section 5 ofthe Federal Trade Commission Act are attached hereto

as an Appendix and are incorporated herein by reference

Both OMC and Hearing Counsel except to the ultimate conclusion

of the Administrative Law Judge and to several specific conclusions

and findings reached in support thereof We shall treat the specific

exceptions first

OMC asserts that the Administrative Law Judge erred In finding

that the conference carriers have provided the best all around ser

vices for shippers in the tradeWe do not agree The specific finding

challenged by OMC can only be read so as to mean that the Confer

ence carriers combined provide a

greater variety in the types of ves
314 FEDERAL MARITIME COMMISSION

sel in the ports of call in the types of cargo carried and a grea

frequency in sailings than do the nonconference carriers The rec

amply supports such a conclusion Thepresident ofFesco testified t

its service is not superior to the combined service ofPWc The PW

made 1 624 sailings in 1970 1307 sailings in 1971 and 1 519 saili

in 1972 Two exhibits admitted into evidence in this proceeding sh

the nonconference services in the PWC trading area Those exhi

show that in 1972 and 1973 Fesco made some 66 and 101 sailin

respectively In those same years OOL and OOCL combined m

some 65 sailings each year Fesco serves only Japan and Hong Ko

and OOL and OOCL serve only Japan Hong Kong Korea and 

wan PWC on the otherhand serves Japan Hong Kong Korea 

wan Viet Nam Cambodia the Philippines and Thailand The P

overland tarifflisted 100 items while the Fesco overland tariffnam

only 25

OMC also asserts that the Administrative Law Judge erred

In finding that overtonnaging in the PWC trade supports approval of the con

without inquiry into the cause of overtonnaging orinto the effectof his decision on 

continuance of overtonnaging

Likewise Hearing Counsel assert in their exceptions that There i

probative evidence that the trade is overtonnaged

These exceptions arise as a result of Judge Morgan s sepa

findings that The trade is grossly overtonnaged and PWC lines 

hurting seriously and

The PWC trade is greatly overtonnaged This view has been publicly stated by 

officials ofthe United States and ofthe apanese Ministry of Transport Not only ar

nonconference carriers increasing their capacity but so are the Conference car

Conversion from old fashioned break bulk type of ships to modern containership

parently has caused overtonnaging to a considerable e tent as well as the entran

Fesco and the expansion of the fleets of nonconference carriers

Hearing Counsel make much of the Administrative Law Jud

reference to comments on overtonnaging made by officials of 

United States and Japan That reference however is not necessar

the decision in this case and it does not appear that the Administra

Law Judge relied heavily upon these officials views In any ev

there is ample evidence in the record to show that at the time 

record was closed the trade wasin fact overtonnaged In this reg

we also reject Hearing Counsel s contention that PWC s survey wh

revealed 599 192 measurement tons offree space in the first thir

1971 and 683 460 measurement tons in the same period in 1972 

13 of the 21 conference lines does not establish that the trad

overtonnaged

18 F
PACIFIC WESTBOUND CONFERENCE 315

In supportoftheir assertion that the survey results must be ignored

Hearing Counsel argue that the free space figures arrived at therein

are not related to the total capacity and are not identified as to con

tainer capacity as compared to breakbulk orbulk capacity This latter

criticism not only ignores the evidence of record in this proceeding

but is irrelevant and immaterial in any event to the finding chal

lenged ie that the trade is overtonnaged

Exhibit 6 of record sets forth by line the pertinent free space

findings ofthe PWC survey Addressing himself to this exhibit Confer

encechairmanDay identified the eightlines listed thereinwhich were

fully containerized Using this information and a simple arithmetical

process one can easily arrive at the container free space in measure

ment tons which in 1971 and 1972 was 521 816 and 494 479 respec

tively

While there is evidence in the record as to the breakdown offree

space as between container and other forms ofcapacity the nonexist

enceofsuch evidence wouldnot be critical to the matter at issue here

Those factors would contribute to a finding ofthe degree ofoverton

naging but overtonnaging existsif there is a substantial amount offree

space on the vessel In this case there is evidence in the record which

establishes that on 62 percent ofthe vessels for one third ofeach year

there was a total ofapproximately 600 000 measurement tons offree

space Thus by any fair reading of that evidence one must conclude

that the trade is to some degree overtonnaged

OMC does not appear to quarrel with the finding that the trade

is overtonnaged but asserts that Judge Morgan did not inquire into

the cause of the overtonnaging or into the effect the extension of

the dual rate contract would have on remedying the overtonnaged

condition of the trade This simply is not so To the contrary the

Administrative Law Judge did inquire into the cause of the over

tonnaging and found that it was attributable to the increase in the

capacity of the Conference and nonconference carriers including

conversion from breakbulk to containerships More importantly

however OMC has missed the point of a finding of overtonnaging

The primary purpose for an inquiry into free space on conference

vessels is to determine whether the Conference vessels will have

the capacity to carry the cargo it intends to commit to itself by the

implementation of an exclusive patronage contract In that sense

the overtonnaged condition of the Pacific westbound trade does

support approval of an exclusive patronage contract as it tends to

establish the commercial reasonableness of the exclusive patronage

practice

Hearing Counsel take issue with the Presiding Officer s finding

18 FM C
316 FEDERAL MARITIME COMMISSION

that PWC lines are in financial difficulty They argue that the 

cord here will not support such a finding The record does not 

tablish that all PWC member lines are in financial difficulty H

ever the Initial Decision under any fair reading does not f

that all PWC lines are in financial difficulty The Initial Decis

finds that some of the lines are in financial difficulty part

larly the American Hag lines 4 The Conference chairman so 

tified and it would not be improper for the Administrative L

Judge to give credence to that testimony as the Conference ch

man is in a position to know the relative strength and weaknes

of the PWC member lines Thus there is adequate record sup

for a finding that some of the member lines of the Pacific W

bound Conference were at the time the record was closed 

some financial difficulty That being so we find Hearing Coun

argument to the contrary to be without merit 4

OMC asserts that the Administrative Law Judge erred

In failing to flnd that the proposed PWC overland noncontract rates will be unj

discriminatory between exporters from the United States and theirforeign compet

This exception is not well taken There is no evidence in this 

cord to show a disparity between the rate on a commodity 

bound from the United States to a foreign destination and the 

on the same commodity from another foreign country to that sa

foreign destination There is therefore no basis for a finding 

the proposed PWC overland noncontract rates will be unjustly 

criminatory between exporters from the United States and t

foreign competitors

Hearing Counsel take issue with the Presiding Officer s finding 

rate wars would be the alternative to approval of this applicatio

similar exception is proffered by OMC In a related area OMC c

tends that the Administrative LawJudge erred Incharacterizing 

competition conducted with modern ships at substantial investm

as very predatory Judge Morgan s specific findings to wh

these exceptions are directed are as follows

Ifthe dual ratecontractisnotextended to overland rates the PWClines must take 

alternative action They could leave the trade or a rate war might result but a rate 

must be avoided if at all possible 1 0 p15

Some of these PWC lines must leave the trade engage inrate wars harmful to 

shipping public orthis application to extend PWC s dual rate to overland territory 

be approved 1 0 p16

4Hearing Counsel are in error whenthey assert that the Presiding Officer found that Seatrain Internationa

Is an Americanflag line The only reference to Seatrain in theInJtial Decision isto theeffect that Seatrainis

difficulties

18 F 
PACIFIC WESTBOUND CONFERENCE 317

We find merit in these challenges at least insofar as they attack the

findings that some ofthe PWC lines would be compelled to leave the

tradeor to engage in rate wars ifthe present application weredisap

proved and that the nonconference competition is very predatory

There is no evidence in this proceeding to show that the Fesco or

OOCL rates are below cost or that the PWC carriers are equally or

more efficient than Fesco orOOCL or that the rates wereset to drive

the Pacific Westbound Conference out ofthe market Therefore the

record is insufficient to support a finding ofpredatory competition

Likewise while the record supports the conclusion oftheAdministra

tive Law Judge that some PWC lines could leave the trade or a

rate war might result that is where the finding recognizes

possibilities rather than certainties it does not support a finding that

anyofthe PWC lines would have no other alternative but to leave the

trade or engage in rate wars However we do recognize that a rate

war or instability in service to the shipping public is probable if the

PWC application is disapproved

Another challenge raised by OMC is that the Administrative Law

Judge erred In finding that the PWC trade is a classic example

where dual rates are justified Whateverbe the merits ofthe finding

complained of and the exception thereto they are clearly irrelevant

to the disposition of the subject application It does not matter

whether or not the PWC trade is a classic example of a trade

wherein a dual rate contract is justified so long as conditions in the

trade warrant the approval of such a contract The determination as

to whether a dual rate contract should be permitted in a particular

trade is not one of degree Either the conditions in the trade justify

such a contract or they do not Once the determination is made that

a dual ratecontract is justified in a particular trade the extent to which

it is justified becomes a meaningless consideration Therefore while

the Presiding Officer s finding of classic example may be character

ized as overkill it falls far short ofreversible error

The Congress the courts and this Commission have all recognized

that dual rate contracts are permitted where the otherrequired con

siderations are met when they are needed to maintain a viable confer

ence The threat to the continued useful existence of a conference

which justifies a dual rate contract system is not to be limited to

fly by night operators but is to be determined by the effect upon

the conference of nonconference competition from whatever type of

competitor

OMC further asserts that Judge Morgan erred In resting his ap

proval of the dual rate contract extension on the deviation of non

conference rates from conference rates The exception is without

18 FM C
318 FEDERAL MARITIME COMMISSION

merit Our reading of the Initial Decision fails to disclose any relia

by the Administrative Law Judge on the deviation ofnon confere

rates from conference rates as a basis for his approval of the dual 

contract extension Such a deviation is mentioned in that portio

the Initial Decision wherein Judge Morgan treats the reasonablen

ofthe spread between the proposed contract and noncontract ra

The Administrative Law Judge mentions the rates of the noncon

ence competition in other parts of the Initial Decision but th

references go to the extent of the nonconference competition an

effect upon the conference trade

Contrary to the assertion of OMC the Administrative Law Ju

did not in his decision and the Commission does not here adva

support or approve the proposition that a conference may unrea

ably elevate its rates and thereby justify a dual rate contract on 

basis of the disparity between those rates and the rates ofthe non

ference competition In this regard there has been no evidence 

duced herein that shows that the Conference has systemati

increased its rates so as to create an unreasonable spread betwee

rates and those of its competition

Both OMC and Hearing Counsel have excepted to Judge Morg

ultimate finding and conclusion that the PWC application has b

Justified By Serious Transportation Circumstances and 

it should be approved Alternatively OMC and Hearing Cou

argue that the Administrative Law Judge erred by not requiring 

dual rate contract for the overland territory is to be approved 

said dual rate contract be separate and distinct from the dual 

contract applicable to the local area and by failing to consider 

effect upon shippers ofAgreement No 8200 2when implemente

conjunctionwith a dual rate contract applicable to the overland t

tory

We come now to a discussion of the law to be applied to the 

dence adduced in this proceeding and the conclusions to be ded

therefrom PWC presently has in fOrce an exclusive patronage 

tract By its terms that contract applies only to local cargo The a

cation before us would delete from that contract that language w

limits the scope of the contract to cargo originating in the local 

and thereby cause the contract to be applicable to cargo origina

anywhere in the United States or Canada

Section 14b of the Shipping Act 1916 as amended authorizes 

directs this Commission to permit the use of an exclusive patron

contract unless the Commission finds that the contract am

ment ormodification thereofwill be detrimental to the commerc

the United States or contrary to the public interest or unjustly 

18 F
PACIFIC WESTBOUND CONFERENCE 319

criminatory or unfair as between shippers exporters importers or

ports or between exporters from the United States and their foreign

competitors and providing that the contract conforms to certain

enumerated requirements including that the contract

7 provides for a spread between ordinary rates and rates charged contract shippers

which the Commission finds to be reasonable inall the circumstances but which spread

shall in no event be more than 15 per centum of the ordinary rates

In Investigation of Passenger Travel Agents 10 F M C 27 45

1966 we held that conference restraints which interfere with the

policies ofantitrust laws will be approved only if the conferences can

bring forth such facts as would demonstrate that the rule was required by a serious

transportation need necessary to secure important public benefits or infurtherance of

a valid regulatory purpose of the Shipping Act

The Supreme Court in FMG et al v Aktiebolaget Svenska Amerika

Linien et al 390 U S 238 1968 approved this standard for approval

ofAgreements under section 15 ofthe Act stating that such standard

involving as it did

an assessment of the necessity for this restraint interms of legitimate commercial

objectives simply gives understandahle content to the broad statutory concept of the

public interest 390 U S 340

The phrase public interest as used in section 14b ofthe Act has the

same meaning as does that phrase in section 15 of the Act Agreement

No 8660Latin America Pacific Coast Steamship Conference and

Proposed Contract RateSystem 12 F M C 149 153 1969 rehrg 14

F M C 172 185 1970 ajfd sub nom Latin America Pacific Coast

Steamship Conference v United States 465 F 2d 542 550 D C Cir

1972 cert den 409 U S 967 1972

Since the proposed extension ofthe Conference s dual rate contract

before us here runs counter to the principles ofthe anti trust laws it

is therefore contrary to the public interest as that phrase is used in

section 14b ofthe Act unless the restraint is necessary to achieve some

legitimate commercial objective Agreement No 8660 above 14

F MC 172 185 We therefore turn to determine whether the

modification proposed is necessary to secure some legitimate commer

cial objective orwhether some lesser included restraint would achieve

that objective or whether no lesser included restraint is necessary to

achieve that objective

In this case there has been evidence adduced which shows that the

volume of certain high value overland cargo carried by PWC has

decreased During the same period of that decrease the volume of

overland cargo carried by Fesco and OOCL has increased There is

18 FM C
320 FEDERAL MARITIME COMMISSION

evidence which shows that the gross revenue received from the 

riage ofoverland cargo formed a larger percentage of the total g

revenue received by PWC than the volume ofoverland cargo car

was of the total cargo carried by the Conference There is evide

which shows that some of the Conference members are in finan

difficulty There is evidence to show that the Conference inten

unless it is permitted to implement a dual rate contract system in 

overlandarea to engage in a ratewar with its nonconference comp

tion

From the year 1969 through 1972 PWC experienced a reduc

in the volume ofcertain highrevenue cargo carried from the overl

territory In 1970 those carryings were24 8percent less than the y

before In 1971 those carryings were 3 1 percent less than in 1970 

1972 those carryings were 234 percent less than in 1971 The ca

ings in 1972 were 44 1 percent less than the carryings for those ite

in 1969 The rates on those items charged by the principle noncon

encecompetition OOCL and Fesco were onthe average 21 perc

less than the PWC rates Those nonconference carriers charged r

which ranged from 17 percent above one item to 45 percent be

the conference rates During the same period wherein the Con

enceexperienced areduction in the volume ofhighrevenue cargo 

principle nonconference competition OOCL and Fesco increa

their Heets as follows OOCLfrom three container vessels to se

container vessels and Fescofrom seven breakbulk vessels to n

breakbulk vessels and seven container vessels

Fesco entered the United States Pacific West Coast trade in Jan

1971 Itfirst commenced overland container operations in that tr

onSeptember 30 1972 During the last three months of 1972 Fe

carried 54 846 revenue tons of containerized cargo ofwhich 25 

cent was OCP cargo All of Fesco s OCP cargo was containeri

Fesco s seven container vessels were utilized in excess of 75 per

oftheir capacity If the 13 711 revenue tons ofoverland cargo ca

by Fesco in the fourth quarter were extrapolated overan entire y

the resultant figure would be 54 846 revenue tons

OOCL also has seven container vessels It appears that OOCL 

experiencing high utilization of those vessels as it increased t

number OOCL carries some overland cargo probably equal to 

carried by Fesco On the basis ofthe foregoing and allowingfor e

OOCL and Fesco might well have carried as much as 100 000 reve

tons of OCP cargo per year which is approximately 20 percent o

total overland cargo carried by those carriers and the PWC car

combined

Overland cargo is usually rated on a measurement basis Over 

18 F

1
PACIFIC WESTBOUND CONFERENCE 321

years 1968 through 1972 overland cargo accounted for on the aver

age 2 73 percent of all of the revenue tons carried by the PWC

members Notwithstanding the percentage of volume over those

same years the overland cargo accounted for on the average 12 37

percent ofthe total gross revenue received by the PWC carriers The

percentage ofthe total net revenue should be greater as this cargo is

high profit cargo The value ofthe overland cargo to the Conference

members greatly exceeds its position in space occupied

Hearing Counsel have made much of the fact conceded by the

Conference that the Pacific westbound trade has been historically

stable as far back as 1961 Hearing Counsel argue that that stability

precludes approval ofthe present application that is the Conference

has notshown that the nonconference competition has resulted inthe

destabilization ofthe services offered to shippers

The Conference retorts that the member lines have not resorted to

meeting the nonconference competition by wholesale reductions in

rates but have sought this extension to their dual rate contract as a

means ofmeeting that competition while maintaining stability inser

vices The Conference asserts however that it cannot long continue

that restraint and that unless it is allowed to implement a dual rate

contract applicable to the overland territory it will be forced to meet

the nonconference competition by reducing its rates below the non

conference level and that it will do so

ltis proper for a conference to reduce its rates so long as those rates

are not so unreasonably low as to be detrimental to the commerce of

the United States in order to meet nonconference competition Since

Fesco s witness testified that its rates are set at all times to be competi

tive with the rates under which traffic moves PWC would find it

necessary if the nonconference competition responsively reduced its

rates to further reduce its rates below those of the nonconference

competition Since several of the PWC members are in an unsound

financial condition it is probable that those members would be unable

to carry the cargo at those low rates As a result those members would

no longer provide the service to shippers presently obtaining to the

possible detriment not only ofthose shippers but ofthe commerce of

the United States as well

lt is to avoid that diminution in service or service instability for

which the dual rate contract is permitted We will not require that the

diminution in service actually occur before we will permit an action

which will prevent that evil The bare assertion by a conference that

instability in service will result at some future time does not provide

sufficient basis to approve a dual rate contract However where as

here that assertion is circumscribed by a great reduction in the vol

18 FMC
322 FEDERAL MARITIME COMMISSION

ume of cargo carried by the conference and by vigorous noncon

ence competition carried on atrates substantially below the rates 

the conference which attracts cargo in part by the payment 

freight forwarder compensation at a rllte double that paid by 

conference and which discourages the tender or refuses the carria

oflow rated cargo

5

while vigorously soliciting highrevenue cargo 

probability of a disruptive and destructive rate war is sufficiently 

hanced to support the approval of a dual rate contract

Because 14 of the 17 carriers who are members of the Far E

Conference FEe are also members of the 21 member PWC 

because those 2 conferences have an approved agreement 

8200 2 which permits those two conferences to discuss and agree 

certain rate matters both OMC and Hearing Counsel deny that s

pers in the overland territory would have any viable alternative

shipping to the Far East viathe West Coast ports ofthe United Sta

Itis this relationship between the two conferences which accord

to those parties causes the dual rate contract now proposed to b

anticompetitive as to outweigh any transportation need poss

shown by PWC Whether or not Agreement No 8200 shall be c

tinued in force is the subject ofanother proceeding before this C

mission in Docket No 7441 Agreement Nos 8200 82001 82

and 8200 3Between the Pacific Westbound Conference and the 

East Conference In that proceediqg the PWC and FEC have 

burden of showing that in all of the circumstances including 

existence of a PWC dual rate contract applicable to the over

territory Agreement No 8200 as amended is not contrary to 

public interest as that phrase is used in section 15 of the Act 

reserve consideration and decision on the interaction ofAgreem

No 8200 as amended with the PWC overland dual rate contrac

Docket No 7441

At present PWC has a dual rate contract applicable to the local a

but none applicable to the overland territory The application be

uswould ifapproved cause there to be one dual rate contract app

ble to both the local and overland territories without differentiat

Ithas been asserted by both OMC and Hearing Counsel that if 

Commission is to approve any dual rate contract applicable to 

overland territory that contract must be separate from the cont

applicable to the local area It is argued that one contract is m

restrictive than separate contracts and that separate contracts 

sufficient to meet the asserted needs ofthe Conference We disag

At present excluding other coast options a shipper in the o

Fescos Cargo N O S rate is approximately 30 percent higher than its commodity rates

18 F
PACIFIC WESTBOUND CONFERENCE

land territory may sign the PWC local contract and ship goods to

the Far East via nonconference overland tariffs or via the Confer

ence local contract rates If there were to be instituted separate

contracts for the local and overland territories that overland ship

per would have the option of signing the local PWC contract but

not signing the PWC overland contract and ship goods to the Far

East via the nonconference overland tariffs or via the PWC local

contract rate in other words the same option that the shipper

now has If it is recognized that the Conference has demonstrated

a need to bind the overland cargo to itself then separate contracts

would not fill that need

In sum the extension to the PWC dual rate contract under con

sideration here can only be approved if it is found necessary to

achieve some legitimate commercial objectives As we said in

Agreement No 8660 above 14 F M C 172 185 1970 in the nor

mal run of things that legitimate commercial objective will be a

conference s need to protect itself from the inroads of nonconfer

ence competition In this case there has been sufficient evidence

adduced to find that the nonconference competition particularly

OOCL and Fesco have made substantial inroads into the sources

of revenue of the Conference and to preclude a finding by the

Commission that one dual rate contract applicable to the entire Pa

cific Westbound Conference trade area is not necessary to protect

the Conference from the nonconference inroads Consequently

the application of the PWC will be approved

However the dual ratecontract presently employed by the Confer

ence binds the merchants who signed that contract only as to local

shipments The merchants may not be deprived of their rights the

reunder except upon90 days notice Further the overland rates now

in force may not be increased except upon 30 days notice Conse

quently the modification herein approved shall not be effective until

90 days after the PWC has given those parties signatory to its existing

merchants rate agreement notice of the modification and the con

tract as modified shall not be binding as between the individual

merchant and the PWC unless both parties have indicated in writing

their intention to be bound by the contract as modified

Commissioner George H Hearn dissenting

Ido not agree with the approval granted by the majority to the

PWC application to extend its dual rate contract to OCP cargo

The majority acknowledges that the proposed extensionofthe PWC

dual rate contract is contrary to the principles ofour antitrust laws and

18 FM C

323
324 FEDERAL MARITIME COMMISSION

to the public interest mentianed in sectian 14b unless shawn 

achieve a legitimate cammercial abjective What is involved th

fare is an artificial device to extend the OCP system 6

itself a synth

ratesystem which invalves a natianal equalizatiOnar absarptian 

hawever arriveat the opposite conclusianfrom the majarity by dr

ing different canclusians from the same recard evidence ar lack a

Themajarity decisian relies primarily an ane cansideratian with 

athers presented in suppO tOfit That consideratian is the prabab

af a rate war or trade instability if the extensian af the dual 

cantract is nat granted The questions must be asked then whO 

start the ratewar whatwill beits cause and what basis is there for s

a conclusian The answers are not hard to nnd

The majority decision states as fallaws

There is evidence to show that the conference intends unless it is permitted to im

ment dual rate contract system in the overland area to engage in a rate war wi

nonconference competition

Nathing cauld be plainer it is the canference which will start 

rate war One wauld assume therefore that the canference wa

then be responding to predatary practices an the part af the 

dependents but such is nat the fact The majarity finds and I

ag

that there is nO evidence in the recard which indicates that the i

pendent lines set their rates sa as to drive the PWCaut afthe ma

Infact FESCO an independent carrier frequentlycited by the m

ity was nat even in the OCP trade until after the PWC filed 

applicatian to extend its dual rate contract Further there is nO 

dence as the majarity admits that the independent carriers par

larly FESCO and OOCL are affering rates belaw cast

Iam at a lass therefare to find the miscreatian an the part of 

independent carriers which wauld justify rate undercutting by 

canference to the extent af precipitating a rate war The anly 

dence that there will be a rate war is the self serving declaratia

the PWC 8 NO ather evidence to that effect can be faund and w

remains is a thinly veiled threat by the canference

It is true that certain high value OCP cargO has been lost by P

members that there has been a cancomitant gain in such cargO on 

part af independent carriers and that such cargO is impartant in 

averall aperatians afboth What is notestablished hawever hrtha

independents are campeting anly far highvalue OCP caxga The 

The fact that other ccmferences have dual rate contraots for OCPeargaisno reason to grant it here Eac

involvi adliFerent trade must be considered on its own merits

11nuatlgation ofOv8rland OCP Rates andAbIOrptIona 12 F M C 184 221 dissenting opinionofComm

George H Hearn 1969

Transcript p 23

18 F
PACIFIC WESTBOUND CONFERENCE 325

is that OCP cargo is generally ofhigh value and that no showing was

made that inoverall competition the PWC carriers are more efficient

than the major independents

What we are left with is the conclusion that the OCP export trade

is subject only to free and open competition hardly an appropriate

target for rate war making

In order to find a basis for the claimed probability ofarate war we

must therefore look for other evidence The majority finds it in the

overtonnaged condition of the trade Whether such is the case is un

necessary to decide The fact is that assuming overtonnaging does

exist it does not justify the extension ofthe dual rate contract

The record shows that the independent carriers have increased the

level oftheir service by increasing the number ofships devoted to the

trade At the same time however the PWC members have done the

same The majority decision acknowledges this fact and sets forth the

extent ofgrowth in conference service including the introduction of

Sea Land s SL Ts PFEL s LASH vessels and the new large and fast

ships of the Japanese consortia

Consequently what overtonnaging exists is attributable to an in

crease in capacity ofboth conference and independent carriers and

the Administrative Law Judge so found

The majority nevertheless tries to sidestep this situation by utilizing

the overtonnaging argument in a bootstrapping manner Itis argued

that the purpose of proving that there is an overtonnaged condition

is to show that if the dual rate extension is granted the PWC members

will have the capacity to carry the additional cargo they will get and

therefore the extension ofthe dual rate contract is justified The cir

cuity of that argument is self evident Its consequences are horren

dous The argument could thereafterbe made thatwhenever a carrier

has unusedcargo space it could use or receive permission for whatever

anticompetitive device it choosesin order to take cargo from competi

tors

The inescapable conclusion is therefore that the PWC is not moti

vated by harmful conditions in the trade to which the PWC itself

contributed or competitors unfair practices Rather the conference is

trying to eliminate the effects ofovertonnaging by placing the burden

mainly on the independents who are only partly to blame if indeed

specific blame for overtonnaging can be assessed No artificial device

so anticompetitive as the one sought here to gamer cargo is justified

in such circumstances This is especially true when the result may be

to upset the forces ofopen competition albeit that the carriers may

all have overextended themselves and subsequently been overtaken

by unforeseen economic forces

18 F MC
326 FEDERAL MARITIME COMMISSION

Adual rate contract is contrary to the public interest unless ne

sary to pursue some legitimate commercial objective 9

Altho

ordinarily that legitimate objective will be a conference s nee

protect itself from the inroads of nonconference competition IO

An important purpose of the Shipping Act is to facilitate the flow of commerce 

while it recognizes that a proper conference system can contribute to this end it 

notundertake to give the conference prior claim on all cargoes norafford the c

ences protection from all possible competition l1

The conference must demonstrate that the approval or extensi

a dual rate contract is required under the circumstances as bein

the public interest in the same manneras a section 15 agreement 

bejustified 12 The mere statement or flat assertion on the part o

PWC 13 that serious trade instability will result from failure to ex

its dual rate contract is not enough Self serving speculation or 

diction does not suffice in dual rate matters any more than in se

15 proceedings

Hearing Counsel and OMC contend that the extension of the 

rate contract in this case is especially anticompetitive because 

PWC and the FEC are parties to Agreement No 8200 The argum

is made that the great similarity in membership of the two co

ences is an additional factor outweighing the alleged benefits o

dual rate contract extension The majority gives short shrift to 

argument on the ground thatAgreement No 8200 is under inves

tion in another proceeding Docket No 74 41 and that its relev

to the dual rate matter can be dealt with there

This postponement ofa decision on the issue is like locking the 

door after the cow is gone By the time Docket No 7441 ru

course the damage from the approval given herein will be done 

the PWC will then be able to prove its assertions in Docket No 7

on the basis that it had prevented the trade instability conven

forecast in this proceeding 6The authority enjoyed by the 

members through all the agreements currently approved shou

sufficient to provide the conference carriers with the ability to 

independent competition

Agreement No 866aLattn Arrulrtca Poctfic CoMtSS Conference 12 F M C 149 160 1969

IO d 160 161

The Duol Rote Cases 8F M C 16 43 1964

ItAgreement No 866QLatinAmerica Pacific Coaat8 S Conference 14 F M C 172 1970 aird 465 

DC Cir 1972 cerl denied 409 US 967 1972 F M C o Scenako Amertko Llnlen 390 US 238 19

13Transcrlpt p 23

HAgreement No 8660LatinAmerlca Paafic Coast 8S Conference 12 F M C 149 158159 1969

ltpacljic Westbound Conference 9 F M C 403 410 1966

laIt should be noted further that the scope of the carriers power in the Pacific trades is not limited 

membership In Agreement No 8200 but extends to Agreement No 8600 between theJapan Korea Atla

Gulf Freight Conference and the Transpacific Freight Conference ofJapan Korea

18 
PACIFIC WESTBOUND CONFERENCE 327

For the foregoing reasons I conclude that the requested extension

of the PWC dual rate contract to its OCP territory should not be

approved No proposal less offensive to the public interestis put for

ward for separation of the PWC contract into OCP and local parts

would result in a situation no different than the one prevailing I

would therefore deny the application to amend the PWC dual rate

contract

SEAL S FRANCIS C HURNEY

Secretary

18 F M C
APPENDIX

EXCERPTS FROM INITIAL DECISION

THE CANADIAN PORTSISSUE The respondents Hearing Co

sel and the American West African Freight Conference are in ag

ment that Canadian ports are included properly within PWC s org

agreement and that thereare nojurisdictional orpolicy reasonsfor 

including Canadian ports in dual rate agreements Also the Amer

West African Freight Conference insists there are strong reasons

Canadian ports should be included in its conference agreement 

in its exclusive patronage dual rate systems

In The Duat Rate Cases 8 F M C 16 page 43 1964 consid

tion was given to the geographic scopes of the dual rate contra

Some contracts required merchant to promise exclusive patron

from or to ports on one of the United States coasts and contigu

ports in Canada or Mexico The argument was made because 

Commission has no direct jurisdiction over non United States c

merce that Canada and Mexico should not be included in the 

tracts presented for approval The argument was rejected and 

Commission stated that if merchants were permitted to ob

lower rates by promising their exclusive patronage only from o

United States ports they could easily use nonconference ve

from or to nearby Canadian or Mexican ports and honor the 

tract only when it met their convenience

In 1959 in Oranje Line et at vAnchor Line Limitedet at 5F 

714 728729 it washeld that where the section 15 agreements c

both the foreign commerce of the United States and also the 

mately related foreign commerce of Canada our jurisdiction u

section 15 exists

In the present proceeding approval of the Canadian port inclu

will tend to insure that similarly situated shippers are quoted e

rates Of course nothing this Commission could do would usurp 

jurisdiction ofthe Canadian government within its own territory 

overits own ports and if the ocean carrier members ofPWC we

violate Canadian law itwould be no defense that the dual rate a

mentis sanctioned by this Commission Furthermore PWCpoint

on brief that there presently is no possibility of conflict with or v

tion ofCanadian law The dual rate contracts must be filed with 

328 18 F
PACIFIC WESTBOUND CONFERENCE 329

Canadian Transport Commission but these contracts do not require

approval in Canada

The American WestAfrican Freight Conference showed in the case

of its African trade that exclusion of Canadian commerce from its

agreement might well result in the dissolution ofthat Conference or

alternatively it might result in an injurious rate war

PWC s basic Agreement No 57 covers the tradebetween the West

Coast ofthe United States and Canada and the Far East Canada has

been included since 1923 when the Conference was organized

It is concluded and found that Commission jurisdiction over dual

rate agreements and organic conference agreements which include

Canadian ports has been established There are no jurisdictional or

policy reasons for not including Canada in dual rate contracts

THE QUESTION OF THE APPLICABILITY OF SECTION 5 OF

THE FEDERAL TRADE COMMISSIONACT Both the respondents

and Hearing Counsel agree that section 5 ofthe Federal Trade Com

mission Act has noapplication whatever to the conference agreement

or the dual rate contract An argument was made in this proceeding

by one ofthe parties which has withdrawn from the proceeding that

if the dual rate contract were approved it would constitute unfair

methods ofcompetition under section 5 ofthe Federal Trade Com

mission Act 15 U S GA 45 a

I and further that neither section 15

nor section 14b oftheShipping Act would exempt the parties from the

alleged violation of the Federal Trade Commission Act since that

statute is not named specifically in the antitrust exemption in the

Shipping Act This argument overlooks otherreferences insection 15

The antitrust exemption provision of section 15 which includes

section 14b contracts specifically refers to the Sherman AntitrustAct

by citation and also refers to amendments and acts supplementary to

the Sherman Act The Federal Trade Commission Act waspassed after

the Sherman Act and the Federal Trade Commission Act supple

ments the Sherman Act The Federal Trade Commission Act was

intended to remedy deficiencies in the Sherman Act Menzies v Fed

eral Trade Commission 242 F 2d 81 83 4th Cir 1957

Itis concluded and found that the power of the Federal Maritime

Commission to grant immunity from antitrust acts makes section 5 of

the Federal Trade Commission Act inapplicable to the proposed

amendment of the dual rate contract

herein

18 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 7154

PACIFIC WESTBOUND CONFERENCE ApPLICATION

TO EXTEND ITS EXCLUSIVE PATRONAGE DUAL RATE

CONTRACT SYSTEM TO INCLUDE ITS OCP TERRITORY

ORDER

This proceeding having been initiated by the Federal Marit

Commission and the Commission having fully considered the ma

and having this date made and entered ofrecord aReport contain

its findings and conclusions thereon which Report is hereby refe

to and made a part hereof

Itis Ordered That pursuant to section 14b of the Shipping 

1916 Respondents Merchants Rate Agreement No 57 DR 4 is 

proved

Itis Further Ordered That the modification herein approved s

not be effective until 90 days after Respondent has given those m

chants signatory to its existing Merchants Rate Agreement notic

the modification herein approved

Itis Further Ordered That Respondents Merchants Rate Ag

ment No 57 DR 4 shall not be binding as between the individ

merchant and Respondent unless both have indicated to each o

in writing their intention to be bound thereby By the Commiss

SEAL S FRANCIS C HURNEY

Secretar

330
1

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 290 1

P P G INDUSTRIES INC

v

ROYAL NETHERLANDS STEAMSHIP CO

ADOPTION OF DECISION

Apr 4 1975

By THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman Commissioners Ashton C Barrett and Clar

ence Morse concurring Commissioner George H Hearn con

curring

This proceeding was initiated by complaint filed by P P G Industries

Inc PPG alleging overcharges by Respondent Royal Netherlands

Steamship Co RNS on a shipment ofplate glass from New York New

York to Port of Spain Trinidad The parties consented to use of an

informal procedure pursuant to Rule 19 46 CFR 502 301 304 and

the claim was heard initially by Settlement Officer Frank LBartak

Mr Bartak dismissed the complaint ofPPG on the ground that Com

plainant had failed to sustain the burden ofproof necessary for recov

ery Thereafter on its own motion the Commission determined to

review the proceeding On review the Commission determined that

certain issues detailed below had not been fully explored by the Settle

ment Officer In order to permit a further consideration of these

issues the Commission remanded the proceeding to the Settlement

Officer with instructions Thereafter having considered the issues as

instructed by the Commission Settlement Officer Bartak again dis

missed the complaint The proceeding has come before the Commis

sion on that determination
332 FEDERAL MARITIME COMMISSION

FACTS

On July 31 1970 Respondents vessel MARON sailed from N

York New York carrying the cargo in issue bound for Port of Spa

Trinidad The cargo involved consisted of 14 cases of plate glass a

its carriage was governed by the provisions of the Leeward Win

ward Islands Guianas Conference Tariff The freight charges lev

upon these 14 cases ofplate glass were prepaid and were based up

a total measurement of 924 8 cubic feet This measurement appe

on both RNS dock receipt and on the bill oflading The dock rece

dated July 27 1970 shows the following outside measurements a

total cubic foot measurement

10 cases each measuring 10 5 X 7 5 X 10

4 cases each measuring 11 5 X 7 5 X 10

Total measurement 924 8 cubic feet

Certain other documents show exterior measurements but do 

show total cubic foot measurement PPG s export weigh sheet 

dated lists 14 cases each measuring 126 in length and 90 in wid

but does not show any cubic foot computation Freight was asses

by RNS on 925 cubic feet at 58 50 per 40 cubic feet plus surchar

PPG challenges this assessment alleging that the freight should ha

been assessed on 735 cubic feet resulting in the alleged overchar

of 305 66

PPG alleges that all 14 cases of plate glass were of identical s

However this allegation is notwithout equivocation PPG statedin 

Condensed Statement of Facts and Actions that

the packages we used are normally standard unless the client requests spe

packaging to meet his own specifications No special packaging instructions were 

ceived with the order at issuel

Additionally confusion was compounded by PPG s commercial 

voice which shows only the glass plate measurement 120 X 84 

no exterior case measurement

RNS defended against this alleged overcharge by relying upon 

dock receipt figures and a tariffrule which allows the carrier to de

claims based on challenged measurements filed after the cargo has 

the carrier s custody Since without dispute PPG filedits initial cla

against RNS on May 20 1971 RNS denied the claim based upon 

six month tariff rule limitation

I

Item lOS of Leeward Windward Islands Guianas Conference Tariff provides

Claims by shippers for aqjustment of freight charges wlll be considered only when submitted in writing t

carrier within sixmonths ofdate of shipment Adjustment of freightbased on alleged error inweight measure

or description mav be declined unless appUcation is submitted in writing sufficiently in advance to p

reweighing remeasuring or verification of description before the cargo leaves the carrier s possession 

expense incurred to be borne by the party responsible for the error orby the applicant if no error is fo

Emphasis added
2South and East Africa ConferenceSouthbound Freight Tariff No 1 FMC No 2 original p 110 Rule 16

P P G INDUSTRIES v ROYAL NETHERLANDS S S CO 333

Settlement Officer Bartak dismissed the complaint of PPG on the

basis that while a tariffrule such as that sought to be relied upon here

by RNS cannot time bar a complaint timely filed under section 22

Shipping Act 1916 the Complainant had simply not sustained its

burden ofproof

Our purpose in reviewing that decision was to ascertain what im

pact if any our decision in Kraft Foods v Moore McCormack Lines

Inc Docket No 73 44 report issued March 26 1974 might have

upon the proceeding In Kraft we permitted a carrier to rely in its

defense upon a similar rule holding that in cases ofalleged error in

weight or measurement the failure of a claimant to comply with an

applicable tariff rule precludes recovery In Kraft the tariff rule at

issue provided

Claims for adjustment of freight charges if based onalleged errors in weight and or

measurement will notbe considered unless presented to the carriers before ship

ment involved leaves the custody of the carrier 2

There the rule in fact provided a rule Reliance by the carrier on

that rule left him no alternative course but to refuse to consider a

claim based on alleged measurement error filed after this shipment

had left his possession In the present case whether or not a carrier

would entertain a claim based on alleged error in measurement is

discretionary The carrier may decline to consider such a claim but

need not at his discretion Recognizing the possibility under such a

rule of unequal treatment among shippers the Commission deter

mined to remand this case with directions to the Settlement Officer

to ascertain the practices of the conference carrier in regard to the

rule We ordered the Settlement Officer to learn whether or not

RNS has infact consistently relied upon this rule inpast claims ofthe

sort provided here in denying similar claims We so ordered so

that we could determine whether ornot RNS wasjustified in relying

upon this rule and whether or not we could permit such reliance here

as we did in Kraft Foods

On remand Settlement Officer Bartak found that RNS had appar

ently consistently denied such claims on the basis of the tariff rule

sought to be relied on here Additionally Mr Bartak found that Com

plainant PPG had no evidence that RNS had not consistently applied

this rule in its handling of claims Mr Bartak concluded therefore

that I RNS wasjustified in relying upon the rule 2 PPG had failed

to establish with reasonable certainty and definiteness the validity of

the claim and 3 that PPG had not met its burden ofproof notwith

standing RNS reliance on the tariff rule in question
334 FEDERAL MARITIME COMMISSION

CONCLUSION

Having reviewed the decision on remand ofSettlement Officer B

tak this Commission has determined to adopt the findings and con

sions included therein We agree that while RNS is here justified 

relying upon its conference tariff rule Item 105 even were it no

justified Complainant has notsufficiently shouldered its heavy burd

of proofto permit it to recover the alleged overcharges

The Decision onRemand ofSettlement Officer Bartak is theref

adopted as the decision ofthe Commission and is attached hereto 

made a

part hereof

I

Commissioners Ashton C Barrett and Clarence Morse concurri

The proceeding wasremanded for the sole purpose ofascertain

whether the carrier in view of the discretionary wording ofItem 

ofthe Tariff had in the past consistently applied the tariffrule to d

claims of the kind involved in this proceeding

The Settlement Officer found that RNS had consistently applied

tariff rule and had denied claims for the adjustment of weight 

measurements belatedly submitted

In light of Kraft Foods 14 SRR 603 Docket No 7344 rep

served March 26 1974 reconsideration denied December 13 19

we conclude that we need go no further for PPG s failure to com

with the requirements of Tariff Item 105 bars recovery

The Settlement Officer s conclusions that PPG has not establis

with reasonable certainty the validity of its claim Finding No 

and has failed to sustain the burd n of proof Finding No 2 

therefore irrelevant for the disposition of PPG s claim

Inadopting the Decision onRem d we would rest our decisio

Finding No 3 and delete Findings No 1 and No 2as irrelevant 

inconsistent with Finding No 3

Commissioner George H Hearn concurring

Iconcur in the result and would uphold the original decision of

Settlement Officer served March 4 1974 My view ofthis case is ba

upon my separate opinion in Economics Laboratory Inc vPruden

Grace Line Informal Docket No 301 F decision served March 

1975

SEAL S FRANCIS C HURNEY

Secretar

18 F
335

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 290 I

P P G INDUSTRIES INC

v

ROYAL NETHERLANDS STEAMSHIP CO

Reparation denied

DECISION ON REMAND OF FRANK LBARTAK

SETTLEMENT OFFICER

On May 16 1974 the initial decision in this informal docket was

remanded to the Settlement Officer for him to obtain and consider

information concerning Respondents application ofa tariffrule Item

105 Adjustment of Freight Charges contained in the Leeward

Windward Islands Guianas Conference Tariff

This proceeding concerns a claim of PPG Industries Inc PPG for

305 66 against Royal Netherlands Steamship Company RNS for an

alleged overcharge of freight on a shipment of14 cases of plate glass

from New York to Port of Spain Trinidad on the vessel MARON

Claimant alleges that the shipment measured 735 cubic feet and that

freight was erroneously assessed on ameasurement of925 cubic feet

Initially the RNS denied the claim on the grounds that it had not been

submitted within six months of sailing Subsequently the claim was

also denied on the grounds that the carrier had not been offered the

opportunity to have the cargo remeasured at the port of discharge

By the initial decision PPG was denied reparations on the grounds

that PPG had failed to establish with reasonable certainty and definite

ness the validity of its claim and that it had not borne the heavy

burden of proof required of an overcharge claimant once the ship

ment has left the carrier s custody

Because of the discretionary nature ofthe tariff rule 1

which then

lItem 105 of Leeward Windward Islands Cuianas Conference Tariff provided

Claims by shippers for adjustment of freight charges willbe considered only when submitted in writing to the

carrier within sixmonths of date of shipment Adjustment of freight based on alleged error inweight measurement

ordescription mflY be declined unless application issubmitted in writing sufficiently in advance topermitreweigh

18 F M G
336 FEDERAL MARITIME COMMISSION

provided that the carrier may decline adjustment offreight claims

the Commission in its Order of Remand stated in part as follows

In order to determine whether ornotrespondent RNS is entitled to rely upon the

rule applicable here it is a prerequisite that we learn whether ornotRNS has infact

consistently relied upon this rule in past claims of the sort provided here If past

treatment of such claims can be shown to have been consistent either one way or

another such showing would go a

long way toward showing the rule to be a rule We

are therefore remanding this proceeding with directions to obtain the requisite data as

to similar claims and their treatment in the past by RNS 2

Pursuant to the Commission s Order Respondent submitted infor

mation data concerning the application ofthe tariff rule which sup

ports its position that it denied claims in accordance with tariff regula

tions as time barred and as filed too late for an outturn measurement

However since its practice in some instances was to deny claims on

the grounds that RNS could not make an adjustment without authori

zation from the Conference or in other instances to suggest to the

claimant that he refer the matter to the Conference office for Confer

ence decision we also requested information as to how the Confer

ence applied the rule in question With respect to the Conference s

application of the rule Respondent replied in part as follows

In connection with this matter we have found that in mostly all cases the Conference

has declined authorization of adjustment onthe basis of regulations incorporated in the

various Tariffs We can find norecent instance where the Conference office has author

ized adjustment of a time barred claim and we believe it is theirstandard rule to abide

by Tariff regulations

PPG was advised of the information submitted by RNS and was

offered an opportunity to submit evidence whether RNS had or had

not consistently reliedupon the rule in past claims ofthe sort involved

in this proceeding PPG replied that it has no evidence that RNS has

not consistently relied on tariff rules in its handling of claims

PPG did comment on the Commission s Order in part as follows

We notethat the FMC gives emphasis to ourCONDENSED STATEMENT OF FACT

AND ACTION that the packages we use are normally standard and this we

feel was misleading to you Namely it opened a question as to how the packaging was

on this shipment standard or outside ournormal practices

Our export weighsheet confirms that no special instructions were received and that

normal standard packaging was employed Further it is inconceivable that since our

packaging shows a uniform weight of 1674 pounds per case and this weight was not

disputed by the carrier that the shipment should have two sets of measurements 3

iog remeasuring or verification of description before the cargo leaves the carrier s possession any expense

incurred to be borne by the party responsible for the error or by the applicant if no error is found Emphasis

added

aEffective July 22 1974 Item 105 of the ConferenceTariff was modjfiedby the word will being substituted

for the word may Accordingly the tariffrule is no longer discretionary

18 F M C
P P G INDUSTRIES v ROYAL NETHERLANDS 5 5 CO 337

While the Item 105 ofthe Leeward Windward Islands Guianas

Conference Tariffis no longer a discretionary rule the treatment of

claims ofthe sort considered here under the rule then in effect is still

relevent to this proceeding

From the evidence submitted it would appear that the tariff rule

was consistently relied upon Also this Settlement Officer finds no

substantive basis on which to reverse his initial decision

Upon reconsideration as directed by the Commission the Settle

ment Officer finds

1 PPG has failed to establish with reasonable certainty and definiteness the validity

of its claim

2 PPG has not borne the heavy burden of proof required of it as an overcharge

claimant in this proceeding once the shipment has left the carrier scustody

3 RNS is entitled to rely on Item 105 as previously constituted and to decline

adjustment of the claim in this proceeding on the grounds that the claim was not

submitted in time to permit remeasuring before the cargo left its possession

PPG s claim for reparation continues denied

S FRANK L BARTAK

Settlement Officer

3PPG sundated export weigh sheet shows each of the 14 cases in the shipment weighing 1675 pounds andhaving

uniform outside case measurements of 126 0 X 90 X B Thedated and signed dock receipt does not show individual

case weights but does show ten cases having outside measurements of 10 5 X 7 5 X 10 and fourcases having

outside measurements of 11 5 X 7510 X 10

18 FM C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 295 1 v

STAUFFER CHEMICAL CO

v

ROYAL NETHERLANDS STEAMSHIP CO

REPORT

Decided Apr 41975

By THE COMMISSION Helen Delich Bentley Chairman James 

Day Vice Chairman George H Hearn Commissioner Comm

sioners Ashton C Barrett and Clarence Morse concurring

Complainant filed its complaint before the Commission allegin

misapplication ofrates by Respondent and seeking reparation for 

alleged overcharge By consent of the parties this case was he

underSubpart S ofthe Commission s Rules ofPractice and Proced

as an informal adjudication of small claims

Settlement Officer Waldo R Putnam issued his decision award

reparation and thereafter the Commission timely issued notice o

intention to review the proceeding

FACTS

Complainant shipped its cargo aboard Respondents vessel ADON

from New Orleans Louisiana to Port of Spain Trinidad pursuan

terms of the Leeward Windward Islands Guianas Confere

tariffon August 22 1970 TheBill of Lading and the Export Decla

tion both describe the cargo shipped as 500 Bags Sodium Pyroph

phate weighing 50 500 pounds

To this shipment Respondent applied the class 8w rate of 46 

per 2000 lbs provided for on 10th revised page 64 ofthe tariff Ho

ever at the time of shipment 10th revised page 64 also provide

reduced rate 6w of 42 50 per 2000 lbs which may be seen to h

338

ill F M
STAUFFER CHEMICAL CO v ROYAL NETHERLANDS Ss CO 339

been effective through November 12 1970 The complete provision

reads as follows

SODA OR SODIUM Viz

Acid pyrophosphate in bulk inbags

barrels or drums 8w class No

R Acid Pyrophosphate in bulk in bags

barrels or drums

Expires November 12 1970

The class 8w rate was 46 50 per 2000 lbs while the 6w rate was

42 50 per 2000 lbs

On April 7 1972 Complainant filed aclaim with Respondent for the

difference between the two rates quoted above By letter of May 8

1972 Respondent rejected this claim as having

6w class No

been filed beyond the time specified by the covering conference and furthermore

the bill of lading did notspecify the cargo as being Sodium Acid Pyrophate sic as is

required in order to receive the class 6w rate

It is ofnote thatin this reply and rejection Respondent did notspecify

any tariff rule with which to corroborate its rejection of the claim

Thereafter Complainant brought this complaint before the Com

mission alleging the facts as recited above Respondent filed nothing

in its behalf but a letter to the Settlement Officer stating

We would advise that the rate of 46 50 per 2000 Ibs wefeel is the correct rate for

Sodium Pyrophosphate which was the descriptionshown on the shipper s Billof Lading

Since there was no way for ourNew Orleans agent to know that the shipment was not

as described on the Billof Lading it was impossible for him to apply a lower rate If

the shipper had classified his cargo as Sodium Acid Pyrophosphate then the rate of

42 50 per 2000 lbs would have been charged

We will of course abide by the ruling of your office regarding this matter

In his decision in this proceeding S tlementOfficer Waldo R Put

nam found that the Complainant had sustained its burden of proof as

to the actual character of the commodity which was moved This

conclusion in conjunction with the finding that the tariffwas ambigu

ous and should therefore be interpreted most favorably to the Com

plainant shipper led Mr Putnam to grant reparation

DISCUSSION AND CONCLUSION

We have reviewed this proceeding and conclude that reparation

should be granted as sought We concur with the findings ofthe Settle

ment Officer insofar as he concludes that Complainant has met its

burden ofproof Wethink itabundantly clear thatthe shipper shipped

and the carrier s agent understood to have been shipped Sodium

18 F M C
340 FEDERAL MARITIME COMMISSION

Acid Pyrophosphate As such the commodity shouldhave been rate

as it was as Sodium viz Acid Pyrophosphate

However we disagree that there is an ambiguity in the tariffwhi

requires interpretation by us There is nothing uncommon in havi

a reduced rate for a commodity temporarily existing side by side w

the standard rate for a commodity Here the precise commodity sim

taneously showed a normal rate of 46 50 per 2000 lbs and a temp

rary reduced rate of 42 50 per 2000 lbs There is nothing ambiguo

here The carrier was able to classify the shipment with sufficie

precision to apply the 46 50 rate and should have had no difficulty 

applying the temporary reduced rate on that commodity In light 

our conclusion that the tariffis not ambiguous we need not and don

adopt the reasoning of the Settlement Officer in this regard We d

cide here only that Complainant has met its burden of proof and 

therefore adopt the ultimate conclusion ofthe Settlement Officer th

Complainant

has successfully sustained the heavy burden of proof imposed upon it as to 

proper identity of the commodity which actually moved

Reparation granted

Commissioners Ashton C Barrett and Clarence Morse concurrin

The decision ofthe Settlement Officer awarding reparations sho

be adopted but with changes

This case does not involve the principles of Kraft Foods v Moo

McCormackLines Inc 14 SRR 603 Docket No 7344 report serv

March 26 1974 reconsideration denied December 13 1974 Rath

the principles enunciated in our opinion in Abbott Laboratories 

United StatesLines Inc Docket No 73 36 report served March 

1975 are controlling

We conclude the bill ofIading description sodium pyrophospha

was sufficiently precise and synonymous with the tariff commod

description sodium acid pyrophosphate to justify the assessment 

the appropriate commodity rate Our views are fortified by the fa

that the incomplete descriptionofthe goods stated onthe bill ofladi

offered no obstacle to the rating clerk Hence the issue ofburden 

proof does not arise in this case The Settlement Officer erred sim

in failing to charge the Class 6W ratethe only applicable rate th

in effect

SEAL S FRANCIS C HURNEY

Secretary

18 FM 
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 305 I

P P G INDUSTRIES INC

v

ROYAL NETHERLANDS STEAMSHIP COMPANY

ADOPTION OF DECISION

Apr 41975

BY THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman George H Hearn Commissioner Commis

sioners Ashton C Barrett and Clarence Morse dissenting

This reparation claim is based upon an alleged overcharge by the

carrier for transportation of cargo inaccurately described by shipper

and his agent on both the bill of lading and the export declarations

This proceeding wasconducted pursuant to 46 CFR 502 301 informal

procedure Settlement Officer Genovese issued her decision award

ing reparation Because the Commission is currently reevaluating its

policy in reparations claims it was determined that the Initial Deci

sion should be reviewed to ensure consistency of policy

FACTS

Under bill of lading dated July 27 1972 P P G Industries Inc

P P G shipped certain cargo described by the shipper on the bill of

lading and on the export declaration as 200 pails and one carton

polishes aboardRoyal Netherlands Steamship Company s RNS ves

sel from New York to Puerto Limon Costa Rica On the basis ofthis

description RNS assessed on the cargo its class 1 tariff rate applicable

to polishes NOS 1 Fourteen months thereafter P P G sought repa

ration relying onits description ofthe goods on its commercialinvoice

as DRX 45 Red Rubbing Compound 100 pails DRX 55 White Rub

IVS Atlantic Gulf East Coast of Costa Rica FMC Tariff No 24 revised pages 35 aand 61

341
342 FEDERAL MARITIME COMMISSION

bing Compound 100 pails and 12 quarts DZL 3200 Light Gray

Primer Surfacer shipped as samples without value

RNS has a commodity rate in its tariff applicable to rubbing com

pounds 2

and a rule which applies to samples without value 3

which

directs that such samples be assessed the rateapplicable to the product

with which the samples are shipped Had RNS assessed the rate appli

cable to rubbing compounds and had it applied Rule 2 h the cargo

would have been transported at a cost of 336 52 rather than the

amount assessed of 630 21 based on the polishes NOS rate The

difference 293 69 is the amount sought by P P G as reparation

P P Gs claim was denied by RNS on the ground that the claim had

not been filed within six months of the time of shipment as required

by Rule 7 c of the tariff 4 RNS also contends that it was perfectly

justified in relying upon the consistent description of the commodity

as polishes found on both the bill of lading and the export declara

tion

The Settlement Officer found that Complainant had sustained its

burden of proof and permitted reparation as sought citing the Com

mission s decision in Western Publishing Company Inc v Hapag

LloydAG Informal Docket No 283 1 served May 4 1972 13 SRR

16 In that case the Commission set forth the rule generally applica

ble to reparation claims based onmisdescription ofcargo and held that

notwithstanding the description in the bill of lading what actually is

moved as shown by all relevant evidence determines the rate appli

cable

DISCUSSION AND CONCLUSION

The evidence relied upon by Complainant P P G to show that the

cargo shipped wasrubbing compound consists of the commercial in

voice cited above That invoice is dated July 10 1972 and shows a

consignment ofRed Rubbing Compound White Rubbing Compound

and Light Gray Primer Surfacer to be shipped via Puerto Limon to

Repuestos Perez Ltda Respondent RNS does not challenge this evi

dence nor does it contest the accuracy of the claim by P P G that the

cargo was in fact rubbing compound RNS relies in its defense solely

on the six month rule which this Commission has repeatedly held to

be no valid defense

As a result the decision ofthe Settlement Officer thatreparation be

granted on the basis ofComplainant s adequate proof ofwhat actually

lId

revised pp 14 and 61

3

d Rule 2h revised p 5l

41d Rule 7 0 which provides Claimsby shippers foradjustmentof freight charges willbe considered only when

submitted in writing to the carrier within six months of date of shipment

18 F M C
SEAL S FRANCIS C HURNEY

Secretary

P P G INDUSTRIES v ROYAL NETHERLANDS 5 5 CO 343

was moved is hereby adopted as the decision ofthe Commission and

is attached hereto and made a part hereof

Reparation awarded

Commissioners Ashton C Barrett and Clarence Morse dissenting

We must conclude that the disposition of this case should be in

accordance with the principles enunciated in our recent opinion in

Kraft Foods 14 SRR 603 Docket No 7344 report served March 26

1974 reconsideration denied December 13 1974 and deny repara

tions

The factual situation may be stated quite simply The carrier has on

file a tariff Rule 20 which reads Whenever this Tariff provides

different rates on a commodity dependent upon type or kind and

adequate description is not stated in the bill of lading it will be as

sumed that it is of a type or kind subject to the highest of the rates

provided for the commodity and freight will be assessed accord

ingly The shipper and his agent supplied the carrier with a bill of

lading as well as an export declaration which read merely 200 pails

and 1 carton polishes Relying on its tariff Rule 2 0 the carrier had

but one choice to assess the polishes NOS rate inaccordance with

the mandate of section 18 b3 46 VS C 817 b 3 Such wasthe case

and concludes the matter

In ouropinion the majority has clearly erred by blindly adhering to

the burden of proof test adopted in Western Publishing Company

Inc v Hapag LloydAG rather than giving recognition to the repu

diation of such application in cases where the factual framework falls

within the principles established in the more recentKraft Foods deci

sion

18 F M C
j

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 305 1

P P G INDUSTRIES INC

v

ROYAL NETHERLANDS STEAMSHIP COMPANY

Reparation awarded

Decision of Vera K Genovese Settlement Officer 1

P P G Industries Inc PPG claims a refund from Royal Neth

lands Steamship Company respondent for an alleged freight ov

charge on a

shipment of polishes carried from New York to Pue

Limon Costa Rica aboard respondent s vessel SINON under bi

lading No 26 dated July 27 1972

The shipment is described in the bill of lading and export decla

tion as 200 pails and one carton of polishes Respondents U S Atl

tic and Gulf East Coast of Costa Rica FMC Tariff No 24 the tar

includes polishes n o s in class 1 for which the applicable rate at 

time ofthe shipment was 103 00 per 2000 Ibs 3

Computed on t

basis respondent collected 630 21 in freight charges

Relying on its commercial invoice 4

PPG claims that the shipm

consisted of 100 pails 500 gallons of DRX 45 Red Rubbing Co

pound 100 pails 500 gallons of DRX 55 White Rubbing Compou

and 1 carton containing 12 quarts of DZL 3200 Light Gray Prim

Surfacer shipped as samples without value which should have b

rated at 55 00 per 2000 Ibs 5for a total freight charge of 336 52 

293 69 less than collected by the respondent

Respondent contends that in classifying the cargo it relied on 

IBoth parties having consented to thelnfanna procedure of Rule 19 aof the Commission Rules of Practic

Procedure 46 CFR 502 301 this decision shall be final unless the CommJssian elects to review it within 15 

from the date of the service thereof

Tariff rates and rules are quoted as in effect on the date of theshipment July 27 1972

3Revised pages 35 aand 61 of the tariff

41nvoice No P 4395 dated July 10 1972 from PPG to Repuestos Perez Ltcla

sRevised pages14 and 61 of thetariff Samples withoutvalue ifsent as advertising matter and subject to c

limitations as toweight and measurements are charged therateapplicable to the cargo withwhich theyare shi

Rule 2 h revised page 51

344

18 F M 
P P G INDUSTRIES v ROYAL NETHERLANDS S S CO 345

description on the bill oflading and the export declaration furnished

by PPG 6

Both these documents were prepared by the Gaynor Ship

ping Corp an independent ocean freight forwarderfollowing instruc

tions received from PPG 7and both described the shipment in identi

cal terms i e as polishes The Schedule B commodity number 8

on

the export declaration specified by PPG also refers to polishes ne

c

not elsewhere classified

We are presented here again with a situation in which the shipper

ships hisgoods under a certain description and then comes in claiming

injury and reparation on the ground that the carrier violated the

statute by charging the rate applicable to that description rather than

a lower rate applicable to a description brought for the first time to

the carrier s attention long after the process of transportation has

ended

Section 18 b 3 46 VS C 817 b 3 prohibits a carrier from collect

ing more or less or a different compensation than provided in its tariff

in effect at the time of the shipment

Inconstruing the statute the Commission has adopted the rule that

notwithstanding the description in the bill of lading what actually

moves as shown by all the evidence determines the applicable rate

Western Publishing Company Inc v Hapag Lloyd A G

9

Respondent is not contesting PPG s statement that the products

described in the shipping documents as polishes were rubbing com

pounds as shown in PPG s commercial invoice

That both descriptions may well cover the product 10 is immaterial

here where the tariffcontains a specific rate for rubbing compounds 11

which is the only rate applicabl0 to that description 12

Respondent also denied the claim for PPG s failure tosubmit it within 6 months from the dateof the shipment

as required by Rule 7 c of the tariff TheCommission has ruled however that a claim filed within two years from

the date the cause of action arose must be considered on its merits Colgate Palmolive Company v United Fruit

Company Informal Docket No 115 1 served September 30 1970 The hill of lading here is dated July 27 1972

the complaint was filed on September 5 1973

TBy letterdated July 10 1972 PPG directed the freight forwarder toprepare the shipping documents for 200

pails of polishes and 1 carton of lacquers spls Fifteen copies of the invoice were attached tothat letterso thatboth

the sender of the letter and the Gaynor Shipping Corp had at the time sufficient informationto more accurately

describe the cargo in the shipping documents

8UnitedStates Bureauof the Census Schedule BStatistical Classification ofDomestic and ForeignCommodities

Exported from theUnited States In preparing the Shipper sExport Declaration for merchandiseexported from the

United States it is the exporter s responsibility to insert the Schedule B commodity number for the item exported

9Informal Docket No 283 1 served May 4 1972 13 SRR 16 1972

IOWebster s New International Dictionary of the English Language Unabridged defines compound as a

chemically distinct substance formed by a union of twoor more ingredients as elements todefiniteproportion by

weight and withdefinitestructural arrangement at p

466 and rubbing as the motion orprocess of chafing

polishing orotherwise treating oraffectinga

surface orbody by the motion of applied pressure uponit atp

1983

IIRevised pages 14 and 61 of the tariff

12Cr UnitedStates v GulfRefining Company 268US 542 546 1925 which held When acommodity shipped

is included in more than one tariffdesignation that which is more specific will be held applicable And where two

descriptions and tariffsare equally appropriate the shipper is entitled tohave applied the one specifying the lower

rate

Rule 2 0revised page 52 of the tariff which requires descriptions in the bill oflading to be specific reads

18 F M C
346 FEDERAL MARITIME COMMISSION

Consequently under the rule of the Western Publishing Comp

case supra respondent s failure to charge the rate applicable to r

bing compounds rather than that applicable to polishes al

induced by PPG s misdescription of the cargo in the shipping do

ments constitutes a violation of section 18b

3 of the Act

PPG is therefore awarded reparation in the amount of 293 69w

interest at the rate of 6percent per annum if not paid within 30 d

of the date hereof

S VERA K GENOVESE

Settlement Office

Wherever this TarUF provides different rates an a

commodity dependent upon type orkind and adequate d

tion is not stated in thebill of lading it willbe assu ed that it isof a

type orkind subject to the highest of th

provided for thecommodity and freight wUl be assessed accordingly The rule hQwever is not appUcable 

compounds rubbing and polishes are listed as separate commodities so that neither ls atype or kind 

other

18 F
347

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 306 1

BRODHEAD GARRETT CO

v

UNITED STATES LINES INC

ADOPTION OF DECISION

Apr 41975

BY THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman Ashton C Barrett George H Hearn and

Clarence Morse Commissioners

This claim for reparation was instituted by complaint filed alleging

improper imposition of charges by Respondent United States Lines

Inc USL on two shipments of Complainants cargo one from New

York to Pusan Korea and one from New York to Manila The parties

consenting this claim was disposed ofunder the informal procedure

provided in Rule 19 ofthis Commission s Rules ofPractice and Proce

dure 46 CFR 502 301 304 Settlement Officer Royal W Skiles issued

his decision denying reparation on both claims This Commission

served notice ofits determination to review that decision

FACTS

Involved here are two shipments of Brodhead Garrett Co BG

cargo on USL vessels in August and November 1972

The first shipment was transported aboard USL vessel AMERICAN

APOLLO on bill oflading dated August 26 1972 from New York to

Pusan Korea and was described on the bill of lading as 6 Boxes

Refrigeration Demo Training Units Parts This cargo was ratedby

the carrier per tariff item 2455 Refrigerating Equipment with Re

frigerating Machinery Installed at the noncontract rate of 10145

per ton applicable to Nagoya Yokohama Kobe Osaka Manila and

101 8
348 FEDERAL MARITIME COMMISSION

Hong Kong Additionally there was assessed a 2 00 per ton ou

charge for the transportation to Pusan Korea

BG alleges that the error involving charges on this shipmen

volves around the carrier s failure to assess a special rate 

contract applicable to cargoes shipped to Nagoya Yokoh

Kobe and Osaka that rate being 78 75 per ton Tariff rule 

mandates that special rates shall apply only on the commo

and to the port for which the special rate is named On this 

the Settlement Officer found BG s claim to the special rate 

supported by the record

The second shipment was transported from New York to M

on USL s AMERICAN AQUARIUS on bill of lading dated Nov

ber 4 1972 This cargo was described allegedly since the b

lading is not found in the record as one box Electronic or E

tric Demo Training Parts Unit Laboratory Apparatus and Eq

ment Respondent USL applied its Cargo N O S rate of 11

per ton to this cargo since the tariff contains no such commo

description under any of the words used in this description BG 

serts that the Machinery and Parts NOS rate should have 

applied As to this claim the Settlement Officer found merely 

USL s assessment of the Cargo N O S rate was proper 

thereupon denied reparation on both claims

DISCUSSION AND CONCLUSION

The claim here involved does not in terms allege an overch

based on violation by the carrier of the mandate of section 18 o

Shipping Act 1916 Rather although seeking reparation for inco

assessment ofrates the complaint alleges that the rates assessed w

1 unduly disadvantageous In violation of section 15

2 uI iustly prejudicial In violation of section 16

3 unjust and unreasonable In violation of section 17

We concur in the finding of the Settlement Officer with respe

denialofreparation The Complainant here has failed to show on 

record any misapplication ofrates by the carrier in violation ofse

18 b 3 ofthe Shipping Act 1916 Neither has there been shown 

treatment either of cargoes or shippers which differs from tha

ceived by him As a result Complainant has failed to meet the bu

ofproof which he is bound to sustain in order to recover damage

the unduly disadvantageous unjustly prejudicial and unjust or un

sonable treatment by the carrier that he alleges

The applicable tariffis Far East Conference Tariff 25 FMC No 3

18 F
SEAL S FRANCIS C HURNEY

Secretary

BRODHEAD GARRETT CO v UNITED STATES LINES 349

The decision ofthe Settlement Officer is therefore adopted as the

decision of the Commission and is attached hereto and made a part

hereof

18 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 306 I

BRODHEAD GARRETI CO

v

UNITED STATES LINES INC

Reparation denied

1

Decision ofRoyal W Skiles Settlement Officer

Brodhead Garrett Co BGC claims 362 39 as reparation 

United States Lines Inc USL for alleged overcharges on two 

ments which moved on USL s vessels during August and Novem

1972 respectively The first shipment moved on USL s bill of la

NY PUSAN 10 dated August 26 1972 from New York to P

Korea aboard the AMERICAN APOLLO The second shipm

moved on USL s bill oflading NY MANILA 5 dated Novemb

1972 from New York to Manila aboard the AMERICAN AQUAR

With respect to the firstmovement the shipper described his c

on the bill oflading USL B L 10 as 6 Boxes Refrigeration De

Training Units Parts which was rated by the carrier per 

2455 Refrigerating Equipment with Refrigerating Mach

Installed at Page 328 of Far East Conference Tariff 25 

No 5

As developed from the information on the bill of lading the 

ment measuring 609 cubic feet rated onameasurement basis of1

measurement tons @ 103 45 per ton plus a bunker surcharg

34 26 resulted in freight charges totaling 1 609 29 The rate ap

to this shipment to Pusan Korea under tariff Item 2455 wa

non contract rate of 101 45 per ton of2 000 pounds or40 cubic 

whichever produces the greater revenue applicable to Group 1 

of Nagoya Yokohama Kobe Osaka Manila and Hong Kong p

2 00 per ton differential over the rate to Group 1 ports constit

Both parties having consented to theinformal procedure of Rule 19 8 46 CFR 502 3014 as amen

decision will be flnal unless the Commission elects to revIew it within 15 days from the date of service t

350

18 F
BRODHEAD GARRETT CO v UNITED STATES LINES 351

the 103 45 rate to Pusan per the Outport Section Page 16 of the

tariff

The second shipment from New York to Manila on the AMERICAN

AQUARIUS was described on the Invoice and Shipping Advice fur

nished by BGC as One Box Electronic Demo Training Parts Unit

Laboratory Apparatus and Equipment In the absence ofany tariff

listing under electronic demo units training laboratory

apparatus or equipment the carrier rated the shipment under

Item 535 Cargo Not Otherwise Specified at Page 172 ofFar East

Conference Tariff 25 F M G No 5 Accordingly the shipment mea

suring 75 cubic feet rated on a measurement basis of 188 measure

ment tons @ 115 85 per ton plus a

currency surcharge of 760

resulted in freight charges of 224 82

BGC s claim for an adjustment of rates was not based upon an

alleged error in weight measurement or description There is no

dispute as to the bill oflading weight measurement or description of

the commodity involved The issue here is one concerning the correct

application of the tariff rates for the commodities named in the bills

ofladings BGC and USL agree that the shipper was not a contract

signatory and was only entitled to the conference non contract rate

which was applied on both shipments

The first shipment described on the bill oflading as Refrigeration

Demo Training Units Parts was rated under Item 2455 of the

applicable tariffunder the category of Refrigerating Equipment with

Refrigerating Machinery Installed viz at the corresponding rate

of 103 45 per ton weight or measurement BGC does not object to

the rating of the commodity under Item 2455 but claims that the

special rate non contract under the same item at 78 75 per ton

should apply The tariff clearly indicated that the special rate only

applies to the ports ofNagoya Yokohama Kobe and Osaka TariffRule

1 e entitled Special Rate Authorizations provides that special rates

published herein apply only on the commodity and to the port for

which the special rate is named BGC s claim in the amount of

345 61 representing the difference between the freight charges on

this shipment in the amount of 1 609 29 actually assessed at the rate

of 103 45 and that alleged to be applicable to the shipment in the

amount of 1 263 68 if the special rate of 78 75 per ton were applied

is not supported by the record

As to the second shipment the claim submitted by BGC described

the commodity as shown on USL s bill oflading NY MANILA 5 as

one Box Electric Demo Training Unit The shipper s invoice con

tains a description ofthe commodity as One Box Electronic Demo

Training Parts Unit Laboratory Apparatus and Equipment USL

18 F M C
352 FEDERAL MARITIME COMMISSION

j

1

i

i

1

I

I

I

rated this shipment under Item 535 Page 172 ofthe Far East Con

ence Tariff 25 FMC No 5 Cargo not otherwise specified 

shipment measuring 75 cubic feet rated on a measurement bas

188 measurement tons @ 115 85 per ton plus a

currency charg

7 60 resulted in freight charges of 224 82

The tariffspecified that Item 535 applies on commodities not 

ered by individual rate items BGC alleges that the shipment sh

have been rated per Item 1650 Page 274 of the tariff which ap

to Machinery and Parts N O S USL submits that there is no lis

under the tariff that fits the description electrical demo u

training laboratory apparatus or equipment as furnishe

BGC and that there was no alternative than to apply Item 

Cargo not otherwise specified A check of the tariff supports U

position On the other hand there clearly is nothing to indicate 

the commodity would fall within the description of those inclu

under Item 1650 Machinery and Parts N O S

Based on the evidence of record USL s

rating of this commo

underItem 535 of the tariff in effect at the time of shipment ra

than under Item 1650 as urged by BGC was proper Accord

BGC s claim in the amount of 16 78 representing the differe

between the freight charges inthe amount of 224 82 as actually r

under Item 535 and that alleged to be applicable to the shipme

the amount of 208 04 had the rate under Item 1650 been app

is not supported by the record

A proper case for the recovery of reparation in the amoun

362 39 claimed by BGe for overcharges on the two shipment

volved in this proceeding not having been made BGC s claim 

reparation in the amount stated is denied

S ROYAL W SKILES

Settlement Offic

18 F 
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 315 1

KRAIT FOODS

18 FMC

353

v

ATLANTIC CONTAINER LINE INC

PARTIAL ADOPTION OF DECISION

Apr 41975

BY THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman Commissioner George H Hearn concur

ring Commissioners Ashton C Barrett and Clarence Morse con

curring and dissenting

This complaint filed by Kraft Foods Kraft seeks reparation in an

aggregate sum of 39152 from AtlanticContainer Lines Inc ACL

The claims are premised on alleged overcharges assessed by ACL

upon four shipments ofKraft cargo transported by ACL from New

York to LiverpooJ 1 The parties agreeing this case was conducted as

an informal proceeding pursuant to Rule 19 ofthe Commission s Rules

ofPractice and Procedure 46 CFR 502 30l through 502 304 Settle

ment Officer Cary R Brady served his decision in this matter and the

Commission thereafter determined to review the proceeding

FACTS

The first shipment in question consisted offour pallets of Mayon

naise 2

moving on bill oflading dated July 13 1972 Thebill oflading

showed this shipment to weigh 7678 pounds and to measure 193

cubic feet To this shipment ACL applied a tariffrate of 58 75 per 40

cubic feet resulting in a charge of 283 47 Kraft alleges that this

application was in error that the appropriate rate is 58 75 rated on

lEach shipment will be discussed separately for the sake of clarity

Descriptions conform to those Oh the respective bills oflading
354 FEDEIl tL MARITIME COMMISSION

I

the basis of cargo measuring not over 60 cu ft per 2240 lbs 3

that the overcharge resultingfrom this misapplication is 82 09 K

notified AC1 of its olaim on November 9 1913 and was advise

the basis ofACL s tariff Rule 22 that the claim was denied Rul

provides in pertinent part

Claims for alijustmenMltftfelght ilillIaedfill allegl9ferrors In weight or 

surertlelit wlllnofbec6hsidered unless presented to the carrier In writing befo

shipment Involved leaves the custody of the carrier

On the Jasis of this Commission s decision in Kraft Foods v M

McCormack Lines Inc Settlement Officer Brady upheld ACL 

fusal to affordreparation to Kraft Foods and denied Krafts claim 

Brady sreasoning was that

The Issue In dispute Involves the question of the appropriate stowage factor fo

shipment which Is a weight and measurementproblem Both elements of the ca

weight measurement claim rule being present the respondent ACL had no al

tive but to comply with the rules oE the conference tarilf and deny the claim

The second and third shipments disputed here were compose

four pallets of Preserves each Each ofthese shipments was asse

a rate of 58 75 per 40 cubic feet the rate applicable to foods

N O S packed measuring over6Deu ft per 2240 lbsTariffitem 

3567 Kraft alleged that the properrate tohave been applied was 

applicable to Preserves Fruit Packed Jams Jellies Marmala

Tariff item No 6905 at 67 7Tper 2240 pounds The claims 

these shipments were timelyffied within the two year statutory 

frame of the Act hut were rejected by ACLon the basis of its 

Rule 22 precluding consideration orclaims notilled witlrln six mo

of the date of shipment

Nothing that in misdescription cases the Cammission will no

cept such aforeshortened limitation and will allow consideratio

claims timely filed under the Act on their merits Settlem

Officer Brady denied these two claims on their merits Mr B

concluded that a

simple description Preserves did not meet 

requisite heavy burden of proof as to the contents of these 

ments to permit the claimant to prevail In short he conclu

that the bm of lading nescriptionof Preserves was not 

Ciently precise to meet the tariff description of Preserves F

Jellies Jams Marmalades

The fourth andfiniil claiIJlrelates to a shipment of two palle

mustard weighing3000 poundsand measuring 132cubicfeet 

j

1i

Tho ratoI58 78 I tholll11lo for FoodstufF N OS packed but difFers In IllappUcallon TarlfFitom N

appUes to foadstufs measurinl notover60 cu ft per 2240lb on a we ght basis while item No 3567 

to foodstuff measuring over60 cu ft per 2240 Ibs toon aW1M basis

18 F 
KRAFT FOODS v ATLANTIC CONTAINER LINE INC 355

assessed a tariff rate of 76 75 per 40 cubic feet to this shipment the

rate applicable to Spices N O S including flavoring salts powders

and pastes packed Item No 8232 Kraft alleged that the proper rate

to be applied was 58 75 applicable to Foodstuffs packed N O S

measuring over60 cu ft per 2240 lbs W 1M Kraft supports its claim

on the basis ofthe bill of lading description mustard and its asser

tion that the cargo was common table mustard Respondent ACL has

denied the claim again on the basis of tariff Rule 22 and offered no

rebuttal to Krafts assertions

After some discussion of Webster s Dictionary definitions Mr

Brady concluded that mustard could be a spice or it might not be

As a result Mr Brady determined that as the N O S rate could be

applicable and that under general principles where two descrip

tions and tariffs are equally appropriate the shipper is entitled to

have applied the one specifying the lower rate citing US v

Gulf Refining Company 268 U S 542 546 1925 He therefore

allowed reparation on this claim

DISCUSSION AND CONCLUSION

As noted in the Facts above Settlement Officer Brady denied repa

ration on the first shipment mayonnaise on the basis ofour previous

decision inKraft Foods We are unable to agree with the conclusion

of Mr Brady that Kraft Foods provides the applicable precedent

ACL s bill of lading shows that the four pallets ofmayonnaise mea

sured 193 cubic feet and weighed 7678 pounds There is no dispute

as to these figures The disputed fact is simply whether that measureI

weight combination equals not over60 cu ftper 2240 lbs item No

3566 or over 60 cu ft per 2240 lbs item No 3567 A simple

mathematical computation would seem to be all that is required to

resolve this issue There is in essence here no claim for adjustment

offreight charges based on alleged errors in weight or measurement

What is involved here is a dispute concerning the mathematics Reso

lution ofthis issue in no way places the carrier in an untenable defen

sive posture as was the case in Kraft Foods We therefore award

reparation as sought with regard to the claim based on the shipment

ofmayonnaise

As to the second and third claims preserves Settlement Officer

Brady denied reparation on the basis that Complainant had had not

shouldered the heavy burden of proofrequired to warrant recovery

We have reviewed the facts of this particular shipment and conclude

that Mr Brady s determination of this issue is correct There is no

18 F M C
356 FEDERAL MARITIME COMMISSION

evidence ofrecord by which Complainant has attempted to cor

rate its claim based on the bill oflading description preserves W

out such corroboration we are unable to find that Complainan

done more than make a

simple assertion of its position This doe

reach the standard required of complainants in such cases in ord

have such a claim sustained

The fourth claim relating to mustard we find to have been 

rectly determined by Settlement Officer Brady Under the fac

seems apparent that there could have been applied to this shipm

either of two possible tariff rates This being so we concur with 

Brady that the shipper is entitled to have the lower rate applied t

cargo

I

Commissioners Ashton C Barrett and Clarence Morse concur

and dissenting

The case should be remanded

Claim No 1 was denied by the Settlement Officer on the bas

Kraft Foods 14 SRR 603 Docket No 73 44 report served Marc

1974 reconsideration denied December 13 1974 and Rule 22 o

tariff However there is no disputeas to the weight and measurem

of the shipment which appear on the bill of lading The comp

alleges amathematical errorin the computation ofthe stowage fa

or disregard of that factor in assessing the rate Kraft Foods th

fore does not apply Reparation should be granted upon a pr

computation of the stowage factor

Claims Nos 2 3 and 4 alleging misclassification due to faulty 

scription were denied for lack ofproof Tariff Rule 3

fprovides 

adjustments in the description in the bUI oflading may be made 

if in conformity with the export declaration The proceeding sh

be remanded with instructions to take official notice of the t

obtain copies ofexport declarations and decide the claims accor

to Rule 3 f The Kraft Foods SfJpra principle would apply to t

claims

An order to show cause should issue to require Atlantic Conta

Line Inc to show cause why it should not be held in violation o

Shipping Act 1916 for its failure to adhere to the requiremen

Tariff Rule 3 f and in particular to verify the bill of Iading des

tion with the United States Export Declaration

I

i

I

I

I

1

j

Commissioner George H Hearn concurring

I concur in the resolution of all the claims herein As to the 

shipment however Ifind no basis for differentiating the matter f

18 F
KRAFT FOODS v ATLANTIC CONTAINER LINE INC 357

the Kraft case Kraft Foods v Moore McCormack Lines Inc 14 SRR

603 606 1974

SEAL S FRANCIS C HURNEY

Secretary

18 F M C
FEDERAL MARITIME COMMISSION

WASHINGTON D C

INFORMAL DOCKET No 315 I

KRAFT FOODS

v

ATLANTIC CONTAINER LINE INC

DECISION OF CAREY R BRADY SETILEMENT OFFICE

Reparation Awarded in Part

Kraft Foods seeks reparation in the amount of 39152 from Atl

Container Line for alleged overcharges on four shipments w

were carried on the respondent s vessels between June and Oc

of 1972

The flrstshipment consisted of4 pallets ofmayonnaise which m

from New York New York to Liverpool England under respon

bill of lading dated Jttly 13 1972 The bill of lading indicated 

weight of the shipment to be 7678 pounds and measured 193 

feet Respondent rated the shipment at 58 75 per 40 cubic fe

accordance with item No 3567 North Atlantic United King

Freight Conference Tariff No 47 FMC 2 5th revised page 118 

58 75 cubic rate applied to Foodstuffs N O S Packed Meas

over 60 cubic feet per 2240 lbs W1M

Complainant contends that when computing the stowage f

the measurement per 2240 lbs for this shipment is 46 eft and w

come under tariff item 3566 which provides that Foodstuffs N 

Packed Measuring Not over60 cu ft per 2240 Ibswould be 

on a weight basis Under the 58 75 rate per 2240 lbs the Com

ant would save 82 09

Respondent based its denial of the claim solely upon Rule 22 o

conference tariff which provides that

Both parties having consented to the informal procedure of Rule 19 46 CFR 502 3014 this dec

be final unless the Commission elects to review it witWn US days from the date of service

358

18 
KRAFT FOODS v ATLANTIC CONTAINER LINE INC 359

Claims for adjustment offreight charges if based on alleged errors in weight or

measurement will not be considered unless presented to the carrier in writing before

the shipment involved leaves the custody ofthe carrier Any expenses incurred by the

carrier in connection with its investigation of the claim shall be borne by the party

responsible for the error or if noerror be found by the claimant All other claims for

adjustment of freight charges must be presented to the carrier in writing within six 6

months after date of shipment Underscoring supplied

The Commission in Kraft Foods v Moore McCormack Lines Inc

Docket No 7344 1974 affirmed the principle that a carrier is

strictly bound to adhere to the terms ofthe tariff as filed unless in

an appropriate proceeding we find tariffrules and regulations to be in

violation of the Shipping Act 1916

Rule 22 explicitly provides that claims based on alleged errors in

weight or measurement have to be presented to the carrier prior to

the time the shipment has left the custody ofthe carrier

By letter dated November 9 1974 the complainant filed its claim

with the respondent approximately 15 months after the shipment had

left the custody ofthe carrier The issue in dispute involves the ques

tion of the appropriate stowage factor for the shipment which is a

weight and measurement problem Both elements of the carrier s

weight measurement claim rule being present the respondent had no

alternative but to comply with the rules ofthe conference tariff and

deny the claim

Accordingly in light of the strict tariff adherence mandate of

Docket No 73 44 and because ofthe complainant s failure to comply

with the tariffrule the instant claim for reparation is denied

Respondent in denying claims on the last three shipments relied

solely on the provisions ofRule 22 which require that claims be filed

within six months after the date ofshipment However the Commis

sion has ruled that a claim filed within two years from the date the

cause ofaction arose must be considered on its merits Colgate Palmol

iveCompany v United Fruit Company Informal Docket No 115 I

served September 30 1970 The claims have been filed within the

statutory two year limit and thus will be treated on the merits

The second shipment consisted of 4 pallets of preserves which

moved from New York New York to Liverpool England under re

spondent s bill oflading dated June 28 1972 The shipment weighed

8000 pounds and measured 251 cubic feet The third shipment con

sisted of4 pallets ofpreserves which moved from New York New York

to Liverpool England underrespondent sbill oflading dated October

2 1972 The shipment weighed 8160 pounds and measured 252 cubic

feet Respondent applied the rate of 58 75 per 40 cubic feet to both

shipments the applicable rate for Foodstuffs N O S Measuring over

Iii F MC
360 FEDERAL MARITIME COMMISSION

60 CFT per 2240 lbs in accordance with item 3567 North Atla

United Kingdom Freight Conference Tariff No 47 FMC 2 5t

vised page 118

The claimant contends that the respondent misclassified both 

ments and should have applied the rate of 67 75 per 2240 pou

the rate for Preserves Fruit Packed Jams Jellies Marmalade a

tariffitem no 6905 4th revised page 156 ofthe conference tariff 

a classification would have saved the claimant 250 03 in fre

charges

In support of its position claimant offers the bill of lading w

describes the shipment as Preserves and nothing more

The test the Commission applies on claims ofreparation invo

alleged errorof a commodity tariff classification is what the clai

can prove based on all the evidence as to what was actually ship

even if the actual shipment differed from the bill of lading des

tion 2

However the claimant has a heavy burden of proof onc

shipment has left the custody of the carrier 3

The tariff contains a specific commodity rate for Preserves F

and in that classification identifies the specific type of preserve

which the rateis applicable namely Jams Jellies orMarmalade 

bill of lading description of the shipments as Preserves stan

alone does not meet the heavy burden of proof required when 

commodity rate in issue is very clear as to what shipments are eli

underitem no 6905 Consequently the shipment must take the F

stuffs N O S rate Claim denied

The fourth shipment consisted of 2 pallets of Mustard w

moved from New York New York to Liverpool England unde

spondent s bill of lading dated June 1 1972 The shipment wei

3 000 pounds and measured 132 cubic feet Respondent rated 

shipment at 76 75 per 40 cubic ft the applicable rate for Sp

N O S including Flavoring Salts Powders and Pastes Packed 

accordance with item no 8232 North Atlantic United King

Freight Conference Tariff No 47 FMC 2 4th revised page 17

Theclaimant alleges the shipment wasmisclassified and should

been rated under Foodstuffs N O S Packed Measuring not ov

cu ft per 2240 lbs as peritem no 3567 5th revisedpage 118 o

conference tariff Such a classification would have saved the clai

59 40 in freight charges

The claimant in support of its contention offers the bill of la

ZWestern Publishing Company Incorporated v Hapag Uoyd A G informal dooket No 283 I Com

Order served May 4 1972

3Colgate Palmolive Co v United Fruit Co informal docket No US I Commission Order served Se

30 1970

18 F
KRAFT FOODS v ATLANTIC CONTAINER LINE INC 361

description of the commodity as Mustard coupled with the state

ment the mustard is common table mustard and should be rated as

Foodstuffs N O S The respondent has remained silent

Webster s Third New International Dictionary ofthe English Lan

guage Unabridged 1964 defines mustard as

Ia A pungent yellow condiment consisting of the pulverized seeds of the black mus

tard or sometimes the white mustard either dry ormade into a

paste as with water or

vinegar and sometimes adulterated with other substances as turmeric or mixed with

spices Underlining Supplied

Itfurther defines spice as

la any of various aromatic vegetable products as pepper cinnamon nutmeg mace

all spice ginger cloves used in cookery to seasonfood and to Ilavor foods as sauces

pickles cakes Underlining Supplied

and condiment as

a all appetizing and usu pungent substance of natural origin as pepper vinegar or

mustard Underlining Supplied

Webster s New World Dictionary College Edition 1968 defines

these words as

Mustard 2 the ground or powdered seeds of this plant often prepared as a

paste

used as a pungent seasoning forfoods Underlining Supplied

Spice l

a

any of several vegetable substances as clove cinnamon nutmeg pep

per etc used to season food Underlining Supplied

Condiment spice seasoning a

seasoning or relish for food as pepper mustard

sauces etc Underlining Supplied

From the commonly accepted definitions of mustard and spice

coupled with that of condiment it is reasonable to conclude that

mustard depending upon its final commercial form and use could be

a spice and then again it may not

Based upon the paucity ofevidence ofrecord the bill oflading the

commodity shipped could reasonably come under either general

N O S classification In United States v Gulf Refining Company 268

U S 542 546 J 925 it was held that When a commodity shipped

is included in more than one tariff designation that which is more

specific will be held applicable And where two descriptions and tariffs

are equally appropriate the shipper is entitled to have applied the one

specifying the lower rate In the instant case both classifications may

well cover the commodity Therefore the shipper is entitled to the

lower rate ofitem no 3567 Reparation is granted in the amount of

59 40

S CAREY R BRADY

Settlement Officer

18 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 316 1

P P G INDUSTRIES INC

v

UNITED STATES LINES INC

ADOPTION OF DECISION

Apr 41975

I

1

I

1

1

1I

1

i

I

j

j

j

iI

i

1I

1

BY THE COMMISSION Helen Delich Bentley Chairman Jame

Day Vice Chairman Ashton C Barrett and Clarence Mo

Commissioners Commissioner George H Hearn dissenting

This case arose from a claim by P P G Industries Inc PPG aga

United States Lines Inc USL forreparationofan alleged overcha

levied by USL on containerized cargo ofPPG The cargo in ques

was one 40 foot container house to housemovement shipper s l

and count said to contain 15pallets offtbreglass yam Thebilloflad

described the cargo tendered to the cartier as one 40 conta

said to contain 15 pallets ofFiber Glass Yarn with a gross weigh

38 999 pounds and measuring 1700 clibic feet Min

To this cargo USL applied the tariff rlltea pplicable to YARNS V

Fibreglass The tariff 5th rev page 218 provided as follows

YARNS VIZ

Fibreglass

32381 I Min 1700 cuft percontalner elf 10 30 72 W M R 2

ElF Nov 15 1972 min deleted W M R 2

The carrier assessed a total charge of 1232 50 on the basis of 1700 

ft Min at 29 00 per 40 cu ft

PPG allegedin its claim that the rate applied was erroneous beca

the minimum cubic foot requirement had been deleted from the ta

on November 15 1972 while the shipment was made on Decem

1 1972 PPGallegesthat USL should have applied a rate of 29 00 

362

18 FM 
SEAL S FRANCIS C HURNEY

Secretary

P P G INDUSTRIES v UNITED STATES LINES 363

ameasurement of914 cubic feet which represents the actual number

ofcubic feet ofthe cargo inside the container 15 pallets each measur

ing 34 X 72 X 43 914 cu ft So applied the proper charge would

be 662 65 which results in an alleged overcharge to PPG of 569 85

This claim was denied by USL solely on the basis ofits tariff Rule 16

which precludes consideration of any claim by a shipper based on

errors in weight or measurement unless filed before the cargo leaves

the custody of the carrier The claim here was filed onApril 19 1973

regarding a shipment made on December 1 1972 Therefore main

tains USL the claim must be denied

Settlement Officer Juan EPine upheld USL s position on the basis

of Kraft Foods v Moore McCormack Lines Inc Docket No 7344

DISCUSSION AND CONCLUSION

We have reviewed this proceeding in light of the record and the

Kraft Food precedent onwhich Settlement Officer Pine premised his

decision We concur in the finding ofMr Pine that Kraft Foods pro

vides the controlling principle and that reparation should be denied

The facts present a classic example ofshipper allegation that the cargo

had an inside measurement of914 cubic feet while the shipping docu

ments show only a 1700 cubic foot minimum description thus leav

ing the carrier in a wholly defenseless position There would seem to

be no possible way for a carrier in such circumstances to rebut the

allegations of a shipper This is precisely the difficulty sought to be

remedied in Kraft Foods which we find to be applicable here

The decision ofthe Settlement Officer is therefore adopted as the

decision of the Commission and is attached hereto and made a part

hereof

Commissioner George H Hearn dissenting

Based upon my dissenting opinion in Kraft Foods v Moore McCor

mack Lines Inc 14 SRR 603 606 1974 Iwould grant reparation in

this case

18 FM C
I

I

I

I

I

I

I

j

FEDERAL MARITIME CO

I

1

I

l

i

I

1

j

I

INFORMAL DOCKET No 31 I

P P G INDUSTRIES INC

v I

UNITED STATES LINES IN

1

Reparation denied i

I

i

Decision ofJuan E Pine Settlement Officer

t

P P G Industries Inc PPG claims 569 5 as reparation f

United States Lines Inc USL for an alleged eight overcharge 

a shipment ofone 40 foot containerloaded with 15 pallets offiber 

yarn moving viathe AMERICAN LEADER fr m Savannah Geo

to London England The shipment moved on ill of lading No 4

dated December 1 1972

The description on the bill of lading covers ne 40 container 

to contain 15 pallets of fiber glass yarn mea uring 1700 cubic 

minimum weighing 38 999 pounds USL plied the Fiberg

Yarns rate of 29 00 per tonof2 240 pounds 01 0 cubic feet as sh

in Item 52381 on 5th Revised Page 218 of its reight Tariff Num

FMC 27 As the shipment weighed 174 tons an cubed 42 5 meas

ment tons as developed from the above info mation on the b

lading USL assessed the rate on a measureme tbasis ie 42 5 m

surement tons @ 29 00 per ton resultingin f eight charges tota

1 232 50

USL rejected PPGs claim citing Rule 16 of riginal Page 12 o

tariff which provides in part

Claims for acijustments of freight charges if based on lleged errors in weig

measurement will notbe considered unless presented to t

e Carrier inwriting b

the shipment involved leaves the custody of the Carrier

Both parties having consented to the informal procedure of Rule 19 a 0 the Commission s Rules of P

and Procedure 46 CFR 1502 301 304 this decision wHl be flnal unless the mmission elects to review it 

15 days from the date of service thereof

364

18 F 
P P G INDUSTRIES v UNITED STATES LINES 365

The billoflading was dated December 1 1972 and according to the

record PPG s claim was filed against USL onApril 19 1973

PPG claims that the shipment did not measure 1700 cubic feet and

has submitted a packing slip which indicates the shipment consisted

of15 pallets each measuring 34 X 72 X 43 for a total measure

ment of914 cubic feet In addition PPG has submitted a

copy ofits

invoice which covers 15 pallets of fiber glass yarn Itis alleged that

based on the measurementof914 cubic feet the above rate of 29 00

should have been assessed on 22 85 measurement tons freight charges

totaling 662 65

PPG correctly points out that Item 52381 of the subject tariff

showed two different rate applications for Fiberglass Yarns i e

Min 1700 cuft per container Elf 10 30 72 WM 2900

Elf Nov 15 1972 min deleted WM 29 00

Both rates cover service one and apply only when shipper loads and

consignee unloads at their risk and expense off the premises of the

ocean carrier The bill of lading was stamped HOUSE TO HOUSE

MOVEMENT and SHIPPER S LOAD STOWAGE COUNT As

the bill oflading was dated December 1 1972 the tariff minimum of

1700 cubic feet per container was no longer in effect

However as USL was tendered the trailer already loaded the rate

assessed was for 1700 cubic feet as was indicated on the bill oflading

In Kraft Foods v Moore McCormack Lines Inc Docket No 73 44

1974 the applicable tariff contained a rule which prohibited consid

eration of claims for overcharges based on alleged errors in weights

or measurements unless the claim had been submitted to the carrier

before the cargo had left his possession The Commission upheld the

carrier s denial of the shipper s claim on the basis of thatrule

Accordingly in light of the strict tariff adherence mandate of

Docket No 73 44 and because ofPPG s failure to comply with tariff

Rule 16 this claim for reparation is denied

S JUAN E PINE

Settlement Officer

18 FM C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 318 1

KRAFT FOODS

V

ATLANTIC CONTAINER LINE

ADOPTION OF DECISION

Apr 41975

By THE COMMISSION Helen Delich Bentley Chairman Jame

Day Vice Chairman George H Hearn Commissioner Com

sioners Ashton C Barrett and Clarence Morse concurring

PROCEEDING

The claim in this docket results from tr n8portation by Atla

Container Line ACL of two Kraft Foods Kraft cargoes on Jun

1972 and August 31 1972 Each cargo consisted of four palle

preserves

l Thebill oflacling for each sliipment ofpreserves descr

the goods simply as Preserves and showed each to weigh 8 

pounds and measure 251 cubic feet

To these two identical shipments ACL applied its Foodstuffs N

packed measuring over60 cu ft per 2240 Ibs rate of 58 73 pe

cu ft or 2240 pounds whichever yields the greater revenue

2 

resulted in a charge on each shipment of 368 65 or a total charg

737 30 Kraft alleges that the appropriatecharge wasthat applic

to Preserves Fruit Packed jams jellies and marmalade 3 That 

is 67 75 per ton of 224Q pounds and its application would h

resulted in acharge of 24196 per shipment or 483 92 total cha

On this basis Kraft alleges that it was overcharged by 253 38 

difference between 737 30 and 483 92

Insupport ofits claim Kraft submitted copies of the bills of la

I Each cargo also contained 3 pallets of honey butthere 1s no dJspute as tothe charges assened by ACLo

pallets in either shipment

INorth Atlantic VK Freight ConferenceTariff No 47 FMC2 ltem 3l567i 11th revised page 118

ald Item 6905 4threv page 156

RR
DISCUSSION AND CONCLUSION

KRAFT FOODS v ATLANTIC CONTAINER LINE 367

and export declarations The bill of lading describes the goods as

Mixed Preserves PEC The export declarations show the preserves

to be described by Schedule B commodity number 053 3010 This

number referstojams marmalades and fruitjellies apple butter fruit

butter grapelade guava jelly and preserves

ACL denied Krafts claim on the basis ofits Tariff Rule 22 which

precludes consideration of such claims unless filed within six months

ofthe date of shipment Since the Commission has repeatedly disal

lowed the defense Settlement Officer Pine rejected this defense and

proceeded to the merits of the claim In so doing and on the basis of

Kraft s documentation and Schedule B commodity description Settle

ment Officer Pine found Kraft to have sustained its burden ofproving

the actual character of the goods shipped Reparation was therefore

awarded in the sum of 253 38

We concur inthe Settlement Officer s determinationthat complain

ant has sustained its burden ofproof and should be awarded reparation

as claimed We note that the facts of this case are virtually identical

to those in our recent Informal Docket 315 1 served April 8 1975

with one notable exception In 315 1 we disallowed the reparation

claimed because of failure by complainant to corroborate its allega

tion In the present proceeding complainant has provided the cor

roborating data which was missing in 315 1 Here Kraft has substan

tiated its bill of lading description by means of export declarations

containing descriptive Schedule B commodity numbers We find as

did the Settlement Officer that this substantiation is sufficient to meet

the heavy burden which must beborne by complainant to warrant the

relief sought

The decision of the Settlement Officer is therefore adopted as the

decision ofthe Commission and is attached hereto and made a part

hereof

Commissioners Ashton C Barrett and Clarence Morse concurring

Reparation should be awarded but on grounds other than those

relied on by the majority

The Settlement Officer without explicitly mentioning official no

tice requested a

copy of the export declaration and found that it

supported the claim He then awarded reparation on the ground that

the shipper had proven his case citing Western Publishing Co v

Hapag Lloyd Informal Docket No 283 1 served May 4 1972 5

4The shipper offered no other evidence than the bill of lading in both Informal Dockets Nos 315 1 and 318 1

sThe burden of proofapplication was repudiated by the more recent Kraft decision 14 SRR 603
368 FEDERAL MARITIME COMMISSION

Tariff Rule 3 f provides that adjustments in the description in 

bill of lading will be accepted only if in conformity with the ex

declaration This means that the export declaration and Schedu

commodity number determine the classification ofthe cargo for ra

purposes

Here the Schedule B commodity number supports the shipp

claim Reparation should be awarded on this ground in conform

with Rule 3 f

of the tariff and in accordance with the principle

Kraft Foods 14 SRR 603 Docket No 7344 served March 26 1

reconsideration denied December 13 1974

SEAL S FRANCIS C HURNEY

Secretar

18 F 
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 318 1

KRAFT FOODS

lR Mr 369

v

ATLANTIC CONTAINER LINE

Reparation awarded

Decision ofJuan E Pine Settlement Officer 1

Kraft Foods Kraft claims 253 38 as reparation from Atlantic Con

tainer Line Ltd ACL for alleged freight overcharges on two identi

cal shipments

The first shipment consisted offour pallets ofmixed preserves and

three pallets of honey which moved from Elizabeth New Jersey to

Liverpool England via the S S ATLANTIC CONVEYOR on Bill of

Lading No A20047 dated June 1 1972 The second shipment con

sisted of four pallets ofpreserves and three pallets ofhoney which

moved from Elizabeth New Jersey to Liverpool England via the S S

ATLANTIC CAUSEWAY on Bill ofLading No A20108 dated August

31 1972

As the shipments are identical and the applicable rate was not

changed between the bills oflading dates ofJune 1 1972 and August

31 1972 this decision will be addressed to the shipment which moved

viathe S S ATLANTIC CONVEYOR butwill apply to both shipments

With respect to the three pallets ofhoney weighing 6 000pounds and

measuring 188 cubic feet thereis no disagreement between Kraft and

ACL over the assessment ofthe rate of 58 75 per ton of40 cubic feet

or 2240 pounds whichever yields the higher rate under Item 3567

lBoth parties having consented to the informal procedure of Rule 19 a

of the Commission s Rules of Practice

and Procedure 46 CFR 502 301 304 this decision will be final unless the Commission elects to review it within

15 days from the date ofservice thereof

ACLdenied the claims for Kraftsfailure to submit them within six months from the date of the shipment as

required by Rule 22 of the tariff The Comission has ruled however that a

claim filed within two years from the date

the cause of action arose must be considered on its merits Co gate Palmolive Company vUTlited Fmit Company

Informal Docket No 115 served September 30 1970 The billsof lading here are dated June 1 and August 31

1972 the complaints were filed on November 7 1973
370 FEDERAL MARITIME COMMISSION

on 5th Revised Page 118 of the North Atlantic United Kingd

Freight Conference Tariff No 47 FMC 2 which covers Foodst

N O S Packed Measuring over 60 cu ft per 2240 lbs As these th

pallets ofhoney measured 188 cubic feet or 70 15 cubic feet per l

ton of2240 pounds the rate wasassessed on ameasurementbasis 

188 cubic feet @ 58 75 per 40 cubic feet or 276 13

However the four pallets ofpreservesweighing 8 000 pounds m

suring 251 cubic feet or 70 3 cubic feet per long ton of 2240 pou

were also assessed the same Foodstuffs rate Le 251 cubic fee

58 75 per 40 cubic feet or 368 65

A review of the e

port declaration reveals that Kraft identified 

Schedule B Commodity Number thereon for preserves as 053 30

The Statistical Classification of Domestic and Foreign Commod

Exportedfrom the United States indicates that this Commodity N

ber coversjams marmalades and fruitjellies apple butter fruit bu

grapelode guava jelly and preserves

Item 6905 on 4th Revised Page No 156 of the above tariff wh

Kraft alleges should have been used names a rate of 67 75 per 

of2240 pounds applying to Preserves Fruit Packed Jams Jellies 

Marmalade Under this tariff description 3 5714 long tons 8 00

2240 of preserves at 67 75 per long ton would have been asse

transportation charges of 24196

Kraft may have anticipated that the Preserves description on 

bill of lading was adequate However the description on the bi

lading should not be the single controlling factor rather the te

what claimant can now prove based onall the evidence as to what 

actually shipped even if the actual shipment differed from the b

lading description 3 Here the Schedule B Commodity Num

removes any doubt as to the commodities which moved Theref

the application ofthe lower rate covered by Item 6905 of the sub

tariff as indicated by Kraft is proper

The two identical shipments of preserves were assessed fre

charges of 368 65 X 2 737 30 As indicated above the fre

charges that should have been assessed were 24196 X 2 483 

Kraft was overcharged 253 38

Kraft is therefore awarded reparationinthe amount of 253 38 w

interest at the rate of6

percent per annum if not paid within 30 d

of the date hereof

S JUAN E PINE

Settlement Office

3 WesternPublishing Company Inc v Hapag Llovd AG Informal Docket No 283 1 served May 4 1

18 F
v

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 320 1

OCEAN FREIGHT CONSULTANTS INC

ATLANTIC CONTAINER LINE LTD

ADOPTION OF DECISION

Apr 41975

BY THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman George H Hearn Commissioner Commis

sioners Ashton C Barrett and Clarence Morse dissenting

PROCEEDING

The proceeding was instituted by complaint filed alleging over

charges by respondent Atlantic Container Line Ltd ACL on two

shipments of diesel engines moving aboard respondent s vessels from

New York to Liverpool Both parties consenting this proceeding was

conducted under the informal procedure provided for in Rule 19 of

our Rules of Practice and Procedure 46 CFR 502 301 304 Settle

ment Officer Lloyd H Lipkey issued his decision in this case and the

Commission thereafter determined to review the case

FACTS

Ocean Freight Consultants Inc OFC as assignee oftitle to claims

of the Caterpiller Tractor Company claims 184 04 as reparation

from Atlantic Container Line Ltd for alleged overcharges on two

shipments ofdiesel engines The first shipment wasdescribed onACL

Bill ofLading A 20062 dated September 6 1972 as 1 SKDBX D 343

ENGINE INTERNAL COMBUSTION DIESEL TYPE ENGINE

and moved from New York to Liverpool aboard the ATLANTIC

SAGA The second shipment was described onACL Bill of Lading A

371

lRFMr
372 FEDERAL MARITIME COMMISSION

20105 dated September 13 1972 as I BOX D334 ELEC S

ENGINE ONLY INTERNAL COMBUSTION DIESEL TYPE 

GINE and moved from New York to Liverpool aboard the ATL

TIC CONVEYOR

The Hrst shipment ACL B L A20062 was rated by the carrie

Engines viz Internal Combustion including gas or oil and p

N O S per Item 3097 North Atlantic UNITED KINGDOM Fre

Conference Tariff No 47 FMC 2 NAUK FMC 2 at 70 25 pe

cubic feet On that basis charges of 247 63 were billed and colle

on 141 cubicfeet Thesecond shipment ACL B LA 20105 wasr

by the carrier as Machinery viz N O S per Item 5350 of the t

82 50 per 40 cubic feet and charges of 323 81 were billed 

collected on 157 cubic feet

OFC claims that the rate applicable to both shipments under 

tariffis Item 3062 which provides a 52 00 W Mcharge applicab

Engines viz Diesel and parts Application of this rate rather 

those assessed results in a saving to shipper consignee of 18

sought to be recovered here OFCsupports its claim by submitting 

pertinent tariff commodity rates and certain promotional pamph

ofthe manufacturer showing the product to be diesel engines

ACL denied the claim originally on the basis ofits Tariff Rule 22 

rev page 21 ofthe tariff which prohibits adjustment offreight cha

unless the claim is presented to the carrier within six months o

date of shipment The carrier has presented no further support o

position during the proceeding

Settlement Officer Lloyd H Lipkey rejected the carrier s relia

ofits rule 22 to defeat the claim Citing Colgate Palmolive Comp

v United Fruit Company Mr Lipkey noted that such a tariff 

could not be used by a carrier to defeat the claim of shippers 

within the two year statutory period provided in section 22 Ship

Act 1916 He thereupon awarded reparation as sought

i

i

i

DISCUSSION AND CONCLUSION

We have reviewed this proceeding and concur in the decision o

Settlement Officer that reparation be awarded However we 

that the Settlement Officer s decision rests solely on the ground 

the rule relied upon by respondent may notbe used to preclude r

in a case such as this Implicit in this conclusion is the determina

that complainant has also met its burden of proof We agree but 

of the opinion that an affirmative Hnding that complainant has 

tained its case should be made explicit We are convinced that c

Informal Docket 115 1 Initial Decision served May 20 1970 decision on remand issued October 6 

18 F
SEAL S FRANCIS C HURNEY

Secretary

OCEAN FREIGHT Y ATLANTIC CONTAINER LINE 373

plainant has adequately met his burden of proof that respondent s

proferred defense is unsatisfactory and that therefore reparation

should be granted With the minor modification the decision of the

Settlement Officer is adopted as the decision of the Commission and

is attached hereto and made a part hereof

Commissioners Ashton C Barrett and Clarence Morse dissenting

On the basis ofthis record we could not grant reparations Rather

we would take official notice of Tariff Rule 3 f and remand this pro

ceeding to the Settlement Officer TariffRule 3 frequires the carrier

to verify the Bill ofLading description with the United States Export

Declaration and request amendmentofthe Bill ofLading if this requi

site has not been carried out Such verification has not been made

Under the circumstances Isbrandtsen Co Inc v United States 96

F Supp 883 at 892 1951 affd per curiam 342 U S 950 compels

remand in order that a full record be established

The burden ofproofissue therefore is misplaced and need not be

considered

18 F M C
j

FEDERAL MARITIME COMMISSION

WASHINGTON D C

INFORMAL DOCKET No 320 1

OCEAN FREIGHT CONSULTANTS INC

V

ATLANTIC CONTAINER LINE LTD

DECISION OF LLOYD H LIPKEY SETILEMENT OFFICE

Reparation Awarded

Ocean Freight Consultants Inc O F C as assignee of titl

claims of the Caterpiller Tractor Company claims 184 04 as rep

tion from Atlantic Container Line Ltd ACL for alleged overcha

on two shipments ofdiesel engines The first shipment wasdescr

on ACL Bill of Lading A 20062 dated September 6 1972 as 

SKDBX D 343 ENGINE INTERNALCOMBUSTION DIESELT

ENGINE and moved from New York to Liverpool aboard the 

LANTIC SAGA The second shipment was described on ACL B

Lading A20105 dated September 13 1972 as IBOX D334 EL

SET ENGINE ONLY INTERNAL COMBUSTION DIESEL T

ENGINE and moved from New York to Liverpool aboard the 

LANTIC CONVEYOR

The first shipment ACL B L A 20062 was pparently rated by 

carrier as Engines viz Internal Combustion including gas oroil 

parts N O S per Item 2097 North Atlantic UNITED KINGD

Freight Conference Tariff No 47 FMC 2 NAUK FMC 2 Charge

247 63 were billed and collected for 141 cubic feet compute

3 525 measurement tons M T at 70 25 per M T 40 cubic fee

The second shipment ACL B LA20105 wasapparently rate

the carrier as Machinery viz N O S per Item 5350 of the above c

tariff Charges of 323 81 were billed and collected for 157 cu 

computed as 3 925 M T at 82 50 M T

IBoth parties having consented to the informal procedure of Rule 19 46 CFR 1502 3014 as amend

decision will be final unless the Commission elects to review it within 15 days from the elate of service th

374

18 F
OCEAN FREIGHT v ATLANTIC CONTAINER LINE 375

The above cited applicable tariff provides in Item 3062 a specific

contract rate for Engines viz Diesel and parts of 52 00 WM The

application of this rate in the above computations results in charges

of 183 30 and 204 10 or overcharges of 64 33 and 119 71 totaling

184 04

The carrier in response to the claim does not dispute the facts set

forth above but merely states our only reason for denying the

claim from Messrs Ocean Freight Consultants was North Atlantic

United Kingdom Freight Conference Tariff Rule 22 A

The above referenced tariff rule cited in error as 22 A is correctly

identified as Rule 22 on 1st Revised Page 21 NAUK FMC 2 in effect

and applicable for shipments on September 6and 13 1972 provides

in pertinent part

22 Overcharges Claims for Adjustment in Freight Charges

All other claims for adjustment of freight charges must be presented to the Carrier

in writing within six 6 months after date of shipment

The Commission treated this argument in Colgate Palmolive Com

pany v United Fruit Company 2 where it held that a tariff rule could

not be used to defeat the two year statute of limitation provided in

Section 22 oftheShipping Act 1916 46 U S c821 The Commission

in its Order to Remand in that case stated

Claims involving alleged errors of weight measurement ordescription shouldnot

be disapproved solely on the procedural basis of a carrier imposed time limitation

provision Emphasis in original Commission Order served September 30 1972 II

SSR 971

Since the claim was brought before the Commission within the

two year period provided by Section 22 of the Shipping Act 1916 3

the respondents denial ofthe claim is invalid

On the basis ofthe foregoing it is found that respondent collected

a greater compensation for the service performed than specified in its

duly filed tariff in violation of Section 18b ofthe Shipping Act 1916

Reparation in the amount of 184 04 is awarded

S LLOYD H LIPKEY

Settlement Officer

2Informal Docket 115 1 Decision o the Examiner served May 20 1970 11 SSR 623 Decision on Remand

served October 6 1970 11 SSR 981 seeProposed Rule TimeLimit 011 Filing Overcharge Claims 12 FMC298 308

1969

3The bills of lading are dated September 6 and 13 1972 and the complaint was filed July 25 1974

18 FM C
I

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 321 1

ABBOTT LABORATORIES

v

ALCOA STEAMSHIP COMPANY

ADOPTION OF DECISION

Apr 41975

j

BY THE COMMISSION Helen Delich Bentley Chairman James 

Day Vice Chairman George H Hearn Commissioner Com

sioners Ashton C Barrett and Clarence Morse dissenting

Abbott Laboratories Abbott filed a claim alleging overcharge 

Alcoa Steamship Company Alcoa on a shipment ofAbbott s go

The claim was handled as an informal proceeding and Settlem

Officer Waldo R Putnam issued his decision awarding reparatio

sought On its own motion the Commission thereafter determine

review this proceeding

I

j

1

FACTS

Under bill of lading dated January 12 1973 Abbott shipped 

Alcoa vessel cargo measuring 352 cubic feet and weighing 8

pounds from New Orleans to La Guaria Venezuela The shipment 

described on the bill of lading as follows

i

I

i

j

I

42 Fibre Drums

2 Stl Drums

2 Cartons

Fibre Drums

48 Pkgs

To this shipment Aloca applied the Drugs harmless Class 1 t

rate of 100 50 per 40 cubic feet l which resulted ina freight cha

of 884 40

Raw Drugs

Raw Drugs

Raw Drugs

Raw Drugs

lUS Atlantic Gulf Venezuela and Netherlands AntUles ConferenceTariff S B VEN IIFMC No 2

376

18 F 
ABBOTf LABORATORIES v ALCOA STEAMSHIP COMPANY 377

By claim flied August 15 1973 Abbott sought adjustment ofthese

freight charges from Alcoa In support of its claim Abbott tendered

its Export Declaration Shipper s Invoice and Packing Slip The Export

Declaration shows what was described on the bill of lading as 48

packages ofraw drugs to be actually the following

Description

a I Fibre Drum Betaine

Hydrochloride

b 23 Fibre Drums Cerelosc

Anhydrous

c I Carton Span 80

d 6 Fibre Drums Vetrawet K

e

3 Fibre Drums Calcium

Phosphate

f

I Fibre Drum INOSITOL

g

6 Fihre Drums KAOLIN

CLAY

h I Carton Magnesium Chloride

i

I Fibre Drum Mama

Copolymer emulsions

m I Steel Drum Corn Oil

k I Fibre Drum Sodium

Bicarbonate

I 2 Fibre Drums Sodium Citrate

m I Steel Drum Sodium Lactate

Schedule B No Schedule B DescriJJtioll

512 0380 Synthetic Or anic Medicinal Chemicals NEe in bulk

0619010 Dextrose including cornsugar except pharmaceutical

554 2036 Surf Actv Agents NEC Except Detergents Acid Type

Clenrs Text Leath Finish Agents

554 2022 Detergents Anionic Synthetic Organic Bulk

514 7099 Inorganic Chemicals NEe Except Medicinals

5411040 Vitamin B Except BI Bl2 Bulk Except Pack forretail

Sale or prep or 2 or more subst

276 2140 Kaolin Clay including Calcined

514 7099 same as e above

5812028 no Schedule B No 5812027 is described as Polyvinyl

Polymer Copolymer Resins NEC in unfinished forms

422 9020 Corn Oil

514 8000 Inorganic medicinal chemicals NEe in bulk

512 0380 Synthetic Organic Medicinal Chemicals NEe

512 0380 same as 1 above

On this basis Abbott alleged that many of these items qualify for

rates other than the rate applied Abbott claims that Items a f

1 and m were correctly assessed the Class 1 rate Item b should

have been assessed the Class 13 rate applicable to Dextrose rated

as Glucose Items c and d should have been assessed the Class

11 rates applicable to Detergent NOS Item e should have been

assessed the Class 16 rate applicable to Calcium Phosphate actual

value not over 300 per freight ton Item g

should have been as

sessed the Class 22 rate applicable to Kaolin Clay NOS Item h

should have been assessed the Class 6 rate applicable to Magne

sium Chloride Item i should have been assessed the item 495

rate applicable to Resins synthetic Item j

should have been as

sessed Class 7 rate applicable to Corn Oil and Item k should have

been assessed the Class 7 rate applicable to Sodium Bicarbonate

On this basis Abbott alleges that it would have been charged

478 04 less which it now seeks in reparation

Alcoa rejected Abbotts original claim on the basis ofits tariff Rule

11 which provides

18 FM C
378 FEDERAL MARITIME COMMISSION

Claims by shippers for adjusbnent of freight charges will be considered only w

submitted inwriting to the carrier within six months of date of shipment Acljustm

of freight based on alleged error in description may be declined unless applicatio

submitted in writing sufficiently inadvance to permit verification of description be

the cargo leaves the carrier s possession

In its defense before this Commission Alcoa continues to rely on 

above rule but also cites its tariff Item 2 m which provides

Wherever this tariffprovides different rates on a commodity dependent upon typ

kind and adequate description is not stated In the Billof Lading it will beassumed 

It Is of a

type or kind subject to the highest rates provided onthe commodity and fre

will be assessed accordingly

DISCUSSION AND CONCLUSION

Having dismissed these defenses of Aloca the Settlement Offi

concluded that Abbott had met its burden ofproving the characte

the goods actually transported As a result he awarded reparation 

sought We concur in that conclusion but we are constrained to n

and discuss further certain points of this case

The Settlement Officer also found Alcoa s reliance upon its ta

Rule 11 is misplaced and we agree In cases involving amisdescript

ofgoods such a rule may not be used to shelter a carrier from 

obligationto pay a legitimate overcharge claim which is timely fi

with this Commission 2 Moreover we believe that the discretion

nature ofthe tariffprovision renders itunenforceable InP PG Ind

tries Inc v Royal Netherlands Steamship Co 3

we discussed at len

the use ofthe word may in a rule similar to thatrelied upon byAlc

and stated that such a discretionary rule wasin effect no rule 

all The Commission further stated that it would not in the futu

permit carrier reliance upon rules which allow for discretion i

carrier s consideration or denial of claims that such rules will no

and of themselves be permitted to defeat a claim for overcharge

This Commission also has previously considered the argument t

one s tariff requires that inadequate cargo description on the bil

lading be assessed the highest tariffrates In Western Publishing Co

pany Inc v Hapag Lloyd A G

4

we determined that notwithsta

ing the description in the bill oflading what actually moves as sho

by all the evidence determines the applicable rate and has sin

upheld that rationale 8

ISee Informal Docket No 292 1 served February 14 1973 PPG IndustrltlSv Flom MercanteGrancolomb

St

3Informal Docket No 290 1 served May 16 1974

4Infonnal Docket No 283 1 served May 4 1972

BSee Docket No 7336 Abbott Laboratories v Unltsd States Lines Inc served March 20 1975

18 FM 
ABBOTI LABORATORIES v ALCOA STEAMSHIP COMPANY 379

Finally this Commission cannot disagree with the showing ofAb

bott Laboratories that the products shipped were something other

than raw drugs Nor can we dispute the showing by Abbott that

there are lesser rates more appropriately applicable to these various

commodities We are dismayed however by Abbott Laboratories

slipshod procedures The willy nilly description of such items as corn

oil and detergents as raw drugs on a bill of lading is inexcusable

Consequently we sympathize with a carrier who relies upon a drug

producing firm s own description of packaged goods as raw drugs

and assesses a raw drugs tariffratebased thereon While we are unable

to gainsay the decision here and feel obliged reluctantly to approve

it we also feel that some expression ofdisfavor towards Abbott s

prac

tice is mandated here

Were this Commission clearly possessed ofequitable powers incases

such as this we would be disposed to deny this claim The actions of

Complainant in its description of its own products should under eq

uity preclude its recovery Being unable so to judge this case we

hereby adopt the decision ofthe Settlement Officer which is attached

hereto and made a part hereof

Commissioners Ashton C Barrett and Clarence Morse dissenting

We would deny the granting ofreparation for the reasons stated in

our concurring and dissenting opinion in Economics Laboratory v

Prudential Grace Lines Informal Docket No 301 F Adoption ofIni

tial Decision served March 20 1975 and in accordance with Kraft

Foods v Moore McCormack Lines Inc 14 SRR 603 Docket No 73

44 report served March 26 1974 reconsideration denied December

13 1974 Tariff rules should be applied unless found to be unlawful

after a proceeding affording due notice to the carrier and an opportu

nity to be heard on that issue

The majority erred by ruling out the possible application of the

second sentence ofTariff Rule 11 6

citing PP G Industries Inc supra

In that case the Commission on May 16 1974 found that prospec

tively a tariffrule is unlawful in those instances where the use ofthe

word may is included as it is in Tariff Rule 11 Here claimant s

cause of action originated prior to service ofthe Commission s Order

of Remand in that case Claimants bill of lading is dated January 12

1973 It is clear that the cargo had left the carrier s possession long

TartffRule 11

Claimsby shippers foradjushnent offreight charges will be consideredonly whensubmitted inwriting tothe carrier

within sixmonths of date of shipment Adjustment of freight based on alleged error in description may be declined

unless application issubmitted inwriting sufficiently in advance topermitverification of description before the cargo

leaves the carrier s

possession

18 F MC
1

380 FEDERAL MARITIME COMMISSION

before May 16 1974 The Commission s pronouncement in P P 

Industries Inc supra had not been served and therefore does n

apply to a claim which was alrady barred under Tariff Rule 11 s

ond sentence having left the carrier s possession without submiss

ofwritten claim for adjustment of freight charges for alleged erro

description Hence we should accord the same treatment to 

parties in this proceeding as that accorded in PPG Industries In

supra Foreclosing the opportunity for aconfer nce or carrier 

apply perhaps a discretionary rule in the presentproceeding wo

be a denial oEdue process

The case should be remanded to the Settlement Officer with 

structions to proceed as directed in the Order on Remand served M

16 1974 in PP G lndustries Inc supra Le determine whether 

not this respondent has infact consistently relied upon Ta

Rule 11 in past claims of the sort provided hereOnly after t

determination has been made should the merits of the case be 

cided

SEAL S FRANCIS C HURNEY

Secretary

I

1

18 FM 
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 321 1

ABBOTT LABORATORIES

V8

ALCOA STEAMSHIP COMPANY

DECISION OF WALDO R PUTNAM SETILEMENT OFFICER 1

Reparation Awarded

Abbott Laboratories Abbott claims a refund in the amount of

478 04 from Alcoa Steamship Company Inc Alcoa for an alleged

freight overcharge on a shipment of raw drugs carried from New

Orleans Louisiana to La Guaira Venezuela aboard Alcoa s vessel

IRMGARD REIGH under Bill ofLading No llN8611 dated Janu

ary 12 1973

In support of its claim for refund Abbott submitted a copy of its

Claim No A2904 Bill of Lading Export Declaration Commercial

invoice and packing list and a

copy ofAlcoa s denial ofthe claim based

solely upon its tariff item 2

barring consideration of claims not filed

within six months subsequent to the date of sailing 3

Abbott alleges

that the shipment consisted of various commodities as shown on the

Commercial Invoice and the description of each item was shown on

the Export Declaration duly identified by correct Schedule B num

ber The bill of lading described all commodities as Raw Drugs

applying Class 1 rate 352 at 100 50 884 40 whereas the tariff

provides specil1c rates for various commodities in question which re

sults in lower freight charges amounting to 406 36 A claim for refund

lBoth parties having consented tothe informal procedure of Rule 19 46 CFR 502 3014 as amended this

decision wiU be nnal unless the Commis sion elects to review it within 15 days from the date of service thereof

lItem 11 U S Atlantic Gulf Venezuela andNetherland Antilles ConferenceTariff S B VEN Il FMCNo 2

3The Commission has ruled that a claim filed within two years from the date the cause of action arose must be

considered on its merits Co gate Palmolive Comparty v United Fruit Company Informal Docket No 115 1 served

September 30 1970 Thebill of lading here is dated January 12 1973 thecomplaint was filed on August 14 1974

United States Bureau of the CElnsus Schedule B Statistical Classification of Domestic andForeignCommodities

Exported from the United States In preparing theShipper sExport Declaration formerchandise exported from the

United States it is the exporter s

responsibility to insertthe Schedule Bcommodity numberfor the item exported

18 FM C

381
382 FEDERAL MARITIME COMMISSION

of 478 04 was submitted to Alcoa Steamship Company onAugust 

1973

Inreply to the complamt Alcoa stated that the claim wasdenied 

accordance with the following tariff provisions

1 Claimantfailed to flle timely notice ofits claim pursuant to Item 11 of United St

Atlantic Gulf Yenezuela and Netherlands Antilles Conference TarilF S B YEN 

FMC No 2 Item 11 reads in part Claims by shippers for aijustment of freight cha

will be considered only when submitted writing to the carrier within six months of 

of shipment

2 Item 1l of the aforementioned tarifFfurther reads in part Aijustment of fre

based on alleged error In description may be declined unless application Is submi

in writing sufficiently inadvance to permit verillcation of description before the ca

leaves the carrier s possession

3 Item 2 paragraph m of the tarifF reads Wherever this tarilF provides dilFe

rates on a commodity dependent upon type or kind and adequate description is 

stated in the BUI of Lading it will be assumed that It Is of a

type or kind subject to 

highest rates provided on the commodity and freight wUl be assessed accordingl

Further Alcoa denies the allegations of the complaint with resp

to collecting charges in excess of those lawfully applicable on a sh

ment described on the bill oflading as Raw Drugs Freight charg

wereproperly assessed on the basis ofthe descriptionset forth on 

bill of lading

Alcoa s reliance upon the so called six month rule requires lit

comment While strictadherence to the published tariffprovision w

required by the carrier such rule has no force nor effect upon Alco

obligationto pay a legitimate overcharge claim which is timely ro

with this Commission 5

Alcoa s defense based upon the tariffprovision stating that A

justment of freight based upon alleged error in description may 

declined unless application is submitted in advance to permit verifi

tion of description before cargo leaves the carrier s poSsession 

derscoring supplied is also rejected In PP G Industries Inc v Ro

Netherlands Steamship Co 6

the Commission discussed atlength 

use of the word may in a rule similar to that relied upon by Alc

and stated that such a discretionary rule was in effect no rule 

all The Commission further stated that it will not in the futu

permit carrier reliance upon rules which allow for discretion in 

carrier s consideration ordenial of claims and that suchrules will 

in and of themselves be permitted to defeat a claim for overcharg

The Commission also has previously considered the Alcoa defen

that its tariff requires that inadequate cargo description on the bil

See Footnote 3and Informal Docket No 292 1 served February14 1973 PP G lndunrl6a vFlottJ Mer

Grancolomblana SA

eSee Informal Docket No 290 1 served May 16 1974

18 F M
See Informal Docket No 283 1 served May 4 1972

ABBOTf LABORATORIES vALCOA STEAMSHIP COMPANY 383

lading dictates the assessment ofthe highest tariff rates In Western

Publishing Company Inc v Hapag Lloyd AG

7

the Commission

determined that notwithstanding the description in the bill oflading

what actually moves as shown by all the evidence determines the

applicable rate Theevidence indicates thatAlcoa had sufficientdocu

mentationbefore it to have properly ratedeach and every commodity

involved on an individual basis

Section 18b 3 ofthe Shipping Act 1916 46 US c 817 b 3 pro

hibits a carrier from collecting more or less or a different compensa

tion than providedin its tariffand ineffect at the time ofthe shipment

Abbotts claim a

copy of which was served upon Alcoa included a

rating ofthe individual commodities in accordance with the Schedule

B commodity numbers shown on the shipper s Export Declaration

with reference to the applicable tariffitems Alcoa in its reply did not

take exception to the rates alleged to be correct by the complainant

Accordingly in the absence ofevidence to the contrary the involved

shipment was improperly rated by the carrier and the shipper is

entitled to reparation in the amount of 478 04 and it is so ordered

S WALDO R PUTNAM

Settlement Officer

18 FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 742

MERCK SHARP DOHME LA CORP A DIVISION

OF MERCK COMPANY

v

FLOTA MERCANTE GRANCOLOMBIANA S A

Actionby carrierin charging transported goods described as Lactalbumin Powde

the Cargo N Os rate was proper and is not a violation of section 18 b 3 o

Shipping Act 1916

Manuel Blasco for Complainants Merck Sharp Dohme 

Corp

ADOPTION OF INITIAL DECISION

Apr 241975

i

I

I

I

I

BY THE COMMISSION Helen Delich Bentley Chairman Jame

Day Vice Chairman Commissioners Ashton C Barrett and C

ence Morse concurring Commissioner George H Hearn 

curring

By complaint filed with the Commission on January 14 1974 M

Sharp Dohme LA Corp Merck claimed that Flota Merca

Grancolombiana S A Flota a common carrierby water between 

United States Atlantic and Gulf ports to Baranquilla Cartagena 

Santa Marta Colombia and a member of the East Colombia Con

ence had on three occasions assessed freight rates higher than t

properly applicable in accordance with the issued tariff Admini

tive LawJudge John E Cograve in his Initial Decision served Octo

18 1974 dismissed the complaint The proceeding is before u

exceptions filed by Merck to which no reply was received

384

18 F
FACTS

MERCK CO v FLOTA MERCANTE GRANCOLOMBIANA 385

The threeshipments at issue moved from New York to Baranquilla

Colombia and the specific commodity shipped was described on the

bills oflading as Lactalbumin Powder 100 Flota rated the ship

ments as cargo N O S This resulted in a higher charge than would

have been the case if the shipments had been classified Powdered

Milk N O S which classification Merck suggested wasproper On the

basis of the above Merck alleged a violation of section 18 b3 of

the Shipping Act 1916 1 and sought reparation in the amount of

1 678 01 which represented the alleged total overchange on the

three shipments

The three shipments in question covered a

span of20 months and

involved bills oflading dated January 6 1972 February 14 1972 and

September 7 1973 The first two shipments were covered by the East

Coast Colombia Conference Freight Tariff FMC No 1 11th Rev

Page 46 effective January 2 1972 2 This tariff contained a rate for

Milk Powdered Plain or Skim N O S not Milk Compounds of

60 80 per 2 000 lbs Item No 595

The applicable tariff at the time ofthe third shipment wasthe East

Colombia Conference Freight Tariff FMC No 1 14th Rev Page 46

effective August 27 1973which contained a rate for Milk Pow

dered orSkim N O S not Milk Compounds of 7100 per 2 000 Ibs

Item No 595

The applicable tariff of N O S rates at the time of all three ship

ments was the East Coast Colombia Freight Tariff FMC No 1 1st

Rev Page 73 effective September 29 1969 which contains a rate for

Cargo N O S Not Dangerous of 87 00 per 2000 Ibs Class or

Item No 1 All the aforementioned are contract rates

INITIAL DECISION AND EXCEPTIONS

Inthe Initial Decision theAdministrative LawJudge denied repara

tion and dismissed the claim

Inrejecting Complainants argument Judge Cograve drew the fol

lowing distinctions

ISection 18b

3 Shipping Act 1916

No Common carrier by water in foreign commerce shall charge ordemand or collect or receiveagreater or

less or different compensation for the transportation of property orfor any service in connection therewith than

the rates and chargeswhich are specified in its tariffson file withthe Commission and duly published and in effect

at the time

Not the 10th Rev effective January 5 1970 as alleged although both revisionscarried the same commodity

description and rate

3Not the 13th Rev effective January I 1973 as alleged again both revisions carried the same commodity

description and rate

18 FM C
386 FEDERAL MARITIME COMMISSION

1

Powdered Milk is dried milk Webster Th rd New International Dictionary o

English Language 1966 Edition Casein Is the chief protein In milk Encyclop

Brlttan ca Volume I Page 324 1973 Edition Albumins are a class of proteins Am

the best known Is lactalbumin in milk Volume V Page 10 Ibid

Merck had argued that Lactalbumin is casein which is coagul

from milk by rennet orby dilute acids flltered and dried Having 

been dried Merck argued this product should be considered to 

powdered milk The Administrative Law Judge did not so f

Rather he found that

1i

1

1

1

i

coagulation orprecipitation of casein from Uquld milk s certainly notdehydr

as contended by complainant Powdered milk Isproduced by dehydration which 

mechanical removalof water Brlttan ca Volume VII Page 180 Coagulation orpr

itation is the change from 8uid to a thickened mass or the separation out In soUd 

from a solution by means of a reagent Lactalbumin casein is produced by che

separation or reaction

Additionally Merck had indicated the use for Lactalbumin is in 

compounding ofadhesives varnishes or ivory substitutes Moreo

in Merck s own evidence attachment G Lactalbumin is liste

Chemicals ratherthan as foods TheAdministrative LawJudge 

that this characteristic of Lactalbumin simply reinforced his find

since the commonly recognized use for powdered milk is nou

ment Further the Administrative Law Judge concluded that w

Lactalbumin to be considered powdered milk the addition to

water shouldreconstitute it liquid milk In fact he found the add

of water to casein would result iIi neither a potable nor a comest

He therefore concluded that Lactalbumin Was notpowdered mi

alleged by erck

Exceptions to the Administrative Law Judge s InitialDecision w

filed by Merck No replies to those exceptions were filed by Flo

In general MercksexQeptions Challenge the Administrative 

Judge s ultimate conclusion that it had not met its burden ofproo

showing that Lactalbumin isaform of powderedmilk Merck arg

that the Administrative Law Judge hadteached hiHlonclusion

strained and unnatural interpretation and construction of the f

and the Tariffprovision Merckbelieves that ithad metits bur

has fully proved that Lactalbumin is Powdered Milk and that 

proper rate for the transported Lactalbumin should have been 

same as that for Powdered Milk

Additionally Merck contends that theAdministrative Law Jud

discussion of the terms coagulation orprecipitation dehydrati

and mechanical removal have nobearing onwhether or not 

talbumin is or is not a form of powdered milk

Inthis connection it is argued that Lactalbumin is powdered 

18 F 

J

1I

I

I

I

I

I

c

j

J

1

j

I

j

i

I
DISCUSSION AND CONCLUSION

MERCK CO v FLOTA MERCANTE GRANCOLOMBIANA 387

formed when milk is coagulated that the curds formed by the use of

dilute acid or rennet change intoa thickened mass and that the liquid

is filtered off and the coagulated milk is dried and powderized

In sUIport ofthis position Merck has raised numerous allegations

offactual error on the part of the Administrative Law Judge These

alleged errors include the following propositions That lactalbumin is

Albumin Milk which is the coagulated curds or casein in milk or

curdled milk that coagulation and curdling is achieved by use of

rennet that the curdled or coagulated Albumin Milk is dehydrated by

filtering off amechanical operation and removing from the milk the

residual waterby evaporation leaving the curds or coagulated milk

that the curds or coagulated milkis further dehydrated by thoroughly

evaporating the residual moisture and that this dehydrated

evaporated Albumin Milk is then powdered becoming Merck alleges

Powdered Milk

Merck further stresses that Milk itself though a foodstuff may and

does have other important uses and that it is classified and listed as

a chemical Thus Merck urges the fact thatAlbumin Milk Powdered

has uses other than as food should have no bearing on the decision

factoFs in this instance

While the discussion above represents a synthesis ofall the excep

tions raised by Merck we have reviewed every allegation of error

whether set forth in the preceding paragraphs or not Any exception

not discussed below was found to raise issues not necessary to the

ultimate disposition of this case or to have been subsumed in the

description of the exceptions above

The principle issue raised by Merck simply stated is whether the

product which comprised the shipment in question consisted in fact

of Powdered Milk so as to qualify for the commodity rate published

inRespondents tariff for that designation

Incases ofthis kind we have established the rule that the determin

ing factor is what the Complainant can prove based upon all the

evidence as to what was actually shipped Informal Docket No 256 1

Union Carbide Inter America v Venezuelan Line Order on Review

of Initial Decision November 12 1973 Western Publishing Co v

Hapag LloydAG Docket No 283 1 Where as here the shipment

has left the custody ofthe carrier and the carrier is thereby prevented

from personally verifying the Complainants contentions we have

held that the Complainant has a heavy burden ofproof and must set

forth sufficientfacts to indicate with reasonable certainty and definite

18 F M C
1

i

388 FEDERAL MARITIME COMMISSION

ness the validity of the claim Western Publishing Co v Hapag Ll

AG supra Johnson Johnson International v Venezuelan Lines 

F M C 84 1973 United States v Farrel Lines Inc 16 F M C 

1973 Colgate Palmolive Peet Co v United Fruit Co Docket 

115 1 Consideration of the evidence submitted by Merck dem

strates that Merck has not met the heavy burden and has failed 

establish with reasonable certainty and definiteness the validity o

claim

There is nothing in the record which persuades us that Lactalbu

and Powdered Milk are synonymous Lactalbumin a protein is 

definition a

compound derived from milk As such it is neither m

nor Powdered Milk 4

Sincethe tariffs inquestion East Coast Colom

Conference Freight Tariff FMC No 1 11th Rev for the first 

shipments and 14th Rev for the third shipment only apply to m

powdered plain or skim which Lactalbumin is not and specific

do not apply to milk compounds which Lactalbumin is we concl

that Merck s claim must be denied

The evidence furnished by Merck clearly does not establish th

shipment described on Respondents bill of lading as Lactalbu

Powder 100 was in fact Powdered Milk which would have b

entitled to a lower rate than what was actually assessed

We note that Complainant s exceptions generally constitute n

ing more than a reargument of contentions already advanced be

the Administrative Law Judge and properly disposed of hyhim

Accordingly we adopt the Initial Decision acopy ofwhich is 

tached hereto and made a part hereof CommissiOnersAshton C B

rett and Clarence Morse concurring

Because of the Administrative Law Judge s reliance on Wes

Publishing Company Incorporated v Hapag Lloyd A G Infor

Docket No 283 1 1972 despite the implications of Kraft Food

Moore McCormack Lines Inc 14 SRR 603 Docket No 7344 rep

served March 26 1974 reconsideration denied December 13 19

we would delete the concluding paragraph ofthe Initial Decisio

the Administrative Law Judge and substitute the following

As in Kraft Foods supra and our dissenting opinion in Oc

Freight Consultants v Royal Netherlands Steamship Comp

Docket No 7239 report served January 30 1975 we appro

these mattersby first determiningif there is a lawfultariffrule appl

See Steadman s Twenty Second EdlHan Medical Di ltDnaf1 1972 which contains thefollowing de6nit

Albumin A typeofsimple protein widely distributed throughoutthe tissues andfluids ofplants and animals 

are soluble in pure water precipitable from a solution by mineral acids and coagulable by heat in acid orn

solution Varieties are found in blood milk and muscle

Lactalbumin The albumin fractionof milk It alters anenzyme Inmilk so that it becomes capable of syn

ing lactose

18 F
SEAL S FRANCIS C HURNEY

Secretary

MERCK CO v FLOTA MERCANTE GRANCOLOMBIANA 389

ble to reparation claims based on asserted errors in weight measure

ment ordescription Ifthere is such lawful rule in the tariff we give

effect to thatrule Absent such tariffrule we then consider the matter

on general principles of tariff classification interpretation There is

such a tariffrule here but it is not applicable under the facts in this

case

Here thereis no claimed errorinweight measurement ordescrip

tion Rather this is a simple factual question whether Lactalbumin is

a form ofpowdered milk That the shipment is Lactalbumin is not

challenged and burden ofproof as to the exact nature ofthe shipment

is not an issue Since the exact nature ofthe shipment is known and

undisputed the only issue here is the simple question whether that

commodity fits withinthe tariff item Milk Powdered Plain orSkim

N O S not Milk Compounds Itdoes not Therefore the complaint

is dismissed

Commissioner George H Hearn concurring

I

agree with the denial ofreparation and although Igenerally con

curin the reasoning ofthe Adoption ofInitial Decision Ido not adopt

the portion ofthe textaccompanying footnote 5ofthe Initial Decision

18 FM C
FEDERAL MARITIME COMMISSION

No 742

MERCKSHARP DOHME LA CORP

A DIVISION OF MERCK COMPANY

v

FLOTA MERCANTE GRANCOLOMBIANA S A

Reparation denied

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE 1

This complaint by Mer lk Sharp Dohme IA Corp Me

against Flota Mercante Grancolombiana S A Flota involves th

shipments evidenced by bills of lading dated January 6 1972 Fe

ary 14 1972 and September 7 1973 Flota has not filed a for

answer but rather relied upon a letter reply denying the claim 

along with the necessity for the s bmission ofclearer copies ofthe 

of lading and a more complete documentation of payment dela

disposition of these claims All the shipments were drums of a c

modity describedas Lactalbumin Powder 100 consigned to Rolda

Cia Uda Barranquilla Colombia Allthe bills of lading are Oc

freight collect or Freight collect Flota rated the shipment

cargo N O S This resulted in a higher charge than would have b

the case if the shipments had been classified Powdered Milk N O 

which classification Merck sugg sts was proper Merck seeks rep

tion in the amount of 1 678 01 which represents the alleged 

overcharge on the three shipments

Merck seeks disposition ofthe complaint under Rule 11 Shorte

Procedure Rules of Practice and Procedure 46 CFR 502 181 W

normally specific consent to the shortened procedure is necessar

view ofthe dispositionofthe claim formal consentwouldonly pro

justice

The shipments span a period oftwenty months The applicable t

I

l

I

I

I

1

I

I

j

IThis decision became the decision of the Commission 4J24 7S

390

18 F
l Both revisionscarried the same commodity description and rate

3

Again both revisions carried the same commodity description and rate

MERCK CO v FLOTA MERCANTE GRANCOLOMBIANA 391

at the time of the first and second shipments was the East Coast

Colombia Conference Freight Tariff F MC No 1 11th Rev effec

tive January 2 1972 not the 10th Rev effective January 5 1970 as

alleged 2page No 46 which contains the rate for Milk Powdered

Plain or Skim N O S not Milk compounds 60 80 per 2000 Ibs as

per Item No 595

The applicable tariff at the time of the third shipment was the East

Coast Colombia Conference Freight Tariff F MC No 1 14th Rev

effectiveAugust 27 1973 not the 13th Rev effectiveJanuary 1 1973

as alleged page No 46 which contains the rate for Milk Powdered

orSkim N O S not Milk compounds 7100 per 2000 lbs as perItem

No 595

The applicable tariff of N O S rates at the time of all three ship

ments wasthe East Coast Colombia Conference Freight Tariff F M C

No 1 1st Rev effective September 29 1969 page No 73 which

contains the rate for Cargo N O S Not Dangerous 87 00 per 2000

lbs Class or Item No 1 All the aforementioned rates are contract

rates

Complainant contends Lactalbumin is casein and therefore classifia

ble as powdered milk The respondent contends Lactalbumin was

properly classified as cargo N O S

Powdered milk is dried milk Websters Third New International

Dictionary ofthe English Language 1966 Edition Casein is the

chiefprotein in milk fincyclopaedia Britannica Volume 1 Page 524

1973 Edition Albumins are a class ofproteins Among the best known

is lactalbumin in milk Volume V Page 10 Ibid

In complainants attachment D a

copy of pages 33 and 34 of a

chemical dictionary Lactalbumin is described as casein coagulated

from milk by rennet orby dilute acids filtered and dried The coagula

tion or precipitation of casein from liquid milk is certainly not dehy

dration as contended by complainant Powdered milk is produced by

dehydration which is the mechanical removal of water Britannica

Volume VII Page 180 Coagulation or precipitation is the change

from fluid to a thickened massor the separation out in solid form from

a solution by means ofa reagent Lactalbumin casein is produced by

chemical separation or reaction

Again complainants attachment D indicates the use for Lactalbu

minis in the compounding ofadhesives varnishes orivorysubstitutes

Moreover in complainants attachment G Lactalbumin is listed under

Chemicals not foods The commonly recognized use for powdered

milk is nourishment Further evidence of the difference between

18 FM C
392 FEDERAL MARITIME COMMISSION

powdered milk and Lactalbumin is the fact that the addition ofw

to powdered milk reconstitutes it liquid milk whereas the additio

water to casein would result in neither a potable nor a comesti

Claims for reparation based onmisclassincation may be prove

evidence of what was actually shipped even though the actual 

ment may be other than that described on the bill oflading 4 Th

to be distinguished from claims for reparation based onmismeas

ment ormisweighing 5 However the claimant has a heavy burde

proof once the shipment has left the custody of the carrier 6 Here 

burden ofproof ofshowing that Lactalbumin is a form ofpowd

milk has notbeen met and accordingly the complaint is dismi

5 JOHN E COGRAVE

Administrative Law Judg

WASHINGTON D C

October 18 1974

I

J

Westem Publishing Company Incorporated vHapag Lloyd A G Informal Docket No 283 1 19

Kraft Foods v Moore McConnack Lines Inc Docket No 73 44 March 26 1974

BColgate Palmolive Co v United Fruit Co Informal Docket No 115 1 1970

18 
18 F MC

393

FEDERAL MARITIME COMMISSION

DOCKET No 73 24

AGREEMENT No T 26352 PACIFIC MARITIME

ASSOCIATION FINAL PAY GUARANTEE PLAN

Agreement No T 26352 which provides for the formula for assessment of PMA

members to fund PMA ILWU Pay Guarantee Plan designed to compensate long

shoremen for reducedworkopportunities caused by technological advances inthe

shipping industry and for lack of work arising from conditions for which the

industry as a whole is responsible found lawful with respect to its application to

automobiles

The benefits of doubling productivity through use of RolRo vessels as well as the

constantly increasing use of such vessels justify assessment of automobiles at an

effective rate one and one halfthat imposed on breakbulk cargoes Responsibility

for loss in manhours moreover is directly attributable to use of RoIRo a techno

logical advance in automobile carriage Thus assessment against automobiles is

reasonable and proper under section 17 Shipping Act 1916

Comparisons of treatment of other categories of cargo demonstrate automobiles treated

at least as advantageously under formula as other classes of cargo Thus even

under broad construction assessment does notsubject automobiles to any undue

or unreasonable disadvantage within the meaning of section 16 Shipping Act

1916

Agreement No T 26352 approved pursuant to section 15 Shipping Act 1916 as not

shown to be contrary to sections 16 or 17 orotherwise violative ofthat Act

Edward D Ransom and Robert Fremlin for Pacific Maritime Associ

ation and its members

HerbertRubin Cecelia H Goetz and Alan A D mbrosio for Wolfs

burger Transport Gesellschaft m b h

Donald J

Brunner Paul J KaUer and David Fisher as Hearing

Counsel

REPORT ON REMAND

fun 23 1975

By THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman Ashton C Barrett Commissioner 1

ICommissioner Clarence Morse did not participate
394 FEDERAL MARITIME COMMISSION

We instituted this proceeding onMay 4 1973 pursuant to sections 

and 22 of the Shipping Act 1916 the Act to determine whet

insofar as it applies to the carriage of automobiles an agreem

between the members ofthe Paci6c MaritimeAssociation PMA c

taining a formula by which PMA members are assessed to cover 

tain longshoremens bene6tsunder a collective bargaining agreem

with the International Longshoremens and Warehousemens Un

ILWU should be approved under section 15 ofthe Shipping Act 

Act orwhether on the contrary such agreement is unlawful beca

it is violative of sections 15 16 or 17 of the Act

Following the submission ofa stipulation offacts affidavits dep

tions and an evidentiary hearing Administrative Law Judge 

brook P Bryant the ALJ issued an Initial Decision in which he fo

the PMA assessment formula agreement lawful in its applicatio

automobile carriage Weissued a short order adopting the Initial D

sion

Following a petition to the Court of Appeals for the Distric

Columbia Circuit to review our order by Wolfsburger Trans

Gesellschaft m b h Wobtrans a shipper ofautomobiles and a p

to this proceeding we carefully examined our decision and conclu

that itmight be open to the challenge that it had not fully perfor

the function ofanalyzing the assessment formula agreement to d

mine the relative bene6ts itgranted and burdens it imposed ins

as automobiles are concerned afunction which the Courts have 

cluded is necessary in considering the lawfulness of agreement

locating assessments See Volkswagenwerk v FMG 390 US 261 

1968 Volkswagen Transame1 ican Trailer Transport no v F

492 F 2d 617 630 D C Cir 1974 Transamerlcan affirming A

ment No T 2336 New York Shipping Association 15 F M C 

1972 We therefore moved the Court to remand the proceedin

us for further consideration Both PMA and Wobtrans supported 

motion and the Court remanded the matter to us

On January 23 1975 to insure that the record for decision in 

proceeding be as complete as is necessary for resolution of the 

ofrelative bene6ts and burdens under the assessment allocation 

mula agreement with respect to assessments related to the carria

automobiles we directed allparties to inform us as to what addit

evidence or briefs they wished to submit BothPMA and Wob

responded by stating that they did not wish to submit any addit

material and desired to have the proceeding decided upon the 

ing record 2

i

J

I

c

i

1

1

I

j

The Commission s Hearing Counsel the only other party to thiproceeding did notrespond to our I

with respect to further evidence orbriefs having taken the position earlierin the proceeding that the is

concerning only PMAand Wobtrans and not the assessmentallocation formulaagreement as awhole and 

1Q 
FINAL PAY GUARANTEE PLAN 395

We have accordingly reviewed the entire record carefully consid

ering all evidentiary materials and arguments of the parties Based

uponsuch examination and application ofthe standards enunciated by

the Courts in Volkswagen and Transamerican we conclude that the

assessment allocation formula embodied in Agreement No T 26352

is lawful with respect to its application to automobiles that it violates

neither section 16 nor section 17 of the Act and that it should be

approved pursuant to section 15

FACTS

The factual background and matters relevant to decision here are

for the most part adequately set forth in the Initial Decision and in

nearly all instances have not been excepted to by the parties Our

factual findings here set forth are therefore based largely upon those

ofthe ALl but we have supplemented his findings by additional re

cord material eliminated unnecessary material and corrected er

rors

Agreement No T 2635 2 entitled Agreement between members

of PMA for funding the longshore pay guarantee plan was filed

December 15 1972 for approval pursuant to section 15 of the

Act The agreement if approved would finalize the assessment for

mula used in the Interim Pay Guarantee Plan Agreement No

T 2635 which was first approved by the Commission on May 23

1972 and then later extended The Interim Plan has allowed

PMA to fund the substantial weekly liability owing to the Plan

under the collective bargaining agreement between PMA and the

ILWU

In our order instituting this proceeding we noted that Wobtrans

had filed a protest against the agreement alleging inter alia that the

assessment formula is discriminatory with respect to automobile

cargoes because the liability under the Pay Guarantee Plan is contin

gent upon the lack ofwork opportunities a problem unrelated to the

carriage of automobiles and that Wobtrans denies that automobile

only a

difference in afew thousand dollars depending upon whether the assessment allocation method supported

by PMA orthat supported by Wobtrans prevails does not involve a

matter affecting the public interest

3Wobtrans in its exceptions to the ALls Initial Decision had objected to various findings of the ALJ and his

failuretomakecertain findings which Wobtrans had requested We have in our factualdiscussion here to the extent

relevant and supported by the record corrected and supplementedthe factualfindings in accordancewith Wobtrans

contentions

1

Agreement No T 2635was originally due toexpire onSeptember 30 1972 Byorder ofthe Commission served

September 29 1972 the agreement was extended until December 28 1972 by order served December 27 1972

the agreement was extended until June 29 1973 by further order on May 3 1973 it was extended toDecember

31 1973 and by order of December 27 1973 the agreement was extended until such time as the Commission

approves disapproves or modifies Agreement No T 2635 2
396 FEDERAL MARITIME COMMISSION

carriage receives any benefits proportionate to the burden of asse

ment Also we directed that a determination be made whether a

tomobiles are subject to any undue or unreasonable disadvanta

because of the assessment in violation of section 16 of the Actor su

assessment is an unreasonable practice related to receiving handlin

storing or delivering property in violation of section 17

j

The Parties

PMA is a corporation composed principally ofstevedore compan

and steamship lines and their agents doingbusiness on the West Co

of the United States Its main business is torepresent its members 

negotiations with various maritime unions among whichis ILWU a

to establish policy for its members in matters involving labor and la

controversy As ofearly 1973 126 companies were members ofPM

Wobtrans is a corporation organized and existing under the law 

the Federal Republic of Germany with its principal place of busin

in Wolfsburg Germany Itoperates vessels engaged in the transp

of vehicles from Germany to the Pacific Coast ports among ot

places The cargo is largely if notexclusively Volkswagen automobil

Wobtrans is not amember of PMA but wouldbe eligible for memb

ship if it became a directemployer of longshore labor However 

stevedores handling the cargoes of Wobtrans are members of P

and accordingly are assessed by PMA on

C

the automobiles handled 

them

Wobtrans does not pay any asseSSments to PMA under Agreem

No T 26352 Assessments againstWobtrans stevedore contract

may because ofeconomic necessity be passed along to Wobtrans T

mannerand amount inwhichsuch charge is passed along is negotill

between Wobtrans and its stevedores We here assume that the en

amount of assessment is passed on to Wobtrans by its stevedore c

tractors

j

CCC

I

j

I

I

j

I

I

1

1

l

i

Background ofthe Agreement

PMA and ILWU have entered into a number ofcollective barga

ing agreements going back over many years in which fringe bene

have progressively been included

In 1960 PMA and ILWU agreed upon a new 5 1 2 year frin

benefit plan the Mechanization and Madernization FUnd M 

or Mech Fund which included early retirement supplemental 

tirement and pay guarantee benefits 5 The ILWU agreed to the 

IiAnother M M Agreement was enteredinto tn 1966 to run foranother five years

18 F
FINAL PAY GUARANTEE PLAN 397

troduction of labor saving devices and the elimination of certain re

strictive work practices In return PMA agreed to create the M

M fund to mitigate the impact upon employees of technological

unemployment This agreement has been referred to by the Su

preme Court of the United States as a milestone agreement

which it was hoped would end a long and troubled history of

labor discord on the West Coast waterfront Volkswagen at 263

264 The funding of the M M Agreement was left to PMA

rather than made a part of the collective bargaining agreement A

determination as to the best and most efficient method of funding

the M M Agreement presented PMA with several novel and

difficult problems

In 1960 although mechanized operations had begun on the West

Coast such as the introduction of packaged loads and packaged lum

ber a general mechanization ofthe industry had not yet taken place

The most obvious innovation had been the introduction of container

service by MatsonNavigation Company Matson a PMA member As

a consequence in 1960 and 1961 few if any ofthe West Coast vessel

operators save Matson looked for savings in manhours because of

mechanization Therefore the PMA members were divided into two

groups with opposing interests One group including Matson an

ticipated imminent substantial manhour savings because ofits con

tainerized service The second group representing more than 90 per

cent ofthe steamship company members ofPMA anticipated that for

the immediate future their operations would continue to be a conven

tional breakbulk cargo handling type ofoperation This second group

opposed a manhour assessment basis for funding the M M Agree

ment because under such an assessment their labor costs per ton

would increase as a carrier with an innovative operation reduced its

manhours per ton

To determine an appropriate method offunding the M MAgree

ment PMA formed the M MFunding Committee which considered

a number ofalternative assessment methods The Committee finally

adopted a tonnage formula which had been used for a number ofyears

to collect PMA dues The Committee wasnotcompletely satisfied with

the assessment formula but believed it to be the best available solu

tion

Tonnage was determined for the PMA assessment by the manner

in which a particular type of cargo was manifested for shipment

except automobiles which wereassessed on the basis ofmeasurement

tons regardless ofhow manifested Automobiles can be manifested by

weight by measurement orby unit Inthe foreign trades automobiles

are manifested on a unit basis on chartered ships but weight and

18 FMC
398 FEDERAL MARITIME COMMISSION

1

sometimes measurement is shown In the coastwise trade autos 

manifested and freighted by weight

The decision to collect the M M fund through a

tonnage ass

ment rather than a manhour assessment was due to the belief of 

breakbulk operators who constituted the bulk of the membership 

PMA that increased containerization was going to reduce total m

hours

PMA refused to make any exception to its uniform tonnage 

although it was aware that such inflexibility was unsatisfactory 

refused to do so on the ground that itwasunable to arriveat a ration

for determining how exceptions should be made

At the time a Volkswagen vehicle had an average measurem

tonnage of8 7tons 40 cubic feet equals 1 ton and a weight tonna

of 09 tons 2 000 lbs equals 1 ton Thus an average Volkswag

vehicle had a measurement tonnage approximately ten times 

weight tonnage Vehicles carried by Wobtrans presently have an av

age measurement tonnage of8577 tons 40 cubic feet equals 1 t

and a weight tonnage of 1075 tons 2000 lbs equals 1 ton Thus 

average vehicle carried by Wobtrans has a measurement tonna

approximately 8 times its weight tonnage

PMA did not submit its assessment plan to the Federal Mariti

Commission for approval in accordance with section 15 ofthe Act a

such approval was not given prior to the time such arrangement 

put into execution When Volkswagen which was then shipping 

vehicles itself refused to pay the PMA tonnage tax PMA brought 

against the stevedores handling its cargo for the monies due Wh

this litigation was pending the amount of the tax was paid into 

escrow fund

InJanuary 1963 Volkswagen Hled a complaint with the Commiss

challenging the underlying agreements among members of PMA a

the acts taken in execution ofsuchagreements as violatingsections 

16 and 17 of the Act PMA made itself a party to this proceeding 

intervening Hearings wereheld onJune 4 1964 TheExaminer fou

the PMA assessment fundingagreement not subject toseotion 15 a

not violative of sections 16 or 17 The Commission agreed and 

missed the complaint6

The Court ofAppeals for the District of 

lumbia Circuit affirmed the Commission 7

On March 6 1968 the Supreme Court in Volkswagen reversed 

Commission and the U S Court ofAppeals and held the assessm

fundingagreement to be subject to section 15 and directed that 

case be remanded for further proceedings to determine whether 

1

IVolbwagenwerk Aktiengese lschajt v Marine Terminals 9 F M C 77 19615

Volkawagenwark Ilkt eng sellachoft o F MG 371 F 2d 747 DC Cir 1966

18 FM 
FINAL PAY GUARANTEE PLAN 399

agreement should be disapproved because ofits effect on automobile

cargoes The Court pointed out

When the vehicles were assessed for the Mech Fund by measurement the assessment

came to 2 35 per vehicle representing if passed on to the petitioner an increase in

unloading costs of 22 5 Ifthe vehicles had been assessed by weight 0 9 tons rather

than by measurement 8 7 tons the assessment would have been 25 per vehicle an

increase of about 24 comparable to the average Mech Fund assessment of 2 2 for

all other general cargo Assessment by measurement rather than by weight thus re

sulted in an assessment rate for the 1titioner s automobiles of 10 times that for other

West Coast cargoalthough automobiles had less to gain than other cargo from the

Mech Fund Agreement at 265266

On March 11 1968 the PMA filed two documents with the Com

mission covering the funding oflongshore benefits underthe M M

fund agreement for the period from June 10 1966 to June 30 19718

Assessments were to be made for the benefit ofwalking bosses long

shoremen and clerks Bulk cargo was exempted from the assessment

for walking bosses which was made on a tonnage basis The portion

ofthe fund applicable to clerks wasto be raised by a manhour assess

ment proportionate to clerk manhours to total manhours All this

corresponded to PMA s original cooperative working arrangement

The Commission with the consent ofVolkswagen which protested

the automobile assessment and Matson which protested the assess

ment ofcargo in containers approved the agreements upon the con

dition that retroactive adjustments would be made in the assessments

if necessary and instituted an investigation to determine whether the

assessment agreement met the requirements of the Shipping Act as

interpreted by the Supreme Court 9 However in the same order the

Commission strongly urged the parties to negotiate and settle their

differences As a result of the Commission s urging PMA requested

Sam Kagel to act as an impartial umpire to determine a binding assess

ment formula for the funding of the M M Agreement Its purpose

was to arrive at a satisfactory solution of the conflict between the

conventional and innovative cargo handling points of view as de

scribed above

Sam Kagel an arbitrator and mediator of national reputation and

wide experience in many industries including the maritimeindustry

was asked by PMA to make a final and binding determination of an

assessment formula subject to approval thereof by the Commission

which would fairly distribute the cost ofthe M M Agreement and

MEMORANDUM OF AGREEMENTS BETWEEN MEMBERS OF PACIFIC MARITIME ASSOCIATION

REGARDING LABOR COST ASSESSMENTS F M C Agreement No T 2148 and MEMORANDUM OF

AGREEMENTS BETWEEN MEMBERS OFPACIFIC MARITIME ASSOCIATION REGARDING LABOR COST

ASSESSMENTS RELATED TOVEHICLE HANDLING F M C Agreement No T 2149

9Docket No 6818 Otder ofApproval atld Notice of InvestigatioTl March 28 1968

18 F M C
400 FEDERAL MARITIME COMMISSION

would not fall unfairly uponthe stevedoring operations ofany part

lar shipper nor place an unfair undue orunreasonable burden on 

particular stevedoring operation Kagel was also instructed that 

formula he recommended had to be compatible with the ben

charges test announced by the Supreme Court in its decision in 

Volkswagen case He was also specifically directed to solicit the vi

ofVolkswagen and its stevedores as well as all other segments of 

industry Kagel arranged numerous meetings with representative

all segments of the industry He met on a number of occasions w

attorneys for Volkswagen and also on several other occasions discus

their views by telephone and by correspondence

Kagel encountered many basic disagreements between the m

bers of the industry as to what would be an appropriate fund

formula The breakbulk carriers disagreed with the position of 

container operators and different positions were taken by carrier

bulk cargo lumber vehicles and other specialty carriers and shipp

Kagels major role was to act as a mediator between the various 

flicting segments of the industry

A principal goal in arriving at a new assessment formula wa

reduce Volkswagen s costsa result which as a practical matterK

took to be a main thrust of the Supreme Courts opinion This re

he accomplished Kagel stated

One of my primary objectives was to reduce the cost to Volkswagen because b

the Volkswagen decision outof the Supreme CourtI amassuming that that assign

would never have been made so far as I was concerned

And so the name of the game was very clearly How could I

redistribut

costs so that Volkswagen s costs would be substantially less than It had been pr

that decision

c

j

OnSeptember 16 1968 Kagel issued his report in which he d

mined that the M M Funding Agreement should be amended 

among other things introducing two new cargo categories nam

automobiles and cargo in containers

Accordingto Kagel the only feasible method ofsolving the prob

wasto meetwith each ofthe several groups with variant interests 

to work out a formula which would be atleast acceptable to all o

parties The result was not a scientific formula but something

that the parties all could live with and mostof them didn tlike particularly 

elements In the Industry which had to pay more than they had paid previously 

obviously didn t like that

In the course of the negotiations Volkswagen advised Mr K

that assessment by weight tonnage rather than measure

would meet its objection to the formula and would conform to 

18 F 
FINAL PAY GUARANTEE PLAN 401

Supreme Courts instruction Alternatively Volkswagen proposed

that automobiles should receive the same treatment as bulk cargo

Kagel considered these suggestions in the light of all the circum

stances and the need for agreement In the formula recommended

by Kagel automobiles and trucks were assessed for the Mech Fund

on a measurement ton basis but at one fifth the amount paid by

general cargo The tonnage assessment contribution for bulk cargo

which had been one fifth the general cargo rate under the earlier

funding agreement was reduced to one seventh the amount paid

by general cargo Cargo in containers was assessed at seven tenths

the general cargo rate Reductions were made on the assessments

against bulk cargo because it seemed likely to benefit little from

new mechanization because it was already highly mechanized and

on container cargo because by 1966 containerized carriage had ex

panded to the extent that much less further mechanization was

likely in the future Reductions for bulk and container cargoes also

helped to secure the agreement of their carriers to a change in the

PMA tax on automobiles Another reason for reducing the tax on

container cargo was to compensate for the money and capital in

vestment involved in this type of transportation

When Mr Kagel was asked how he arrived at these fractions he

answered

And when you ask me how did I arrive at one seventh or one tenth orone fifteenth

I didn t arrive at that I worked it out between the parties

Kagel found his recommended formulato be in accordance with the

correlation ofbenefits and burdens under the agreement as required

by Volkswagen

According to Wobtrans Kagel s formula ameliorated but did not

eliminate the disproportionate increase in labor costs experienced by

automobiles as compared with general cargo due to the Mech Fund

assessment Volkswagen agreed not to oppose approval by the Com

mission ofthe revised M M assessment formula but Simultaneously

put on the record that its acquiescence was not intended to foreclose

itwith respect to any other or future proceedings Among the reasons

for this agreement not to oppose Kagel s

report were 1 Volkswagen

would receive a substantial sum of money held in escrow pending

resolution ofthe dispute 2 Volkswagen was anxious to cooperate in

the achievement of stable and peaceful labor conditions on the West

Coast Although it felt the new agreement was not entirely in accord

with the Supreme Court opinion Volkswagen accepted Kagel s for

mula as doing rough justice

PMA filed Kagels modifications in a single agreement covering all

18 FM C
402 FEDERAL MARITIME COMMISSION

cargoes including automobiles The Commission in approving 

new agreement said 10

Agreement T 2210 differs from the two earlieragreements In establishing lesser as

ment for certain types of cargo than the assessments against general cargo Bulk c

Is assessed at 1 7 automobiles and trucks exclusive of truck trailers at 1 5 and car

In containers at 7 10 the general cargo rate

No party to this proceeding voices anyobjection to the new method of assess

Furthermore the method embodies whatappears to bea reasonable compromise o

positions of the various parties which the Commission encouraged in Its order Ins

ing this proceeding and was determined by the arbitrator to beIn accordance with 

guidelines enunciated In Volkswagenwerk Aktlengesellschaft v Federal Maritime

mission 390 U S 261 1968 the case which held that the Commission had jurisdi

over PMA s assessment agreements and directed the Commission to examine 

lawfulness

The Commission expressed the caveat that its approval of the ag

ment

does not of course prevent the Commission s further considerationof the la

ness of the assessments provided therein should consideration In the future ap

proper

Pay Guarantee Plan and its Background

In 1969 PMA and ILWU began negotiating with respect to 

collective bargaining agreement to succeed the agreement du

expire onJune 30 1971 Both PMA and ILWU anticipated a cont

ous decline in the need for longshore labor in the Pacific Coast p

because ofanticipated increases in productivity primarily contai

zation

By 1968 average longshore productivity on the Pacific Coast 

substantially increased from its Mech Fund levelWhereas in 1960 

1961 only 84 tons werebeing dischargedper manhour by 1968 

figure had increased to 15tons just short of twice the earlier fig

The principal change involved in automobile handling subseq

to the Mech Fund was the introduction of specially designed ve

from which automobiles can be rolled on and off Ro Ro instea

being liftedon and offthrough the use of ship s gear Lo Lo Ro

carriage requires specialized vessels and new capital investmen

though the productivity of automobile carriage has increased s

what because of the use of better equipment on LolLo moveme

the mlljor increase in productivity has come from the use of Ro

vessels

The difference in productivity between the LolLo carriage 

RolRo can be seenfrom Wobtrans experience inhandling vehicl

ODocket No 6818 Approval ofAgreement T2210and Discontinuance of Proceeding January 17 19

18 F 
FINAL PAY GUARANTEE PLAN 403

the Port ofLos Angeles and the Port ofSan Francisco Ro Ro opera

tions are more than two but less than three times as productive as

conventional automobile carriage

The innovative cargo handling methods permitted by the Mech

Fund resulted in steadily increasing average productivity on the Pa

cific Coast Productivity had risen 300 since the original adoption of

the Mech Fund in 1960 61 and 200 since the extension ofthat fund

in 1966 This increase in productivity has resulted in a decline in

manhours of employment on the Pacific Coast despite a steady in

crease in tonnage every year except 1971 when a strike disrupted the

waterfront Following a small decline immediately after the adoption

of the Mech Fund in 1961 hours worked in the Pacific Coast ports

remained steady or increased until 1970 when they experienced a

sharp decline

Manhours declined between 1969 and 1970 despite an increase in

total tonnage of two million tons and declined further in 1972 the

next non strike year while total tonnage dropped only insignificantly

Although two million more tons were handled on the Pacific Coast in

1972 than in 1969 total manhours of employment have dropped al

most one third Both the increase in average productivity and the

sharp decline in manhours employment reflect the increase in con

tainer carriage

From 1964 to 1973 there has been a decrease in manhours used per

ton loaded or discharged without an offsetting increase of total tons

handled All categories ofcargo have experienced a decrease in man

hours used per ton loaded or discharged by reason of elimination of

restrictive work practices andlor by reason ofthe introduction ofnew

cargo handling equipment or methods

By 1969 container cargo represented 1 4ofall general cargo enter

ing or leaving Pacific Coast ports other than logs and lumber and

automobiles Between 1969 and 1972 the amount of container ton

nage transported through Pacific Coast ports almost doubled increas

ing from somewhat more than six million tons to twelve million tons

while breakbulk carriage suffered a corresponding decline from nine

teen million tons to little less than twelve and one half million tons

Automobile tonnage remained relatively stable between 1962 and

llWobtrans Productivity 1969 1972

MOl1hours per ton Tonnage permanhour

LoILo

San Francisco 103 9 69

Los Angeles 085 1184

RolRo

San Francisco 049 2047

Los Angeles 037 27 30

Therecord shows that the productivity of breakbulk is 1 16 tons per hour 86 manhours per ton

18 FM C
404 FEDERAL MARITIME COMMISSION

j

j

1963 1 434 704 and 1 554 429 respectively increased about 1 3 

1964 1 969 937 increased about another 1 6 in 1965 2333 69

remained about the same by the end of 1967 19662790 661 19

2 445 764 increased about another 2 5 in 1968 to 3 433 662 a

other 2 7 in 1969 to 4 384 191 remained relatively constant in 19

4524 600 and increased very slightly overthe 1970 level in 1972 

5 233 750 12 Wobtrans has in the past few years accounted for a re

tively small and diminishing percentage of the Pacific Coast autom

bile movement 1969 28 197024 1971 21 197214 D

ing the last ten years there has been a steady increase in the numb

ofJapanese and other imported vehicles in addition to those carr

by Wobtrans entering Pacific Coast ports The movement of autom

biles from Japan constitutes the bulk of Pacific Coast automob

movement and is predominantly a Ro Ro operation 13

Although the record herein shows that Ro Ro vessels were int

duced by Wobtrans on the West Coast about 1965 no great or cons

ent use wasmade ofthem until 1969 Wobtrans used noRo Ro vess

on the West Coast in 1968

The cost per manhour of PMA s assessment has steadily increas

for all cargo because of the increase in productivity and the decl

in manhours of employment In 1961 when the Mech Fund was f

adopted manhour assessments for fringe benefits constituted o

slightly more than 10 percent oftotal direct labor cost per manho

by 1969 such assessments represented close to 20 percent

In 1963 Wobtrans employed 2400 ganghours to discharge 

cargoes in 1972 itemployed 3 375 ganghours or roughly 25 perce

more labor

One ofthe purposes of the M M Agreement had been to enco

age the adoption oflabor saving devices on the West Coast Hence 

became important to furnish some form of pay guarantee to insu

workers a guaranteed income as work opportunity diminished T

concept ofpay guararitee had actually been part of the first five ye

M M Agreement A substantial portion of the Pay Guarantee P

was modeled on the pay guarantee language of the original M 

Agreement

When PMA and the ILWU began negotiations for a new contract 

1970 it was clear that some type ofPay Guarantee Plan in lieu oft

JlWe agree withthe parties that statistics for 1971 are in general unreliable and may be atypical because 

was astrikeyear The automobile tonnage in 1971 was 4 805 033

13Although the evidence that theJapanese automobJle movement ispredominantly Ro Ro is contained in 

non evidentiary portions ofthe record Ie Opening Brief of Wobtrans page 28 Transcript of Oral Argum

page 23 it maybe taken as well founded coming as it does from Wobtrans being detrimental to its awn fina

interest i e the Japanese automobJles have multipUed to the detriment of Wabtrans market share and b

uncontradicted

18 F M 
FINAL PAY GUARANTEE PLAN 405

M MAgreement would be a necessarypartofthe collectivebargain

ing agreement The negotiations resulted in PMA ILWU Memoran

dum ofUnderstanding ofFebruary 10 1972 and the Pay Guarantee

Plan which wasincorporated therein was ineffect an extension ofthe

M M Agreement The February 10 1972 Pay Guarantee Plan

created a contingent liability of 5200 000 payable at the rate of

100 000 per week contingent upon lack ofwork opportunities The

plan guaranteed 36 straight time hours per week to A men and 18

straight time hours per week to B men The method of raising

contributions to meet the guarantee was again left to the determina

tion of the employers Liability under the plan is contingent on lack

ofwork opportunities

By aMemorandum ofUnderstanding dated June 24 1973 the Pay

Guarantee Plan was extended and the employers annual commit

ment was increased from 5 200 000 to 6000 000 Also the liability

became fixed instead of contingent as it was under the original Pay

Guarantee Plan

Although diminishing work opportunity was one of the principal

concerns ofthe ILWU in seeking a Pay Guarantee Plan the benefits

which longshoremen receive under the plan are not solely related to

declining work opportunity

Itis unlikely thatthePay Guarantee Plan will be discontinued when

there is sufficient work for all longshoremen and in fact there is pres

ently and wasin 1972 sufficient work for most ofthe established work

force The principal concerns of the ILWU in negotiating the Pay

Guarantee Plan in addition to diminishing work opportunity were

1 the highly seasonal nature oflongshoring in some ports 2 the fact

that longshore work comes in peaks and valleys because ships often

arrive in groups or not at all and 3 the danger that trades may dry

up and ports may die

The Pay Guarantee Plan provides basic worker security as impor

tant to a longshoreman as is his employment in the industry Itcovers

not only benefits brought into being because some cargoes create

diminishing work opportunities it creates benefits to compensate for

a lack ofworkarising from conditions for which the industry as awhole

is responsible

Pay Guarantee Plan Assessment Agreement

When the Pay Guarantee Plan in the Memorandum ofUnderstand

ing of February 10 1972 was ratified PMA had to determine an

assessment formula to fund the benefits under the plan Pending the

determination ofa final formula to fund thePay Guarantee Plan PMA

18 FM C
406 FEDERAL MARITIME COMMISSION

decided to adopt an interim funding method based upon the formu

approved for the M M Agreement This interim funding formu

was incorporated into Agreement No T 2635 which provided 

interim funding to September 30 1972 which as above noted h

been extended from time to time The Executive Committee ofPM

acted as a Funding Committee to consider the manner in whi

longshore fringe benefits should be assessed under the Pay Guarant

Plan and the otherfringe benefit plans The Committee s discussio

weresimilar to those ofthe original M M Funding Committee On

more therewere twoconflicting interests the conventionalopera

and the container operator By this time however many ofthe ope

tors who had been in the first group were now in the second a

consequently a far lesser proportion of the membership was co

cerned about the effects of a manhour assessment It became evide

after a number ofmeetings that the Executive Committee could n

reach a consensus and Kagel was asked by PMA to consider the pro

lem and make an appropriate recommendation

Unlike Kagel s role in connection with the M M assessment agr

ment as to which he wasasked to make a final and binding assessm

determination Kagel was retained by PMA in an advisory capacity 

act as an impartial umpire in recommending a Pay Guarantee asse

ment formula Upon his appointment on April 20 1972 Kagel so

ited the views of all segments of the industry to assist him In Kag

letter to industry representatives he listed alternative funding me

ods namely an hourly method a tonnage method and an hour t

method which had been considered by various study groups and 

discussed these three principal funding methods in his letter Ka

received many responses to his letter from members of the indus

in which various positions were taken as to an appropriate fundi

method He circulated these responses to all parties who had repli

to his initial inquiry and received no further comments

Volkswagen through its attorneys communicated with Kagel 

letter and by telephone on several occasions to present its views O

ofVolkswagen s contentions was that the carriage ofautomobiles w

not responsible for a decline in manhours Volkswagen also asser

that the problem before Kagel was similar to the problem rais

by the automobile assessment formula of the New York Shipp

Association NYSA and submitted for Mr Kagel s review Vol

wagen s exceptions to the Hearing Examiner s Initial Decision 

the NYSA case and its reply to the other exceptions filed in th

proceeding

In addition to his discussions with Volkswagen and other indus

representatives and his study ofthe industry s views submitted to h

Kagel also reviewed the materials which were presented to him 
FINAL PAY GUARANTEE PLAN 407

his investigation and determination ofthe M M funding formula

On November 21 1972 uponcompletion ofhis investigation Kagel

issued his recommendations for funding the Pay Guarantee Plan He

recommended that the funding formula for the M M Agreement be

adopted for the Pay Guarantee Plan because he found that it was

fairer than any other method and because inparticular automobiles

benefitted in proportion to the burdens imposed by reason of the

employment of Ro Ro technology and more efficient use of man

power which would have been impossible in the absence of the collec

tive bargaining agreement As a result automobiles and trucks exclu

sive of trailers would be assessed on a measurement ton basis but at

1 5 of the assessment rate for general cargo bulk cargo would be

assessed 17 of the general cargo assessment and container cargo

would be assessed 7 10 ofthe general cargo assessment Contributions

for the benefit ofclerks would be made on a manhour basis Kagel s

recommendation was approved by PMA and the Memorandum

Agreement approving his recommendation is Agreement No T 2635

2 which is the agreement pending before the Commission in this

proceeding

In December 1972 PMA at Kagel s recommendation determined

to fund the Pay Guarantee Plan by the same funding formula used

during the interim periodand set forth in No T 2635 and onDecem

ber 15 1972 filedwith the Commission Agreement No T 2635 2 No

T 2635 2 recites that the funding formula expressed in No T 2635 is

adopted until termination ofthe aforesaid ILWU PMA Pay Guaran

tee Plan and extensions thereof The PMA ILWU memorandum of

February 10 1972 had an expiration date of July 1 1973 As noted

above on June 24 1973 PMA and ILWU entered into a new Memo

randum of Understanding to expire June 30 1975 which increased

the amount available to the Pay Guarantee Plan during the two

years life ofthat agreement to a fixed fund of 6000 000 each year

PMA has continued the funding formula ofthe interim agreement and

Agreement No T 2635 2for funding ofthe pay guarantee plan under

the 1973 collective bargaining agreement

Computations Relating to Automobile Carriage and Assessments

Total vehicles discharged by Wobtrans at West Coast ports in 1972

were

Port

Los Angeles

San Francisco

Columbia River and Portland

Seattle

Total Number of

Vehicles

45 977

31 219

nn

un 6 483

4 086
408 FEDERAL MARITIME COMMISSION

j

1

LoI Lo unloading costs per vehicle were

Port Unloading Coats Per V

Los Angeles 

San Francisco 

Col4I1lbia River 

Seattle 

PMA asserts on the basis ofthe above figures the weighted avera

unloading cost per vehicle dischargedfrom Wobtrans vessels in 1

was 886 the Pay Guarantee Plan assessment as of August 4 19

for automobiles was 032 per ton since an average Wobtrans veh

measures 8 577 tons the Pay Guarantee assessment on an avera

Wobtrans vehicle is 8 577 X 032 or 274 per vehicle The cle

manhour assessment for the Pay Guarantee Plan as ofAugust 4 19

was 29 per hour Inthe San Francisco Bay area for 1972 Wobtra

stevedore Marine Terminals discharged an average of 096 vehic

per manhour Consequently PMA says that if Wobtrans had be

assessed on a manhour basis the per vehicle assessment for its ope

tions inSan Francisco for 1972 would have been 029 divided by0 

or 302 Theper vehicle assessment for RoI Ro operation in San Fr

cisco in 1972 would have been 0 29 divided by 230 or 126 At 

Angeles on a manhour basis Wobtrans would have paid 207 

LolLo carriage 029 divided by 140 and 096 on RolRo 0

divided by 3 013 The total ofWobtrans vehicles discharged at W

Coast ports was 87 765 vehicles in 1912 and an average Wobtra

vehicle measures 8577 tons Therefore the total measurement t

nage ofWobtrans vehicles dischargedontne West Coast In 1912 w

752 760 revenue tons The total PMA tonnage handled atWest Co

i ports in 1972 was as follows

l

1

1

ReVenue 

Automobile 5 233 

General Cargo including automobJles 36 002 

All Cargo hnnnnnuhn

hnnnn

h nn n u

n 9437 

Wobtrans vehicles discharged in 1972 therefore comprised only 

percent of the total automobile tonnage only 2 1 percent ofthe g

eral cargo tonnage and only 13 percent of all cargo

As to the relative amount ofWobtranfassessment the total PM

tonnage for 1972 weighted to account for difFetiUg assessments 

different classes of cargo was 31 493 516 revenue tons Thetotai 

sessments under Agreement No 1 2635 2 for all cargo w

5038 960 Wobtrans assessmentforthe 152 760 revenue tons carr

in 1972 at 032 per ton was 24 088 Thus Wobtrans assessmen

1972 was only 48 percent of the total assessments ven though 

represented 1 3 percent ofall cargo carried Ifexperience proves t

the assessment rate at 16 per ton will result in more than the 

10
FINAL PAY GUARANTEE PLAN 409

quired 6000 000 all per ton rates will be proportionately reduced

Beginning in 1969 there has been a steady increaseinWobtrans use

of Ho Ho vessels as shown by the following summary

Total Movements

Year Lo Lo

1969 uu u 138 561

1970 u u u 118 011

1971 107 504

1972 u u u 67 618

RolRo

u 2 466

11 037

11 247

20147

Ro Ro of Total

1 75

55

uu 947

22 96

The difference in productivity in San Francisco for Wobtrans

LolLo and Ho Ho vessels for 1972 was as follows

Vehicles Per Vehicles Pcr

ManhourLo Lo ManhourRo Ro

0 96 u 2 30 u

Increase in

Productivity

240 times

At Los Angeles in 1972 Ho Ho productivity exceeded LolLo produc

tivity 2 15 times Figures for the period 1969 1972 show that Ho Ho

operations are more than two but less than three times as productive

as conventional automobile carriage

PMA submits the history of Wobtrans tonnage decline since 1969

as follows

Decline in Wobtralls Tonnage

Year Vehicles Tonnage

1969 uuuuuu 141 027 u 1 209 588

1970 129 048 u 1 106 845

1971 uu uu u u u 118 751 1 018 527

1972 87 765 u uu u 752 760

Wobtrans expected an increase in manhours and tonnage in 1973

The Joint Stipulation ofFacts submitted by the parties to this pro

ceeding includes a productivity figure for automobiles of86 tons per

manhour as of 1972 Using this figure PMA calculates the decline in

manhours resulting from Wobtrans decreased carryings since 1969

can be approximated as follows

DecliTle in Mathours

Year Total Tonnage Total

Manhours

1969 1 209 588 u uu uu 140 650

1970 u uuu 1 106 845 128 703

1971 uuu 1 018 527 uu u u 118 433

1972 u u u 752 760 87 530

Using a 256 comparative ratio between LolLo and Ho Ho produc

tivity figures a not unreasonable figure for a productivity ratio be

tween two and three and reaching as high as 2 88 PMA figures the
410 FEDERAL MARITIME COMMISSION

loss in manhours from Wobtrans use of RolRo vessels since 1969 

be estimated as follows

Loss in Mtmhours Due to Wobtrans RalRa Carriage

Ro Ro Manhours Actual RalRo Loss 

Year Vehicles IfLo Lo Manhours Man

1969 nnn 2 466 nn nn 2459 nnnn 961 n 

1970 nnn 1l 037 nn nn 1l 007 nnn 4 300 nnnn 

1971 nnnn 1l 247 n nn 1l 217 nn n 4 382 nn n 

1972 nn

nnn 20 147 nn 20 093 n n 7 849 nnnnn 1

j

1

A summary of approximate decline ofmanhours using 1969 

base year resulting from a Wobtrans decreased carryings and b 

shift to RoI Ro vessels is as follows

Total Decline in Monhours

By Decrease By Shift to Total 

Year in Carryings RoRo Vessels in Man

1970 nnnnnnnn 1l 947 nnnn

n 6 707 n n nnnn 18 

1971 nnnnnnnn 22 217 nnnnnn 6 835 nnn n nn 29 

1972 n n n nnn 53 120 nnnn n 12 244 nn n nn 65 

Ifother productivityratios suggested by the record are used sim

losses ofmanhours resulting from Wobtrans increasing shift to Ro

vessels are revealed Thus if the four year 1969 1972 average 

ductivity for Rol Ro vessels for the years 1969 1972is used 2 21 14 

total loss of manhours due to Wobtrans decreased carryings and 

to RolRo vessels in 1970 1971 and 1972 is 107 286 a differenc

only 5 from the loss of 113 070 manhours based on the 256 pro

tivity ratio Similarly if the 2 40 productivity ratio for San Franc

for 1972 is used the total loss of manhours caused by Wobtr

decreased carryings and shift to RolRo vessels for 1970 1

and 1972 is 110 428 a difference of only 2 from the 113 

figure

Longshore labor costs on the West Coast have increased from 

per hour in 1960to 8 86 per hour in 1972 PMA asserts however 

Wobtrans per hour labor costs have decreased below the 4 13 l

of 1960 at least with respect to the RolRo carriage the employm

ofwhich was made possible by virtue of the Pay Guarantee Plan 

its predecessors The unloading cost per vehicle for LolLo vessels 

886 in 1972 The discharge rate for LolLo vessels in San Franc

in 1972 was 0 96 vehicles per manhour and for RolRo vessels 

vehicles per manhour The reciprocal ofthese figures is manhours 

vehicle which is 104 for LolLo vessels and 043 for RolRo ves

Therefore the labor cost per hour forLolLo vessels in 1972 was 

14Th1s figure is based upon the operations at San Francisco and Los Angeles since precise productivity 

are not available for Seattle and Portland the ather West Coast ports through which Wobtrans vehicles en

Wobtrans acknowledges however the record shows that prod9ctivity in these ports was comparable to that 

Angeles and San Francisco Exceptions of Wobtrans p 59

18 F 
FINAL PAY GUARANTEE PLAN 411

divided by 104 manhours per vehicle or 8 52 per hour Since labor

costs per manhour are constant the labor cost per vehicle for Ro Ro

vessels in 1972 was 852 X 043 manhours per vehicle or 3 66

Wobtrans states and the record supports a finding that the per

vehicle labor rate in 1960 was 4 26 Consequently PMA asserts

Wobtrans use of Ro Ro vessels has enabled it to reduce its per

vehicle labor costs from 4 26 in 1960 to 3 66 in 1972 a reduction

of 14

Discussions and Conclusions

Wobtrans position basically is that the assessment formula is unlaw

ful and should not be approved pursuant to section 15 because it

creates an unreasonable practice by imposing a burden on automo

biles out ofproportion to the benefits received contrary to section 17

and unduly orunreasonably disadvantages automobiles vis a vis other

categories of assessed cargoes contrary to section 16

At the outset ofour discussion ofthe lawfulness of the assessment

formula as it applies to automobiles it is necessary to articulate clearly

the legal standards by which the application of such assessment for

mula should be judged

Insofar as section 17 is concerned the Supreme Court has explained

that in order for an assessment to be reasonable as applied to a particu

lar category of cargo the correlation of benefit to the charges

imposed must be reasonable and the charge must be

reasonably related to the service rendered Volkswagen at 282 The

impact of the assessment rather than the intent with which it is im

posed determines its lawfulness and the benefits and burdens must

be related in a more exact manner than amere finding that a certain

category receives substantial benefits under assessments Id

In his concurring opinion in Volkswagen Mr Justice Harlan ob

served that since there was no perfect way to apportion the costs

at 293 charges need only be reasonably related and not perfectly

or exactly related at 295 In making the determination ofthe

reasonableness ofthe relationof benefits to burdens Mr Justice Har

lan suggested that inquiry should be made whether charges are as

appropriately proportioned as would be feasible at 294

Insofar as section 16 is concerned the majority of the Supreme

Court in Volkswagen left open the question ofits application to assess

ment allocation agreements and offered no guidance as to the stan

dards to be used if the Commission found it applicable Mr Justice

Harlan also left the question open noting only that in considering the

application of section 16 the Commission should inquire whether

18 F M C
412 FEDERAL MARITIME COMMISSION

special treatment for a certain class ofgoods wasnecessary u

the circumstances and if so whether the special rule adopted wa

fairest that could be devised at 294

The U S Court ofAppeals for the District of Columbia Circui

further clarified and elaborated on the standards for determining 

propriety of assessment allocations in Transamerican Trailer T

port Inc v FM C 492 F 2d 617 D C Cir 1974 Transameri

a decision affirming the Commission s actions with respect to as

ments for longshoremen s benefits in the Port of New York A

ment No T 2336New York Shipping Association 15 F MC 

1972 As that Court observed

The increased fringe benefit costs in part a reflection of the unions concern tha

modernization will lead to excessive job displacement mustbe divided among a 

of employers whose labor productivity varies significantly In this context precise 

lations are elusive and absolute equity Is beyond concrete demonstration At bes

assessment agreement must represent a compromise of sorts at 620

Moreover the Court in Transamerican observed with specific r

enceto automobiles that the Commission had acted properly ind

mining the propriety of the assessment allocation when it evalu

the numerous suggested aSSeSsments for automobile cargoes 

weighedthe nature ofthe burdens imposedby each against the na

ofthe benefits received by the automobile interests at 630

Applying the above standards to the assessment allocation for

here in issue we conclude that its application to automobiles is 

sonable within the meaning of section 17

As Wobtrans itself admits in general a formula based onmanh

in whole or in part is unfair because it asseSSeS least those who 

benefitted most under an aSSessment plan for labor benefits na

those who have been able to increase productivity by decreasing m

hours throughthe USe ofmechanization See Wobtrans Exceptio

the Initial Decision pages 29 30 57 16 On the other hand a ton

basis for assessments provides the basis for more nearly relating 

dens imposed under an assessment plan both to benefits rece

under the planbecause ofincreased productivity and to responsi

for such increased productivity In other words since burdens u

the plan are based on amount oftonnage carried aSSessments will 

directly in accordance with the increase in productivity or decr

in manhours and will impose the greatest burden on those categ

1

A manhour basis for assessment may be proper in particular instances among which are thepreve

diversIon of acertain category of cargo from a port which could be caused by a

tonnage assessment 

protectionagainst payment by certain c goes for thefailure of aport tomaintainaminimum number of 

longshore labor for which failure such categories of oarit are notresponsible See TransamBrlcan at 627 

contends nor do wefind that a manhour basis for assessment is proper here

18 F 
FINAL PAY GUARANTEE PLAN 413

ofcargo which have most increased productivity or decreased man

hours and have benefited the most because ofincreased productitivy

and reduced manhours

Insofar as automobiles are concerned however their rate of pro

ductivity combined with their peculiar shape createsa problem where

assessment on a tonnage basis is concerned As the Court recognized

in Transamerican either of the traditional methods of measuring

thatcargo weight or cubic measurement is inappropriate at 623

Ifautomobiles were assessed on a measurement basis without regard

to productivity they would pay about eight times what they would

pay on a weight basis their ratio ofmeasurement to weight being

about 8 to I see page 7 supra and eight times what cargo assessed

on aweight basiswould pay This obviously would be unfair Similarly

however at least in the context of this proceeding an assessment on

aweight basis would also be unfair Inorder to obtain an accurate basis

for comparison of the rates of assessment for different categories of

cargo or even to determine the effective rate of assessment for any

particular category ofcargo we must determine not only the relative

cost per ton underthe assessment agreement but the relative cost per

hour

An example may serve to clarify the matter under consideration If

a

very productive cargo compared to some other type of cargo say

eight times as productive is assessed at a much smaller rate say

one eighth the rate on the othertype ofcargo bothtypes ofcargo will

pay the same effective rate The per hour assessment as a basis of

comparison is the one we utilized in considering assessments in the

New York assessment agreement case affirmed in Transamerican See

Agreement No T 2336New York Shipping Association 15 F M C

supra especially at pages 277 279

The following tables show the relative productivity comparative

levels of assessments under the assessment formula agreement and

the effective rates underthe agreement for automobiles and the other

categories of cargo both in actual costs and in ratios

TABLE I

Productivity

Cargo Category TOilS Per ManhoUT

Beakbulk nn

n 16

Lumber 2 07

Automobiles 8 60

Containers

3 52

Bulk 20 92

TABLE II

Assessments Under Pay Guarantee Formula

Cargo Category Ratio with breakbulk as base Per TOil as ofAugust 4 1973

Breakbulk u 1 16

Lumber 1 16

18 FM C
414 FEDERAL MARITIME COMMISSION

Automobiles o n32

70 nn un nnn 112

143 n nn nn 023

Containers

Bulk

TABLE 1Il

Cost Per Hour EjJectifJe Assessment Rate

Cargo Category

Breakbulk 

Lumber 

Automobiles 

Containers 

Bulk n

n nnn nn n nnn n 

TABLE IV

Cost Per Hour Effective Assessment Rate RatiosApproximate

Breakbulk 

Lumber 

Automobiles 

Containers u 

Bulk nnnnn nnnn u nnnnnnn 

i

1

On the basis ofthe foregoing itwould appear that automobiles 

about half again as much as breakbulk cargo under the assess

formula agreement As Wobtrans acknowledges see Wobtrans 

ceptions to the Initial Decision page 32 the comparison most 

vant in determining the reasonableness ofthe assessment on aut

biles is its relationship to the assessment on breakbulk cargo w

pays the lowest per hour cost has benefited least from mechaniz

since it does not utilize RolRo carriage containerization or 

specialized mechanized handling methods and thus is least resp

ble for manhour loss due to mechanization

It is fair to say that the record in this proceeding supports an e

tive assessment on automobiles of approximately half again 

placed on breakbulk cargo Wobtrans is ofcourse correct that d

minations with respect to the lawfulness ofassessment formulas sh

be made from a particular base time to protect against attrib

increases in productivity to factors not relevant to the proper 

frame We find the proper base time to be 1969 both because 

the base generally used by the parties for computations with re

to the reasonableness ofassessments and because it marks the tim

the last examination and approval by the Commission ofPMA s a

ments for work loss due to mechanization See Commission o

dated January 17 1969 approving Agreement No T 221O and d

sion at pages 11 12 supra

The record herein clearly shows insofar as automobile carria

concerned both decreasing manhours and an increase in produc

due to mechanization The record shows that there has been for 

category of cargo including automobiles all during the 1969 

period a decrease in manhours used per ton loaded or discha

without an offsetting increase of total tons loaded This decrea

i

I

18 
FINAL PAY GUARANTEE PLAN 415

manhours per ton moreover is related to the elimination ofrestric

tivework practices and the introduction of new cargo loading equip

ment and methods which have been permitted because of the pay

guarantee fund which is designed to compensate for decreasing man

hours caused by the new work practices and cargo handling methods

and equipment

Insofar as automobile carriage is concerned the major factor con

tributing to decrease in manhours per ton has been the greatly ex

panded and expanding use of Ro Ro vessels This cargo loading and

unloading innovation whereby automobiles are driven off and on

vessels rather than being lifted on and off results in a reduction of

manhours per ton ofsomewhere between 200 and 300 per cent Wob

trans in fact does not contest that its Ro Ro operations are more

productive than its conventional lift on I lift off Lo Lo operations

that the use of Ro Ro in place of Lo Lo has increased productivity

and that this increased productivity through the use ofRo Ro vessels

has diminished longshore employment See Wobtrans Exceptions to

Initial Decision page 38

The amount ofreduction in manhours caused by the use ofRo Ro

vessels can moreover be quantified During the period under consid

eration ie the years 1970 and 1972 omitting 1971 because of its

problematical nature Wobtrans use ofRo Ro rather than Lo Lo ves

sels alone accounted for the loss ofover18 000 manhours see page 22

supra

6

The Ro Ro movement and its corresponding loss of manhours is

furthermore all the more significant when one bears in mind 1 that

Wobtrans has in the past few years 1969 1972 accounted for a rela

tively small and diminishing percentage ofthe Pacific Coast automo

bile movement while the movement of automobiles from Japan

which constitutes the bulk of the movement has shown a steady in

crease from its inception about ten years ago and 2 that the carriage

ofJapanese automobiles is now predominantly a Ro Ro operation To

the extent that a Japanese automobile carrier rather than Wobtrans

carried the trade automobiles even more manhours were lost and

such losses were far from compensated for by additional automobile

tonnage since automobile tonnage showed little increase inthe 1969

1972 period See page 14 supra

When Wobtrans operations alone are considered it is clear that

during the period in question a definite trend appears toward increas

ing use of Ro Ro carriage In 1969 only 2 466 175 of Wobtrans

vehicles were transported by Ro Ro By 1970 this had increased to

16Even if Ro Ro operations were considered closer to 2 than 2 56 times as productive as LalLa operations

Wobtrans operations alone would have accounted for the toss of more than 12 000 manhours

18 F M C
416 FEDERAL MARITIME COMMISSION

11 037 8 55 by 1971 to 11 247 9 47 and by 1972 20 

22 96 Ro Ro movements increased between four and five tim

over the 1969 level in 1970 and virtually doubled the 1970 leve

197217 to the point where Ro Ro constitutes nearly 25 of a

Wobtrans automobile carriage a point which it reached in f

years

IS Even ifWobtrans maintains the 1972 ratio ofRo Ro to Lo

vessels an unlikely occurrence since Wobtrans expected an incre

in both tonnage and manhours in 1973 see page 21 supra wh

would appear to require greatly expanded Ro Ro operations itw

because of increased Ro Ro productivity over LolLo levels alre

be benefiting at about one and one halftimes as much as breakb

cargo

19 Moreover ifWobtrans remains at its 1972 rate ofgrowth 

merely doubles its amount of RoI Ro carriage in each succeeding y

in the near future a more likely prospect considering Wobtrans 

tention to increase tonnage and manhours it will be benefiting 

least twice and perhaps as much as three times as much as breakb

cargo Under the circumstances and bearing in mind that char

need only be reasonably related and not perfectly or exa

related 20 and that precise calculations are elusive and abso

equity is beyond concrete demonstration 21 the effective assessm

under the pay guarantee assessment formula of 1 1 I 2 times that 

breakbulk cargo can hardly be said to be unreasonable

When Wobtrans operations are seen in perspective ie as rep

senting avery small share of automobile carriage the vast ml iority 

which has utilized Ro Ro to a much greater degree and becaus

its continuing expansion is continuing to do so the 1112 times bre

bulk level of the automobile assessment seems even more reas

able in terms of relating burdens and benefits

The record suggests no more feasible in Mr Justice Harla

language method ofassessing automobiles in terms of benefits 

burdens As noted above a formula based on manhours in whole 

in part creates the problem of assessing least those who should 

assessed most A formula based on tonnages without considering p

ductivities would also be faulty because it would fail to consider 

effectiverate ofassessment paid ie the cost per hour If as Wobtra

suggests we assessed it at a weight ton rate it would pay the sa

effective rate as general cargo because of the relationship shown 

Il We ignore 1971 as unreliable but as can be seen there is adoubling of vehicles carried by RolRo in 

over1971 as welt

18As noted at page 15 supra Wobtrans had no Ro RQ Pacific Coast carriage in 1968

IIIIfRolRoproductivity is taken as roughly 2 15 times that of LalLa the lowest figure advanced by Wobt

Wobtrans shift of25 ofits operatJon to Ro Ro has alreadybenefited it to thedegreeof 129 times that ofbreak

Ifa2 5 figure susedforthe Ro Ro LalLa productivity ratio thebenefitratioofWobtrans vis avisbreakbulk is 

OVolkawaflen at 295 concurring opinion of Mr JusHce Harlan

U

Transamerlcon at 620

18 FM 
FINAL PAY GUARANTEE PLAN 417

this record between the ratio ofWobtrans automobiles measurement

to weight and the ratio between Wobtrans automobiles productivity

as compared to breakbulk productivity The record shows that by

coincidence both ratios are about eight to one Thus the productivity

rate of eight multiplied by the assessment rate of 1 8 the breakbulk

rate would give automobiles the same effective cost per hour rate as

breakbulk cargo

Wobtrans contention that it is unfair to assess automobile cargo as

a whole more than breakbulk cargo because of the increased produc

tivity and reduced manhours for which Ro Ro is responsible is not

convincing First of all as Wobtrans concedes Exceptions of Wob

trans page 61 the relevant category for cargo assessment compari

sons and evaluations is automobiles notVolkswagens Just as Wobtrans

asserts that it should not be punished for loss in manhours due to

factors unrelated to the objectives of the guarantee fund ie

in

creased competition from Japanese automobiles so it must realize

that when automobiles are considered as a whole Ro Ro is the domi

nant form ofcarriage in the Pacific Coast trade here under considera

tion

Secondly it is the category of automobiles which specifically be

nefits from the shift to and increasing use ofRo Ro vessels and there

fore it is automobiles which should be required to bear the burden of

such benefits Thus in Agreement No T 2336 New York Shipping

Association affirmed in Transamerican weconsidered automobiles as

a single category recognizing that it involved both Ro Ro and Lo Lo

carriage See 15 F M C supra at 277 279 304305 14 F M C 107

115 138139

Furthermore consideration of Ro Ro carriage as a separate cate

gory is completely unwarranted in the context ofthis proceeding and

on the present record Since the proceeding is designed to determine

only the proper assessment for automobiles conclusions with respect

to assessments for Ro Ro carriage in general could well be said to be

outside the scope ofthis proceeding Evenif they were not however

the record herein will support no conclusions with respect to Ro Ro

carriage in general There is no evidentiary basis for finding the pro

ductivity ratio for Ro Ro vis a vis conventional carriage for cargo

other than automobiles no showing of the extent to which Ro Ro

carriage was used for cargo other than automobiles before the base

time and no indication of the degree to which cargo other than

SWe have not as will be seen from our computations on page 29 supra considered loss of manhours due to

increased competition in determining the reasonableness of the assessment formula We believe that the reasonable

ness of assessmentformulas can be determined withoutreferencetothe economic situations of persons in particul

assessment categories cr Agreement No T 2336 New York Shipping Association 15 F M C supra at 277

18 F M C
418 FEDERAL MARITIME COMMISSION

automobiles is suitable to Ro Ro carriage Finally if indeed o

cargo is suitable to and has been transported by Ro Ro carriage 

seems most likely that such cargo would have been containerized 

ease and economy of movement and that for such cargo contain

were rolled on and off In that case such cargo would have b

assessed as containerized cargo a

category for which a specia

sessment rate already exists 23

The two remaining contentions of Wobtrans in opposition to 

assessment on automobiles are that the assessment is improper 

cause its present level of productivity is not new productivity 

that it should not be made to pay for decreasing manhours w

automobile manhours are increasing

Itcannot seriously be contended that RoI Ro productivity is notn

productivity In 1961 the date ofthe startofthe first M M fund th

wereno Ro Ro vessels in the Pacific Coast trade and as the Supre

Court observed in Volkswagen the unloading of automobiles 

already so highly mechanized that there was little likelihood of 

provement at 266 In 1966 when the second M M fund beg

very few of Wobtrans vehicles were transported by Ro Ro and 

record does not show that any other vehicles were transported 

Ro Ro at that time By 1968 even the minimal Ro Ro carriage 

Wobtrans had ceased Thus the two to three times increase in prod

tivity of Ro Ro overLo Lo carriage must indeed be treated as n

productivity Furthermore Wobtrans argument that increase 

productivity because ofRo Ro carriage has been offsetby a decre

in productivity in La Lo carriage 24 fails to consider that but for 

use ofRoI Ro carriage Wobtrans would have experienced two to th

times less productivity for each Lo Lo vessel used thanitexperien

on each Ro Ro vessel actually used

As we have noted above Wobtrans is not being penalized beca

ofits decreasing manhours due to competition from apanese auto

biles a factor which has not been considered in determining 

reasonableness of the automobile assessment Moreover Wobtr

benefits from our treatment ofautomobiles as awhole since manho

spent on automobile carriage as awhole are increasing unlike th

of Wobtrans which as noted at page 22 supra have shown a

ste

and expanding decrease On the other hand although manhours 

increasing somewhat for automobile carriage as a whole they 

increasing at avery much slower rate than would be the case ifo

lI3The record shows interestingly that ifautomobiles are containerized they too would be assessed 

assessment rate for containerized cargo

I4Combtned Ro Ro and LalLa productivity for Wobtrans was about 13 vehicles per manhour durin

19691972 period

18 F
FINAL PAY GUARANTEE PLAN

Lo Lo carriage were used for automobiles The slight increase in

automobile tonnage for the 1969 1972 period would account for two

to three times more than the present manhours ifonly Lo Lo carriage

were involved The reduction in manhours through the utilization of

Ro Ro carriage is a benefit to automobiles a benefit directly related

to its responsibility for lost manhours and a benefit for which it should

pay The pay guarantee plan unlike the assessment plan involved in

the NYSA ILA proceeding does notinvolve the concept ofcompensa

tion for shortfall Le the payment for falling below a certain num

ber ofmanhours a concept which does not apply when manhours are

expanding Automobiles would not be liable for a shortfall type of

assessment On the other hand as we determined in the NYSA assess

ment matter with affirmance by the Court ofAppeals assessment for

a pay guarantee plan for guaranteed income per longshoreman based

on a certain number of hours worked is not dependent upon finding

responsibility for or even the existence of decreasing manhours A

pay guarantee rather is an obligation to be borne by the entire trade

and by each section ofthe trade in relation to its fair share ofthe costs

of the pay guarantee fund See Agreement No T 2336 New York

Shipping Association 15 F M C supra at 269 270 Transatlantic

492 F 2d supra at 6278 Certainly automobiles which have been

responsible for and greatly benefited from the use ofnew and highly

mechanized cargo carrying methods and the decrease in manhours

per ton which these methods create should pay their fair share ofthe

fund designed to compensate longshoremen for increasing produc

titivy i e a decrease in the manhours per ton ratio caused by the use

ofmechanization As our analysis ofthe automobile assessment shows

the formula for assessing automobiles is fair because it reasonably

relates benefits to burdens and does so moreover in a way which is

as appropriate as is feasible 25

In turning now to the question ofthe lawfulness ofthe formula for

automobile assessments under section 16 ofthe Act we wish to make

clear at the outset the nature and extent of the inquiry which is

relevent under this statutory provision within the context of the

present proceeding In the present proceeding unlike that involving

UWobtrans attackuponthe mannerin which PMAandMr Kagel derived the formula forautomobile assessments

isbeside thepoint Even if Mr Kagel and PMA didnot considerthe proper matters in establishing the automobile

assessment andwethink that the factual discussion atpages 16 19 supra shows that theydid the determination

of the propriety orthe formula is fortheCommission not PMAand orMrKagel Moreover the procedure by which

the formula js established is irrelevant so far as its legality is concerned it is the effect of the assessment that

determines its legality Just as the supposed good intentions of PMA in Volkswagen didnot insulateit from attack

the alleged failure of PMA and Mr Kagel tofollow the proper standards in establishing the formulashould not make

it unlawful Cf Volkswagen at 281 282 Irrespective of the procedure by which the automobile assessment was

established we have examined the automobile assessment formula and have found it tobe reasonable because of the

fairness of its impact on automohile carriage

18 FM C

419
420 FEDERAL MARITIME COMMISSION

the assessments of the NYSA we are not concerned with the rea

ableness ofthe assessments for any category of cargo other tha

tomobiles Our concern with the assessments on other categorie

cargo is limited to ananalysis of whether they are such as to su

automobiles to undue or unreasonable prejudice or disadvanta

We have received littleguidance as to how determinations conc

ing assessments are to be made under section 16 The only c

statement on the matter is Mr Justice Harlan s dictum in his con

rence in Volkswagen reiterated by the Court of Appeals in T

samerican that the Commission should inquire whether sp

treatment for a class of goods was necessary under the circ

stances and if so whetherthe special rule adopted wasthe fairest 

could be devised See page 24 supra

It could be contended that since we have already concluded 

special treatment wasnecessarily accorded automobiles and tha

special formula for assessing them related benefits to burdens 

manner as appropriate as is feasible we have already made 

cient inquiry as to whether the formula for assessing automobil

the fairest that could be devised particularly when it is rem

bered that precise calculations are elusive and absolute equ

beyond concrete demonstration Transamerican at 620 Streng

lent to such position by the Supreme Courts observation in V

wagen that since only the assesSlt ent onautomQbiles is 

lenged thllre is noreason tosuppese that the Commi sion wi

consider expeditiouupprovalQfsomuClhef the ageelllent as is 

in di spute at 278 Such expeditious approval wowd seem to

gest that the lawfulnen ofcaigQasfessments on particular categ

ofcargo can be determi ried without reference to aSsessments ono

cate8ories of cargo

It could on the other hand however be argued that question

prejudice and discrimination by theirvery nature require an exam

tion of the treatment accorded different categoriesQf cargoes

We find it unnecessary to decide between the two views as to 

application ofsection 18because even iftheJatter view is correct 

record herein does not show that automobiles are in any way un

fully prejudiced ordisadvantaged DY tllautomobiieassessIllent v

vis the assessments on other categories ofcargo In fa t

comparis

of the treatment of other categories ofcargo demonstrate tha

tomobiles are treated atleast as advantageously under the assess

formula as other classes of cargo

As shown by Table IV at page 28 supra taking the assessmen

breakbulk cargo as the basic level the ffectiverates ofassessmen

different categories ofcargo reveal ratios to the breakbulklevel in 

following amounts lumber l 3 4 automobilesl 1 2 containe

j

1

1

I

1

1

j

I
FINAL PAY GUARANTEE PLAN 421

21 6 bulk 2 12 Thus every category of cargo for which a special

rate of assessment has been established pays more than automobiles

This hardly seems unfair to automobiles Examination of the record

moreover supports the fairness of the assessments on automobiles

vis a vis those on other categories of cargo

Lumber for example although it pays more than automobiles has

experienced a lesser increase in tonnage during the 1969 1972 period

than automobiles 6and its productivity rate which is much lower

than that ofautomobiles 207 tons per manhour vis a vis breakbulk s

116 tons per manhour as compared to automobiles 860 has evi

dence of record indicates increased less significantly than either

containers or automobiles and consequently reduced manhours

less

Containerized movements on the other hand have greatly in

creased in volume In 1969 container cargo represented 1 4 of all

general cargo entering or leaving the Pacific Coast ports other than

logs and lumber and automobiles Between 1969 1972 container

traffic doubled from about 6 million to about 12 million tons and

breakbulk traffic correspondingly decreased from about 19 million to

about 12 5 million tons Containerized cargo therefore should be

expected to be assessed at a significantly higher effective rate than

automobiles and it is 216 times breakbulk rather than 11 2 times

breakbulk Although as we stress the question ofthe reasonableness

of the assessment on categories of cargo other than automobiles is

beyond the scope of this proceeding we can and do find that automo

biles are not unfairly treated because containerized cargo is not as

sessed at a still higher effective rate Ifin fact as appears to be the case

containerized movements use one third the manhours ofbreakbulk

mOvements while automobiles through the utilization ofRo Ro trans

portation are able to decrease manhours somewhere between two and

three times the 2 1 6 as compared to the 1 1 2ratios for these types

ofcarriage seem quite appropriate Furthermore when one considers

that evidence ofrecord indicates that containerized transportation is

unlikely to grow at as great a rate as Ro Ro automobile transportation

in the near future the ratio seems even more reasonable and the

2SCompare the following with the comparable figures for automobile tonnage on page 14 supra

J7Record projections based on Maritime Administration studies for the Pacific Coast indicate that container

tonnage willretain its present share of tonnage overthe next few years 1973 1980 growing ata

rate slightly lower

thanthe rateforall tonnage during the early part of the period 1973 1975 On the other hand testimony of record

shows that now the major shift is to the use of Ha Ro vessels

lQ 1O U ro
422 FEDERAL MARITIME COMMISSION

1

relatively low automobile assessment rate vis a vis the containe

should enable RolRo automobile carriers to recoup some of 

investment in new equipment

The last category bulkcargo pays considerably more than aut

biles as would be expected because ofvery great productivity 

tons per manhour as compared to automobiles 8 60 tons per 

hour Nor does it appear that automobiles are unfairly treate

cause the effective rate on bulkcargo is not still higher Although 

cargo is very productive the evidence of record indicates th

productivityin not new Bulkoperations were already highly m

anizedin 1961 and expected to gain little from further mechaniza

The same appeared true in 1968 Such mechanization as helped 

appreciably came as early innovations Tonnage for bulk ca

over the 1969 1972 period has remained remarkably stable 28 S

manhour production Future projections indicate moreover tha

percentage ofbulk tonnage vis a vis all tonnage will remain relat

constant growing slightly faster than the average in 1973 1975 

slightly slower than the average in 1976 1980

Finally the record reveals that productivity has increased o

tomobiles carried even on LoI Lo vessels because ofthe use of b

equipment and that commodities other than automobiles not 

special category and assessed to their disadvantage on ameasure

basis rather than aweight basis 29would pay a tonnage rate five 

higher than automobiles While such statistic is not particularly m

ingful absent productivity figures for the other commodities it 

tainly is not prejudicial to Wobtrans interests

No cargo category other than automobiles has challenged the 

guarantee assessment allocations and Wobtrans is the only autom

interest which has challenged the formula This proceeding is lim

to the question of the propriety of the assessment on automo

Within such context we feel that the record is sufficient to allow 

such cargo comparisons as may be necessary and that such com

sons favor rather than prejudice or disadvantage automobiles

Our decision herein is in no way inconsistent with oUr actions in 

other assessment allocation proceeding following Volkswage

Volkswagen we were directed by the Supreme Court to deter

1

j

1 a8Total Dry Bulk Tonnage

1969 u 22 537 761

1970 u uu 25 660 018

1971 u 19 762 760

1972 u 23 435 590

i9Such commodities do exist See Volkawagenwerk Aktieng886llschaft v Marine Terminals 9 F M C 

1965

J

18 F 
FINAL PAY GUARANTEE PLAN 423

the proper assessment for automobiles which we did in Docket No

6818 where we approved an assessment allocation formula for au

tomobiles like the one we approve here Although as Wobtrans con

tends see page 11 supra there may have been reasons for approving

the formula not specifically related to the correlation of benefits to

burdens the result here can hardly be said to be inconsistent with a

similar result in an earlier proceeding Moreover the problems which

troubled the Court in Volkswagen have been explored in this pro

ceeding In Volkswagen the Court was concerned because the M M

fundassessment appeared to increase automobile costs ten times more

than costs for other cargoes while automobiles appeared to be unlikely

to benefit more than other classes ofcargo from increased mechaniza

tion at 265266 281 The record in the present proceeding how

ever shows that a automobile costs have not increased but kept at

the same level as underthe former agreement ie 20 measurement

ton b automobiles are assessed at 11 2times the general cargo rate

which is reasonable in the light ofbenefits received and c the benefits

accruing to automobiles are the result ofincreased productivity result

ing from new mechanized methods of handling automobiles which

were neither in use norforeseeable at the time of Volkswagen

Similarly our decision here squares with our actions with respect to

the assessments made by the New York Shipping Association In our

decision with respect to the earliest NYSA assessment period we exam

ined we approved with affirmance in Transamerican an automobile

assessment on a weight ton basis Just as Wobtrans successfully con

tended however with respect to the assessment there in issue that

one could not mechanically apply the 20 measurement ton assess

ment measure used on the Pacific Coast without examination of the

facts and circumstances pertaining at thePortofNew York 15 F M C

supra at 277 so here we cannot mechanically apply the weight ton

measure There is moreover good reason not to apply it The weight

ton measure wasadopted in the NYSA proceeding because assessment

at the 20 measurement level would have had the effect taking the

productivity of automobiles into consideration of taxing Lo Lo au

tomobiles at an hourly rate of 668 over 2 1 2 times as much as the

hourly rate of 2 61 for breakbulk cargo 15 F M C supra at 279 and

Ro Ro automobiles at 12 51 per hour The 20 measurement level

ofassessments increased costs overseven times for Lo Lo carriers and

13 times for Ro Ro carriers 15 F M C supra at 277 Moreover

Ro Ro carriage for automobiles the source ofincreased productivity

due to mechanization played a very small part in the transportation

ofautomobiles at thePort ofNew York Less than 10 for Wobtrans

18 F MC
424 FEDERAL MARITIME COMMISSION

See 14 F MC 94 138 1970 In fact only about two percent o

tonnage at New York moved on Ro Ro carriers see 14 F M C 

107 The record moreover did not envision the expanson of Ro 

automobile carriage at New York In the instant case however 

assessment does not involve an increase over earlier levels and 

record shows wide and expanding use of highly productive Ro 

vessels for automobile transportation Nevertheless in spite of th

signi 6cant differences the effective assessment rate for automob

under the pay guarantee planis in fact quite similar to that adop

in the NYSA case In NYSA we approved an assessment formula 

automobiles which taxed Lo Lo automobiles at 3 81 per hour Ro 

autos paid about twice this as compared to 261 per hour for bre

bulk cargo The auto breakbulk ratio in NYSA is thus not far diffe

from that present here ie 2752 per hour average for all autos 

1856 per hour for breakbulk cargo The similarity is even gre

when one realizes that some costs assessedunder the formulain N

ona tonnage basis e g pension bene 6ts and welfare bene 6ts are p

under the agreement here under consideration on a manhour b

which may be more bene 6cial to Wobtrans 3o

We have since Transamerican considered two other agreement

New York involving assessments for automobiles in one of wh

covering 1971 1974 we approved automobile assessment on a 1

measurement ton basis ie somewhat higher than aweight ton b

and in the other of which covering 19741977 we approved s

assessment on a weight ton basis Both of these agreements like 

1969 M M agreement involved voluntary settlementby the shipp

association and the automobile interests and hence may not invo

precisely the same considerations as are operative here See page 

supra We mention our action with respect to these agreements 

to show its correctness or applicability to the instant proceeding 

only for the sake of completeness and to show that it is so fa

appears not inconsistent with our action here

One final issue must be considered Prior to the hearing in 

proceeding the question arose as towhether ourorder instituting 

proceeding covered consideration of the formula adopted for 

fundingofthe pay guarantee plan under the 1973 collective barg

ing agreement which was entered into subsequent to institution 

this investigation The Administrative Law Judgeruled that itdid 

that no new funding agreement need be 6led He was correct 

30Even if the effective assessment in NYSA is compared with the effective rate on Wobtrans alane wh

somewhat higher than theeffective rate on automobiles 8iawhole because ofWobtrans greater productivit

page13 supra acomparison which as noted at page32 aupro weconsider improper the results are still s

since both in NYSA and here Wobtrans pays about 1 1 2 times the breakbulk level for 10 10carriage and 

the 10 10 level for Rao carriage

18 F 
FINAL PAY GUARANTEE PLAN 425

proval of the interim assessment agreement under which PMA

operated was extended until action on the final agreement Agree

ment T 26352 itself provides that it applies to the ILWU PMA pay

guarantee plan and extensions thereof Thus there has never been

a time when assessments have not been covered by an approved

agreement nor since the formula for assessing automobiles has not

changed 31 is there any necessity for submitting a new agreement

This does not mean as Wobtrans seems to fear that our approval

here is approval ofthe funding formula for all time We have continu

ing jurisdiction overthe assessment formula agreement under section

15 ofthe Act and will examine the agreement afresh oncomplaint or

on our own motion whenever it appears that changed circumstances

may require such action City of Los Angeles v Federal Maritime

Commission 385 F 2d 678 683 D C Cir 1967 Insofar as our exami

nation here is concerned however the funding formula for the pay

guarantee plan Agreement No T 2635 2 has not been shown to be

contrary to sections 16 or 17 or otherwise violative of the Shipping

Act 1916 Therefore Agreement No T 26352 is ordered approved

pursuant to section 15 and this proceeding is discontinued

SEAL S FRANCIS C HURNEY

Secretary

31There is in fact acertification in the record here by PMA sSecretary that PMA has continued the funding

formula of theinterim agreement and Agreement No T2635 2 forfunding ofthepay guarantee plan underthe 1973

collective bargaining agreement

18 F MC
FEDERAL MARITIME COMMISSION

1

DOCKET No 7417

AGREEMENT No 99551 A S BILLABONG WESTFAL LARSEN 

CO A S

FRED OLSEN AND CO AND STAR SHIPPING A S

ADOPTION OF THE INITIAL DECISION

June 30 1975

J

BY THE COMMISSION James V Day Vice Chairman Ashton C 

rett and Clarence Morse Commissioners

The proceeding wasinstituted to determine whether Agreement 

99551 Agreement among A S Billabong Billabong Westfal La

and Co A S Westfal Fred Olsen and Co Olsen and Star Ship

A S Star should be approved disapproved or modified pursua

section 15 of the Shipping Act 1916 Agreement No 9955 1 e

tially provides a procedure by which Star acts as the vehicle thro

which the other parties conduct ajoint service charter vessels to 

share profits or losses and establish corporate management of S

such a manner as will accomplish the purposes

Sea Land Service Inc Sea Land andthe Transpacific Freight 

ference of Japan Korea TPFCJ K and its member lines who 

tested the Agreement when it was published in the Federal Reg

were named petitioners in the proceeding

In his Initial Decision Administrative Law Judge Norman D K

concluded that 1 the Commission has section 15 jurisdiction 

Agreement No 99551 since the Agreement gives special advanta

regulates competition and establishes a cooperative working arra

ment 2 Star s rate structure and rate making practices in 

inbound transpacific trade have not been shown to be in viol

of section 14 Fourth 16 First or any other provision of the 

and 3 Star s services are to the benefit of shippers ports 

other persons and the Agreement should therefore be appro

I

j

Chalrman Helen Delich Bentley did not participate

426

18 F 
AGREEMENT NO 9955 1 427

This proceeding is before us on exceptions to the Initial Decision

Upon careful consideration of the record in this proceeding we

conclude that thePresiding Officer s findings and conclusions set forth

inhis Initial Decision are except as hereinafter noted proper and well

founded and we accordingly adopt them as our own However with

out disturbing any ofthese findings and conclusions there are certain

matters raised on exception which we believe warrant discussion

Exceptions not specifically discussed have nevertheless been re

viewed and found to either constitute reargument ofcontentions al

ready properly disposed of by Judge Kline or to be otherwise without

merit

StarShipping excepts to Judge Kline s finding ofsection 15 jurisdic

tion over Agreement No 99551 Star asserts that Agreement No

99551 is an agreement of corporate ownership and therefore it is

in error as a matter of law for the Administrative Law Judge to con

clude that the Commission has jurisdiction over the Agreement We

believe that Star s assertion of the lack of section 15 subject matter

jurisdiction in the circumstances presented by consideration ofAgree

ment No 9955 1 is not well founded

It is clear from the legislative history ofthe Shipping Act 1916 that

Congress considered that termination of the anticompetitive confer

ence agreements would result in either cutthroat competition with

only the strongest shipping companies surviving or consolidation by

acquisition and common ownership House Committee on the Marine

and Fisheries Report onSteamship Agreements and Affiliationsinthe

American Foreign and Domestic Trade H B Doc No 805 63 Cong

2d Sess 1914 Faced with this alternative

the committee chose to permit continuation of the conference system but to curb

its abuses by requiring government approval of conference agreements It did so be

cause itappears that if conferences were abolished the result wouldbe anetdecrease

in competition through the mergers and acquisition of assets agreements that would

result from unregulated rate wars FMC v Seatrain Lines Inc 411 U S 726 738

1973

The functions ofthe Federal Maritime Commission are therefore lim

ited to regulation of anticompetitive activities carried on between

viable carriers by agreement for cooperative working arrangements

Mergers and acquisitions werenot to be encouraged butrather were

to be fully susceptible to scrutiny under the antitrust laws On the

other hand the viability ofindividual lines was to be encouraged by

approval ofcooperative working arrangements between such lines

Of course the distinction between the merger acquisition and the

cooperative working arrangement is not always readily discernible

For the purpose of determining the boundaries ofthe Commission s

18 FM C
428 FEDERAL MARITIME COMMISSION

jurisdiction it is not enough to merely attach a label of merge

cooperative working arrangement to the transaction under scrut

but rather the Commission must look to the end result of the Ag

ment Ifthe end result of the Agreement is that the life of a via

carrier is extinguished by its absorption into the corporate struc

ofanother carrier then the Commission may have nojurisdiction o

an agreement because there is no ongoing arrangement to regul

In a true and absolute merger oncethe deed is done there is no

for the Commission to undo it Itis beyond the power ofthe Com

sion to resuscitate an expired comJ1lany and unscramble the as

under its power to disapprove agreements previously approved F

v Seatrain Lines Inc 411 U S 726 735 1973 If however 

carriers remain independently viable even though their agreem

contains or has overtones ofmerger and oracquisition and the Ag

ment creates ongoing rights and responsibilities between the part

then there is a

relationship which may be regulated and by mand

ofCongress must be regulated

The Agreement here in question sets forth the terms of the j

venture between Billabong Olsen Westfal and Star to establish 

operate a worldwide shipping company It provides that Star s

time charter vessels from Billabong Olsen and Westfal Larsen 

specifies the proportional total tonnage ofcharters by Westfal Lar

Billabong and Olsen to Star The value of the charters the metho

computation ofthe charter hire and the payment for charter hir

the same for all the parties to the Agreement Thus a ship charte

to Star by Billabong will be owned by Billabong wUl be manned 

aBillabong crew which will be paid by Billabong and Billabong 

be compensated for the operation of its ship not bya flat charter 

but by a portion of the profit derived from the operation oft

charter ship The Agreement also specifies that in the event that 

joint service established by Agreement No 9955 1 joins any con

ence each ofthe members Westfal Larsen Billabong Olsen and S

shall be entitled to the same privileges as are permitted to memb

of other joint services who are conference members

While the arrangement effected by Agreement No 9955 1 

some attributes of a merger ownership agreement in the estab

ment of a

separate corporate Star it transcends a mere merger 

effectuates a cooperative ongoing arrangement in the foreign c

merce of the United States wherein all four carriers are actively 

ticipating Furthermore since the parties to the Agreement are 

viable the parties may take baok their charters and continue th

operations as prior to section 15 approval if the Agreement should 

disapprovedby the Commission Billabong Olsen Westfal Larsen 

18 F
AGREEMENT NO 99551 429

Star have notbeen merged into one are independently viable and in

cooperation areactively participating in the foreigncommerce ofthe

United States through an agreement which creates ongoing rights and

responsibilities over which the Commission has jurisdiction 1

Sea Land and TPFC K and to a more limited extent Hearing

Counsel attacked the rates ofStar as being violative ofsections 14 16

17 or 18 ofthe Shipping Act 1916 Sea Land and TPFCJ K assert

therefore that the agreement is not approvable under section 15 of

the Act Itshould be noted that in a complaint case wherein a specific

violation of the Act is alleged the complainant has the burden of

showing the violation By alleging a specific violation ofthe Act in the

case involving the approvability ofan agreement under section 15 the

burden cannot be artificially switched Even though the parties to an

agreement may have the burden ofshowing benefits to be derivedby

approval of the agreement the parties to an agreement cannot be

saddled with the burden of proving a negative Le there is no viola

tion of the Act merely because an allegation ofa violation ofa specific

section of the Act is alleged We concur with the decision of the

Administrative Law Judge that in this proceeding there was not a

showing that either Star s FAK rates or volume discount rates were in

violation of any section of the Shipping Act 1916

With regard to Star s FAK rates the record shows that a high per

centage ofStar s carryings are in electronicgoods and thatStar did not

carry the wide variety of items carried by Sea Land such a motor

cycles auto parts and porcelain ware which are lower rated com

modities TPFJK K Sea Land and Hearing Counsel all contend that

this showing is sufficient to conclude that Star s FAK rates are in fact

discriminatory against low value low ratedcommodites and discrimi

nate in favor ofhigh value high ratedcommodities The Administra

tive Law Judge on the other hand found that there was insufficient

direct causal connection between the nonmovement oflow rated low

value commodities and Star s FAK rates which were lower than spe

cific commoqity rates of the complaining carriers for the cargoes at

issue The Administrative Law Judge simply concluded and we con

cur that there were many other possible reasons why the lower rated

commodities were notmoving onStar While not passing onFAK rates

generally we do find thatStar s FAK rates have notbeen shown to give

any undue or unreasonable preference oradvantage to anyparticular

person in violation of sections 16 First establish any rate fare or

charge which is unjustly discriminatory between shippers in violation

of section 17 or establish a rate which is so unreasonably high or low

litis not necessary for the Commission to address Star sobjection totheadmissibility of its ratesand practices

in this proceeding since Star has not been adversely affected by consideration of these issues

18 FMC
430 FEDERAL MARITIME COMMISSION

as to be detrimentalto the commerce ofthe United States inviolat

of section 18 b 5 2

With regard to volume discounts the Commission agrees with 

Administrative Law Judge that Star s volume discount rates were 

per se unreasonable and that there wasnot a showing of a violatio

section 14 Fourth or 16 First of the Shipping Act 1916

Sea Land and TPFCJ IK also except to the Administrative L

Judge s finding that Star s practices in implementing Agreement 

99551 are neither detrimental to the commerce of the United St

nor contrary to the public interest and therefore the Agreem

should be approved Sea Land excepts to the Initial Decision in 

it failed to adopt certain of its proposed findings of fact which S

Land submits would support a

contrary finding by the Commiss

The findings proposed by Sea Land are ahnost exclusively limite

the inbound trade from Japan and Korea Even if we were to ag

that the proposed facts of Sea Land were supported in the rec

which we on the whole do not 3

we would nevertheless feel c

strained to approve Agreement No 995 51 because ofthe impor

public benefits shown by Starto flow to the shipping commerce of 

United States which more than overcome the alleged detrime

effects on the inbound trade between Japan and Korea

TPFCJIK takes the position that Star had a burden of not o

showing that there were serious transportation needs or impor

public benefits which could be derived from Star s overall service 

also that Star had the burden of shoWing that there were ser

transportation needs or that there were importan publiC benefit

be derived specifically from Star s inbound trade from Japan 

Korea We do not agree The Commission will notrequire a show

of transportation necessity to be made for every trade area cove

I

I

1

TPFCJ IK excepts to Judge KUne setgllLpoint analysis of th ts oifaettlng th allegatioQs of discrim

as being in error Q ite to the contrary weRndJu eKline s

a1ysis to correctly un rscore thefa11ure of 

connection between the allegation ofdilCrinit tion and the showing of discrimination

3For example Sea Land s assertions that Star has made a zero Investment in the trade that Star s ser

shippers is highly selective that there is adisparity in inbou d andDutbo lnd shipper services and that Star 

are unknowable are simply notsupported by record That Star might In agiven lrcumstanc set rates to m

of pocket expenses is irrelevant since jpdge KUne found thatStar s ratelmet fully distributed costs in the in

tradein 1973 Consideration of Sea Land sbreakevenpoint istotally irrelevant to the determination of theap

bility of this Agreement The fact that Star was the initiator ofFAK and multt contatner rates isalso not re

because as has been discussed earlier it has not been shown that Star s

FAK ormulti container ratesare vi

of the Act

4TPFCJ K also made allegations offactual errors which for the most part are unsupported by the 

Irrelevant orbnmaterial to the ul timate concllJlions Most9f th e

objectlonJ have been addrusedin the b

this opinion or are simU8 to the allegationH fSea Lanciaddrelled inthe previou s foot ote dwe see no n

discuss most of them further Contrary to theexceptions QfTPFCJ KtheAdministrativeLawjudgedid find th

to be overtonnaged and correctly omitted theadjeQtive endvely indecribJng the overto nnagIt lg sin

extentwas not olear from the record judge Kline was correct in excluding proffered exhibit 70 page 2as unr

hearsay in that he couldnothave givenany weightto it ifit had been admitted In any case iEthe Bgures con

therein had been considered theywould not have changed the outcome of this proceeding

18 F 
AGREEMENT NO 99551 431

by an agreement The whole agreement is to be considered all the

benefits and all the detriments

Sea Land and TPFCj K both put forward suggested conditions to

or modifications of Agreement No 99551 in the event that it is

determined that theAgreement should be approved They assert that

theAdministrative Law Judge erred in dismissing the conditionswith

out analyzing each ofthem or adopting them in his Initial Decision

Wehave analyzed each ofthe proposed amendments or modifications

and find that theAdministrative Law Judge was correct in not adopt

ing anyofthe amendments or modifications to the Agreement and in

notanalyzing each and everyone ofthem The proposed amendments

or modifications were to correct alleged violations oftheShipping Act

Upon the failure of showing that Star s practices and Agreement were

in violation of the Act the proposed modifications or amendments

were properly dismissed

SEAL S FRANCIS C HURNEY

Secretary

18 FM C
FEDERAL MARITIME COMMISSION

I DOCKET No 7417

AGREEMENT No 9955 1AIS BILLABONG WESTFAL LARSEN A

CO A S

FRED OLSEN A m CO AND STAR SHIPPING A S

1

ORDER

I

The Federal Maritime Commission instituted this proceedin

determine whether Agreement No 99551 is unjustly discrimina

or unfair as between carriers shippers exporters importers orp

or between exporters from the United States and their foreign c

petitors detrimental to the commerce ofthe United States cont

to the public interest or is in violation oftheShipping Act 1916 

therefore whether it should be approved disapproved or modi

and the Commissionhaving this date made and entered its Adop

of Initial DecIsion which is made a cpart hereof by reference sta

its findings and conclusions

Therefore It Is Ordered That Agreement No 99351 be 

hereby is approved pursuantto s ctiQn 13 of the Shipping Act 1

By the Commission

C 1

I

i

i

SEAL S FRANCIS C HURNEY

Secretar

j

1

1

cJ

i

432

lR F 
18 FM C

433

FEDERAL MARITIME COMMISSION

No 74 17

AGREEMENT No 99551 A S BILLABONG

WESTFAL LARSEN CO A S FRED OLSEN CO

AND STAR SHIPPING A S

Agreement establishing a joint service chartering enterprise found subject to section

15 of the Shipping Act 1916 since itgives special advantages regulates competi

tion and establishes a cooperative working arrangement overseas situs of the

parties notwithstanding

Evidence relating to ratemaking practices of respondent Star is properly to be consid

ered in determining the approvability of the agreement even if the agreement is

notessentially one of rate fixing

Star s rate structure and ratemaking practices in the inbound transpacific trade not

shown to be in violation of section 14 Fourth 16 First orany other provision of

the Act In fact Star s services found to have benefited shippers ports and other

persons Agreement therefore approved

A carrier who competes with lower rates and alternative methods of pricing such as

FAK is not shown to be a predator orunduly prejudicing shippers especially if

his rates aTe compensatory justified by transportation conditions shipper testi

mony orcomplaints are absent and there is no evidence that the carrier has or

will deny shipper requests for reasonable rates Such competition especially in

inflationary times is not contrary to the public interest ordetrimental to com

merce

R Frederic Fisher Edward M Keech and HaroldE Mesirow for

respondents

Charles F Warren George A Quadrino and John H Caldwell for

petitioner Trans Pacific Freight Conference ofJapan Korea

Edward M Shea John Mason John A Douglas and C Michael

Tarone for petitioner Sea Land Service Inc

Donald JBrunner C Douglass Miller and Stephen T Rudman

Hearing Counsel
434 FEDERAL MARITIME COMMISSION

j

I

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE 1

This proceeding was initiated by the Commission on May 7 19

in order to determine whether an agreement among four part

namely Westfal Larsen Co W L A S Billabong Billabong F

Olsen Co Olsen and Star Shipping A S Star merits appro

pursuant to section 15 of the Shipping Act 1916 the Act

The subject agreement No 99551 is actually an agreemen

extend the life of an earlier agreement No 9955 which essent

provides for a procedure by which Star acts as the vehicle thro

which the other parties conduct ajoint service charter vessels to S

share profits or losses and establish corporate management of Sta

such a manner as will accomplish these purposes The parties to 

agreement named as respondents in this proceeding seek exten

of approval indefinitely with two minor modifications relating 

name change and definition of expenses

2

The previous agreem

which had been approved by the Commission onNovember 12 1

and through which Star has been operating was due to expire 

November 12 1974 Its life was extended by the Commission h

ever untilJanuary 12 1975 in order to provide the parties Presid

Judge and the Commission adequate time to carry out their res

tive functions leading to a sound and proper decision in this cas

The filing ofAgreement No 99551 provoked two protests file

the Trans Pacific Freight Conferenceofapan Korea TPFCJIK 

Sea Land Service Inc Sea Land named petitioners by the C

mission s Order of Investigation Essentially petitioner Sea L

based its protest on the assertion that Star has been publishin

certain type of rate structure FAK coupled with volume disco

which according to Sea Land is or may be unreasonably low 

criminatory among shippers and precludes movement ofcertain c

modities aswell as establishing disparate rates all allegedly in v

tion ofvarious sections oftheAct Petitioner TPFCJI Kquestioned

need for continued approval oftheStar agreement and tosome ex

duplicates Sea Land s assertions regarding the effect of Star s 

volume discount rate structure onmovement of certain commod

and regarding the level of the rates

The Commission s Order acknowledges the protests as well as 

reply to them filedby Star and concludes thatAgreement No 99

1

IThis deoision became the decision of the CommissionJune 30 1975

These two modifications which no party opposes change the name Star BulkShipping CompanyA1S 

Shipping A S and define expenses of Star in a

new Article 28 essentially as expenses deRned by the B

Directors in its discretion

See Extension of Approval of Agreement 9935 August 20 1974

18 F

j
AGREEMENT NO 99551 435

should be made the subject of a formal investigation to determine

whether it should be approved disapproved ormodifIed pursuant to

section 15 of the Shipping Act 1916 The Commission furthermore

ordered the proceeding to be expedited so that the issues raised

therein could be resolved prior to the termination date of the basic

agreement November 12 1974 since extended as noted untilJanu

ary 12 1975

As will be discussed below a basic problem with which all parties

to the proceeding have had to contend is the fact that the Commis

sions Order does not frame the issues specifically raised by the pro

tests despite the fact that Star s reply to the protests emphatically

asserted that those issues related primarily to matters outside the

scope of a section 15 investigation i e to rates which if anything

should be determined in separate proceedings It was and remains

unclear whether the Commission s mere acknowledgement of the

protests and reply without further discussion of the issues raised

therein meant to convey the Commission s desire to litigate these

rate related issues The Presiding Judge took a broad view of the

Order so that the fullest and most complete evidentiary record could

be developed and accordingly allowed evidence fleshing out the con

tentions of the petitioners even if the relationship of the evidence to

the agreement itself was at times tenuous This was done to some

extent in consideration ofthe fact that the subject agreement wasdue

to expire onNovember 12 1974 and thatfailure to allowthe develop

ment of a full record on all issues arguably within the scope ofthe

Commission s Order might have led to a subsequent remand from the

Commission which in all probability would have carried the proceed

ing well beyond the November 12 date on which the agreement was

due to expire It was also done in consideration of the fact that the

Commission s Order although framing the issues in ultimate terms of

disapproval cancellation or modification of the subject agreement

does paraphrase the statutory language ofsection 15 which expressly

invokes issues involving unjust discrimination or unfairness among

carriers shippers etc detriment to the commerce of the United

States public interest considerations and other violations ofthe Act

Order p

3

4

As Star points out however evidence relating to the

so called rate issues was allowed to enter the record on a de bene or

provisional basis conditioned on a showing that a causal relationship

existed between the agreement itself and Star s

ratemaking practices

4The Order states that pursuant to Sections 15 and 22 of the Shipping Act 1916 a proceeding is hereby

instituted to determine whether Agreement No 9955 1 is unjustly discriminatory or unfair as between carriers

shippers exporters importers Of ports orbetween exporters from the United States and their foreign competitors

detrimental tothe commerce of the United States contrary tothe public interest or is in violation of the Shipping

Act 1916 and therefore whether it should be approved disapproved ormodified

18 F M C
436 FEDERAL MARITIME COMMISSION

Whether this causal connection has been shown will be discuss

below In any event Star has maintained the position that the ra

related issues ought notto have been litigated inthis type ofinvestig

tion

BASIC FACTUAL BACKGROUND

The following findings of fact providea basic factual foundation 

which the issues in this proceeding can be appreciated and evaluat

In the section below entitled Discussion and Conclusions addition

findings offact are made where necessary for determination ofpart

ular issues

How Star Operates

1 Star the subject ofAgreement 99551 is a Norwegian corpo

tion originally formedin 1959 and is a common carrierby water int

foreign commerce of the United States

2 At the time of its formation Star then known as A S Star Sh

ping was wholly owned by Mr Per Waaler but in 1964 a new co

pany Star Bulk Shipping Company was registered with Per Waa

and W L as owners

3 InJune 1968 W Ltransferred its interest to Westfal Larsen B

Shipping Company A S

4 In February 1969 Star Bulk was formed into a limited compa

and its name was changed to Star Bulk Shipping Company A S

5 In June 1970 Per Waaler transferred his interest to Billabon

6 At the effective date of Agreement 9955 November 12 19

Star Bulk Shipping Company A S changed Us name to Star Shipp

A S On that date Star had the follOwing shareholders W L Ols

and Billabong

7 Billabong owns 40 percent of the outstanding shares ofStar a

Olsen and W L 30 percent each

8 W L is aNorwegian corporation and is a common carrier in t

foreign commerce ofthe United States in the trade between ports 

the U S West Coast and ports in South America W L is owner off

open hatch vessels under charter to Star W L has at no time engag

in either container forestry products or other dry cargo carriage 

the transpacific trades It is not competitive with any of Star s ope

tions and at no time has W L had plans or intentions contingent 

otherwise to engage independently in transpacific trade or in Sta

type of bulk parcel or forestry products movement in bulk type v

sels

9 Olsen is a Norwegian corporation and until 1970 was a comm

18 FM 
AGREEMENT NO 99551 437

carrier in the foreign commerce of the United States At no time in

the past or present has Olsen competed with or duplicated Star s

operations At no time had Olsen carried forestry products or any

other products in the U S West Coast Japan Korea trade and it has

no plans contingent or otherwise to do so

10 Billabong is a Norwegian corporation incorporated in 1965

which does not itself operate as an ocean carrier Historically Bil

labong has had an owner charter relationship with Star Starbeing the

operator ofthe Billabong vessels Billabong owns or controls through

long term time charter nine ofStar s 19 open hatch vessels

11 Agreement 9955 is ameans whereby the principals to the agree

ment may obtain capital necessary to conduct a worldwide service

which none ofthe three could hope to nnance individually

12 Star s Board ofDirectors which includes representatives ofthe

threeprincipals determines overall company policy and nnancial per

formance The Board does not involve itself in actual management

nnancial details vessel operation orpricing Star s rates practices and

operational matters other than broad policy making are decisions

made by Star s management The Board ofDirectors and the princi

pals do notinvolve themselves in rate making orpricing decisions but

rather are concerned with overall long term nnancial results and re

turn on investment In the latter context however the Board may

become involved in decisions concerning fundamental rate policies

and practices in contrast to individual rate setting

13 All of Star s vessels are chartered to Star by its principals and

charter hire is paid by Star in proportion to contribution oftonnage

and on the basis ofStar s net revenues Star distributesits net revenue

to its principals by means of payment for charter hire

14 Star has 19 open hatch vessels contributed by Star s principals

who either own them or time charter them Open hatch vessels

have hulls which are open boxes having no tween decks but which are

subdivided into holds The hatches extend almost from one side ofthe

ship s hull to the other These open hatch vessels are well suited for

carrying forestry products and bulk products since the large hatches

permit complete and direct access to the hold and are also capable of

carrying containers although they are not cellular underdeck and

have not been ntted with container guides

15 Star s open hatch vessels due to their on board cranes can load

and discha ge cargo whether bulk or containerized independent of

shore side cranes and do not normally call at container terminals

when transporting containers

16 With reference to the trade to and from United States West

Coast and British Columbia ports Star s primaryinvolvement includ

18 F MC
438 FEDERAL MARITIME COMMISSION

J

ing the design and suitability of its vessels and their cargo handl

equipment is the carriage of forestry products to Japan Korea No

Europe and the Mediterranean For Star forestry products are 

core ofStar s service and the reason for Star s choice ofships

17 The philosophy ofStar has been and is to remain a ship opera

and to minimize interest in terminals other land based installatio

and containers Because ofthis philosophy Star adopted FAK freig

all kinds rates Star approaches rate making from the standpoint 

renting space on a vessel

18 Even absent the vessels contributed by W L Star would s

endeavor to charge FAK rates and the departure ofW L would aff

neither Star s rate structure nor rate level

19 For as long as Star has been involved in the inbound transpac

trade it has maintained an FAK rate structure Star Shipping Ea

bound Freight Tariff FMC No 7

20 Star also has an FAK per container rate structure in the Euro

United States West Coast trade Star Shipping Westbound Frei

Tariff No 1 FMC No 3

21 Between 3 5 and 4 percent of Star s worldwide gross reven

are represented by revenues obtained in the inbound transpac

trade

22 Theoutbound transpacific revenue exceeds inboundtranspac

revenue by a better than 3 to 1 margin

23 Staris the largest carrier offorestry products in the outbou

transpacific trade

24 Star carries 70 percent of its world wide movement offores

products from British Columbia and 30 percent from the Uni

States West Coast

25 500 000 tons offorestry products move onStar fromthe Uni

States West Coast 135 000 tons ofwhich are destined for Japan a

Korea

26 For Star the outbound movement offorestry products is St

primary movement in the transpacific trade

27 The inbound transpacific trade is considered secondary by S

28 Star s vessel scheduling practices are basedOn the needs of 

forestry products movement

29 Although Star was offered the opportunity to carry contain

ized cargo from Taiwan to the United States West Coast it did 

avail itself of that cargo because of scheduling commitments to 

movement of forestry products

30 Star s policy in the inbound transpacific trade is to maxim

vessel employment and Star s revenues in order to enable Star to 

rate competitive in the outbound transpacific trade

i

i

I

c

c1

1

18 F M 
AGREEMENT NO 9955 1 439

31 The Star open hatch vessels are especially well suited to the

carriage offorestry products due to their large hatches and on board

cranes which enable forestry products cargo to be loaded and dis

charged in a rapid efficient and economical manner

32 The Star open hatch vessels are also especially well suited to the

carriage of chemicals and fertilizers inbulk due to their large hatches

and on board cranes which enable chemicals and fertilizers in bulk

to be loaded and discharged in a

rapid efficient and economical

manner

33 The continuation ofthe Star service at its present level is essen

tial to the continued ability ofUnited States West Coast forestry pro

ducts exporters to sell their products in foreign markets

34 Star provides service at United States West Coast ports which do

not normally receive service from liner vessels such as Eureka Cali

fornia and Coos Bay Oregon Such service facilitates the export of

United States forestry products

35 Star provides container service from ports in Japan to Tacoma

Washington and provides bulk cargo service between ports inEurope

and San Diego California Such service is important to the economic

well being ofthose ports

36 United States West Coast exporters offorestry products have no

alternative to Star s service since

A Other liner operators are usually unwilling to call at those U S

West Coast ports at which forestry products exporters find it economi

cally feasible to tender cargo to ocean carriers

B Other liner operators do not offer service comparable to Starin

terms of suitability ofships or cargo handling equipment

C Rates charged by other liner operators particularly conference

liner operators are such that American forestry products would not

be able to compete in world markets if transported by liner carriers

other than Star

D Other liner operators particularly conference liner operators

are unwilling to carry forestry products ifbetter payingcargo is availa

ble

37 Inthe conduct ofits business Star adheres to its published tariffs

38 In 1973 Star had a calculated capacity of8 365 forty foot equiva

lent containers in the inbound transpacific trade

39 In 1973 Star carried 1 858 loaded containers forty foot equiva

lents in the inbound transpacific trade on 23 voyages for 57 different

shippers

40 In 1973 Star s vessel utilization rate for the inbound transpacific

trade in terms of container capacity was 22 percent

41 In 1973 Star s loaded container carryings expressed in terms of

18 F M G
440 FEDERAL MARITIME COMMISSION

twenty foot equivalent units TEU were 19 percent of the load

container carryings ofthe members of the TPFCJ K

42 The basic United States port call pattern for Star in the inbou

transpacific trade is that one vessel will call at Tacoma and the n

inbound vessel will call at Los Angeles

43 The following table describes the distribution ofStar s service 

major shippers ofcontainerized cargo in the TPFCJ K trade in 19

NO OF

SHIPPER 40 FEU

I n nn 901

2 n nnn 599

3 nnn n

n 208

4 42

5 nnnn 32

6 nn nn 19

7 17

AU Other Shippers

TOTAL n nn 1 858

PERCENTUM OF STAR CUMULATIVE PERCEN

TOTAL 1973 CONTAINER OFSTAR S TOTAL 19

CARRYINGS CONTAINER CARRYlN

nnnn 48 5 nn n nnnn 48 5

nnnnn 32 2 n n n 80 7

nn n 11 2 n n nnnn 919

nn nn 2 3 nn nn n 93 6

nnn 1 7 n nnnnn 95 9

nnnnn 10 nnnnn n 96 9

nnn 0 9 nnnnnn 97 8

nnn 2 2 nnnn

n 100 0

n nn 100 0 n n n 100 0

44 A representatiave itinerary for a Star vessel in the transpac

trade in 1973 would be for the vessel to load forestry products ca

at U S West Coast ports such as Eureka California and Coos B

Oregon then to sail to British Columbia to load forestry produ

cargo then sail to ports in Japan where the forestry products ca

would be discharged and containers loaded though not necessarily 

the same ports and then sail to Los Angeles or Tacoma where 

containers would be discharged and the vessel would then sail 

Eureka or Coos Bay to load forestry products

45 In the inbound transpacific trade Star advertises its saili

regularly in publications in the Far East and the U S West Coast wh

enjoy general circulation in the Shipping Community

46 Star also distributes its sailing schedules to approximately 

shippers and ports in JapIiIIl

47 Star makes no distinction between large and small shippers 

its solicitation efforts

48 The institution ofa dual rate contract by the TPFCJ Kon Oc

ber 1 1973 impaired Star s ability to obtain a broad range of co

modities for its transpacific inbound container service

49 The service offeredby Star to shippers ofcontainerized cargo 

the inbound transpacific trade is a second class service since S

does not provide intermodal services such as arrangement of inla

movement within the United States does not provide CFS serv

does not provide the frequency ordefiniteness of schedule offered 

TPFCJ Kcarriers and does not offer speed in ocean transit compa

ble to what some of the TPFCJ K containership operators can of

18 F M 
AGREEMENT NO 9955 1 441

50 In order to compensate for its service deficiency Star seeks to

compete on a rate basis

51 Star publishes rates which decrease with the number ofcontain

ers tendered by the shipper The per container rates applying from

Japan to the U S West Coast are as follows

FORTY FOOT CONTAINERS

One container butless than 10

10 containers but less than20

20 containers but less than 40

40 containers but less than 70

70 containers but less than 100

100 containers and over

1 975 00

1 925 00

1 875 00

1 825 00

1 775 00

1 725 00

TWENTY FOOT CONTAINERS

One container butless than 20

20 containers but less than 40

40 containers but less than 80

80 containers but less than 140

140 containers but less than200

200 containers and over

1 015 00

990 00

965 00

940 00

915 00

890 00

7thRevised p29 A Star Tariff FMC No 7

52 Witnesses for Star testified that there were some savings in

administrative costs when the same shipper tenders a large number

of containers However witnesses could not quantify the amount

saved The primary reason for the volume incentive rates was to in

sure that Star had sufficient containers in its eastbound service The

management of Star was concerned that it would be operating the

service with only a few containers

53 The utilization of Star s volume incentive rates east bound

during 1973 was as follows

VOLUME CONTAINERS IN 40 FEU PERCENT OFTOTAL

CONTAINERS

Category I eg Minimum I but less than 10 222 11 9

Category II e

10 containers but less than 30 181 9 8

Category III eg

30 containers but less than 50 294 15 8

Category IV eg 50 containers but less than 100 849 45 7

Category V 100 containers and over 312 5 16 8

TOTAL nn

nn 1 858 5 nn

n 100 0

54 Star allows a reduction of freight per container eastbound

where shippers use containers owned or leased by them and de

livered directly to the container yard The reduction for a twenty

foot container is 250 00 the reduction for a forty foot container

is 400 00 Star s Eastbound Freight Tariff No 1 FMC No 7 2nd

Revised p

20 The actual cost savings to Star which are realized

Thefive categories of volume incentive rates shown in 1973 were expanded to six categories in 1974

18 F MC
442 FEDERAL MARITIME COMMISSION

when a shipper owned or leased a forty foot container is utiliz

are

i

j

Uft on charge at the leasing company depot 

Uft off charge at Star s CY 

Drayage leasing company to Star 

Lease including drop off charge 2

Allotment for return of container 

TOTAL 4

i

55 According to one study an average of 76 percent of the to

tonnage carried by Star on 18 eastbound voyages between 1972 a

1974 was electronic goods or 918 of the containerized cargo c

ried

56 Howard Harrington Vice President and General Manage

Star Shipping USWC Inc testified that electronic goods compris

large percentage ofStar s total tonnage eastbound In 1973 ithas b

estimated thatStar carried roughly 80 000 revenue tons ofsuch goo

57 Star carried no Auto Parts motorcycles footware orporcela

ware which are lower rated commodities that the TPFCJIK and S

Land listed as major moving commodities in the trade

How Sea Land Operates

58 Sea Land is a large containership operatoroffering a broad ra

of services in the eastbound transpacific trade Cargo tendered 

Sea Land is received at the container freight statim l

or container y

in Japan and in the case oflocal traflfc is delivered to a contai

freight station or container yard in a U S Pacific Coast destinat

port Stripping and stuffing ervices are provided for less than trai

load shipments in both the U S and Japan Irithe case of OCP car

itis placed onrailcars at Points ofinterchange The consignee recei

it either at rail ramp or his door depending onthe rail service M

bridge cargo is delivered to the rail terminal in the port for furt

movement inland pursuant to ajoint through service Sea Land adv

tises that its fast service saves the shipper money inthe form ofinte

which must be paid on goods which are in transit

59 Sea Landestimate that its capitalinvestment in containeriza

has been approximately L5 billion of which approximately 

million is attributable to its transpacifi 1service FiveSL7 vessels 

employed bySea Land in the transpacific service Each ofthe vess

which are leased has an assigned valuedf approximately 55 mil

for a total of 275 million In addition Sea Land owns feeder ves

valued at 34 million and charters feeder vesselswith a capitali

value of 8 million Investment in containers chassis power eq

j

18 F
AGREEMENT NO 99551 443

ment and other equipment amounts to 78 million Leased shoreside

facilities are capitalized at 111 million leased cranes at 23 million

and other investments of 56 million

60 Approximately 83 percent of Sea Land s total expenses in its

transpacific operations are of a fixed nature and do not vary with the

amount of traffic

61 Sea Land has made a business decision to invest in shoreside

facilities However Earl B Hall Sea Land s Treasurer conceded that

all container operators need not lease their shoreside facilities as does

Sea Land

62 At the time Sea Land made the capital investment decision to

place sixSL7s in the transpacific trade itwasprojected that the vessels

wouldmake 104 sailings a

year It wasanticipated that the SL7s would

operate at 82 percent utilization eastbound

63 The SL7 was designed to carry 1 096 35 40 foot containers and

operate at a maximum speed of33 knots However the SL7s deployed

in the transpacific trade are being operated at 22 1 2knots orapproxi

mately 10 knots slower than their maximum speed

64 Since 1972 when the decision was made to place six SL7s in the

transpacific trade the price offuel has risen dramatically In 1972 the

price offuel was approximately 3 00 per barrel currently it is 11 00

to 12 00 per barrel Using figures estimated by Star as Sea Land s fuel

consumption it was calculated that at 22 rather than 33 knots Sea

Land would save approximately 53 million a year

65 Although it was originally planned that six SL7s would operate

in the transpacific trade only five are actually in service The sixth

vessel is being used for relieving the other vessels for drydocking At

some point in the future it will be assigned to a trade however

Sea Land has not announced its plans in this regard

66 By operating its five SL7s at 221 2 knots Sea Land anticipates

that it will make 52 sailings a

year in the transpacific service instead

of the projected 104 sailings This would produce 56 000 eastbound

container spaces annually Ifthe same vessels wereoperated at near

maximum speed they could produce over 72 000 container spaces

annually

67 Actually Sea Land had 55 551 available container slots in the

eastbound transpacific trade during 1973 It carried 54 505 containers

during the year giving it a utilization of 98 1 percent

68 Sea Land requires a utilization factor of approximately 90 per

cent in order to break even on earnings after making allowance for

operating expenses capital cost and interest expense associated with

the trade

69 Sea Land depends heavily on electronics not only as a

large

18 FM G
444 FEDERAL MARITIME COMMISSION

i

I

segment of tonnage on its vessels but also as a contributor to ach

overall revenues required by Sea Land A deterioration ofthe hig

rated portion ofthe cargo mix could erode the profit opportunities 

Sea Land

70 U S Hagcarriers carried 298 718 revenue tons of elect

goods eastbound in the trade or 413 percent of the total electro

goods moved by members oftheTPFCJ K Sea Land carried 143 

revenue tons ofelectronic goods in 1973 or 48 percent of that car

by all U S Hag carriers in the conference

71 The electronics market continues to grow in Japan and 

Land s share of that market continues to grow

72 Sea Land as a TPFCJ K member utilizes the TPFCJ K ta

It strongly supports commodity type tariffs of the sort publi lhed 

TPFCJI Kas opposed to FAKtype tariffs ofthe sort published by S

73 In setting the level of commodity rates Sea Land takes 

account the value of service that is the value of the service to 

cargo interest Speed and regularity of service are also import

Sea Land also corisidersthe value of the commodity itself and 

ability to pay the rate

74 Sea Land prepared a study showing the cargo consi lts of 

consecutive SL7voyages which sailed in May 1974 The study dem

strates the wide range of commodities carried by Sea Land un

commodity rates The commodities range from relatively high ra

commodities suchasTY cameras to relatiVely low rated items suc

automotive parts The lowest gross freight shown is 42 04 per r

nue ton By comparison a

shipper tendering Staronlyone40 

container loaded with 47 torisof cargo would in effect be char

42 02 a ton or 1 975 a container 6

75 Below listed are the gross revenues tons loaded by meas

ment torts and the stowage factor by long tons of the ten lea

commodities shipped via Sea Land first for the Japan U S Pa

Coast trade and then the Korea V S Pacific Coast trade forthepe

July 1

through December 31 1973

1

i

c

j

1

Stow S3 

Commod ttJ Footor IL7 M T Groa RB

JAPAN

Elect ODS n 3 4 n n nn h

40

n n n n 1

Tuna hn n nnn 17 on on Oh 18n on on n 1

Auto Parts 00 00 4 S Uh n nn 40 n nnn 1

Motorcycles nn n 4 1 00 000000 00 SO nnnnn 9

Machloery h n 19 n n n

nO40 nnonnnn 2

Syo Mfg 000000000000 4 0 hnn n 40nn n h 2

Porcelainware 3 8 40 1

Under Star s volume discount plan a

shipper tenderina certain numbers of containers would be charged 

rates The lowest pouble rate over100 containers tendered would be 36 70

18 F 
AGREEMENT NO 99551 445

Toys Novelties 67 40

TV 54 n

Musical 40 lost 64 40

KOREA

Syn Mfg 4 0 42 2630

Footwear 4 6 42 1929

Cotton Textiles 2 2 42 2616

ElectCDS NOS 54 42 2346

Toys 6 7 42 1817

TV s 54 42 2108

Musical Insts 64 42 2159

Sporting Cds 4 8 42 2244

Tuna 17 18 1364

AutoParts 4 3 42 1667

nn 1842

2030

2187

76 Sea Land s

fully allocated expenses for handling loaded 35 foot

containers from Yokohama to Oakland were as follows

For an average container of electronics 1 697

For an average container of all commodities 1 595

Foran average container of motorcycles 1 542

Vessel operating expense terminal marine terminal land and mainte

nance both fixed and variable are allocated on a per container basis

Part ofthe administrative expense and part of the sales expense are

allocated on the basis of revenue derived from the carriage of the

container Cargo claims are allocated on the value ofthe commodity

The administrative sales and claims expenses arethe only oneswhich

vary with the commodity carried Sea Land did not make any study

to develop the different cost characteristics that are attached to each

commodity

Sea Land s Views on Nonconference and FAK Practices

77 Ronald B Gottshall Director ofPricing Far East for Sea Land

sees two primary faults with an FAK rate structure such as Star s It

does notrecognize that some commodities are unable to pay the level

of FAK rates and still market their goods Additionally Mr Gottshall

maintains that it places a ceiling on the rate structure

78 The TPFCJ K wasrequested to establish by a number ofmajor

importers in the U S container or volume rates on a variety of com

modities The conference set up a committee ofwhich Mr Gottshall

wasa member to study the proposals The committee concluded that

except for documentation therewere no cost savings whichmight be

passed on to the shipper for tendering a volume shipment The ad

ministrative savings are far less than the 50 differential per container

at the various container incentive breaks in Star s rate structure Mr

Gottshall would be happier if Star discontinued volume incentive

rates and simplypublished anFAK rateat close to fully distributed cost

18 FMC
i

I

446 FEDERAL MARITIME COMMISSION

79 Prior to this proceeding Sea Land had difficulty determin

what Star was doing in the trade In describing Star Mr Gotts

testified they are almost invisible Mr Gottshall stated that 

only thing Sea Land could find out about Star was that they had s

ings

80 Sea Land wasaware that Matsushita an exporter ofelectron

was shipping with Star however Sea Land did not know the volu

oftraffic because the total volume ofMatsushita traffic had neverb

determined Matsushita shipped with Sea Land in 1969 but wasne

amajor account in terms of their total volume Sea Land had som

their business as did other carriers

81 Anumber of electronics firms did not sign conference dual r

contracts For example Sony did not sign a contract but uses a 

of nonconference and conference vessels Sanya recently termina

its dual rate contract A number of electronics exporters are mov

to the nOhconference linesStar Tokai Sea train orOrient Overs

Container Line OOCL Initially 65 to 70 percent of the electron

firms signed dual rate contracts At present about 50 percent 

contract signatories

82 When asked to quantify the direct effect that Star has had 

Sea Land up until the present day Mr Gottshall replied

j

The direct effectwould be loss of some of the Matsushita cargo that they could ha

So that would be a direct effect There is ather cargo on there being handle

NVOCCs of which presumably some of that cargo was cargo which was previo

handled We can t always Identifyexactly who It was orwhatit was but It was pres

bly there

Now obviously you say we re salling at 98 percent That s true On the other h

we carry a disproportionate number of motorcycles We carry a lot of tunaflsh An

carry a lot of commodities that are on the low rated side Because we are reaso

cost efficient we can handle these and make an overall profit But maybe It s no

profit we could have made had we had a mix that hadn t been affectedby some o

better cargo flawing to Star

So In terms of quantifylng an Invisible Is a little difficult Those are the things I

of happeplng

83 Star is not the only nonconferencecarrier which carries e

tronic goods FESCO is a substantial Carrier of electronic goods 

cluding white goods refrigerators washers and home applianc

Approximately 20 percent of the tonnage carried by OOeL ise

tronic goods Rates maintained by FESCO and OoeL are below th

maintained by the conference The reduced rates of FESCO cau

the conference to reduce its rates on electronics

84 Seatrain and Tokai have tariffs withFAK and volume incen

rates Mr Gottshall testified that these rates tend to attract hig

1

18 F
AGREEMENT NO 9955 1 447

ratedcommodities suchas electronics IfStar stopped utilizing volume

incentive and FAK rates but Seatrain and Tokai continued to use

them Mr Gottshall concedes that this traffic would flow to them

A Seatrain publishes a tariff which includes FAK rates in addition

to commodity rates FAK rates from Japan or Korea vary from 2000

per 40 foot container to 2 800 Seatrain International S A Japan

Korea Eastbound Pacific Coast Freight TariffNo 615 FMC 61 4th

Revised Page 131 A

B Tokai Line publishes a tariffwhich includes FAK rates inaddition

to commodity rates FAK rates from Japan vary from 1 825 per

40 foot container to 1 975 Tokai Line Local and Overland Freight

Tariff FMC 2 8th Revised Page 68

85 Sea Land estimates the average weekly capacity of FESCO at

1 010 TEUs Seatrain at 325 TEUs and OOCL at 505 TEUs Star s

capacity is estimated at 200 TEUs per week Star does not actually

provide a weekly service rather it is roughly a bi weekly irregular

service

The Views of Sea Land sExpert Witness

86 Elliot Schrier President of Manalytics Inc appeared in this

proceeding on behalf of Sea Land He was retained by Sea Land to

study the record in the proceeding and testify as to the consequences

of approval ofAgreement 99551

87 Mr Schrier testified that Star does not maintain regular

schedules or advertise to the extent liner carriers do nor does it offer

commodity rates or attempt to attract a broad range ofshippers and

commodities He concluded that Star s pricing is detrimental to the

liner operators in the Far East U S West Coast service Mr Schrier s

conclusion that Star does not maintain regular schedules wasbased on

the fact that he could not find schedules in the publications which he

checked Mr Schrier did not compare the advertising of some ofthe

smaller members ofTPFCJ K with that of Star Finally he did not

make any investigation ofStar s marketing efforts inJapan

88 Mr Schrier conceded that he was not aware of a trade inwhich

the FAK rates charged by one carrier has totally driven out commod

ity rates in the trade Furthermore he admits that the three year

participation ofStar in the transpacific trade has not led to a rate war

89 Mr Schrier attempted to show what would occur if other neo

bulk carriers adopted Star s method ofoperation He concludes that

disruption of liner operations would be extensive

90 Mr Schrier s projection regarding other neo bulk carriers is

based on a sample of300 ships from the Bulk Carrier Register 1973

18 FM C
448 FEDERAL MARITIME COMMISSION

He assumes that these vessels could be converted to carry contain

and attempts to estimate their container capacity

91 Mr Schrier wasnot aware ofany specific non liner that wan

to convert to this sort of operation if Agreement 99551 were 

proved He was not aware of any bulk vessels that have actually 

ried containers from Japan and Korea to the United States

92 Mr Schrier could not recall Ifany other open hatch ves

other than Star s were included in this study

93 Mr Schrier did not know how many of the 300 vessels in 

study had on board cranes for containers He did not know whet

the shore facilities in Japan were generally available to bulk carr

for loading and discharge of containers

94 Mr Schrier has made no study of the itineraries of the 

vessels

95 Mr Schrier did notinvestigate the exact disposition or configu

tion ofany ship in the 300 ship study Moreover he did not determ

the strength of the hatch covers and their suitability for suppor

loaded containers

How the TPFCjK Operates

96 TheTPFCJ Kgeographically embraces the trades from port

Japan and Korea to Pacific Coast ports of the United States and 

inland points viasuch ports The conference publishes a port to p

tariffincluding bothlocal and OCP rates and aminlbrldge tariffn

ing joint throughrates to East Coast ports

97 At present the TPFCJ K has 16 member lines The confere

began the year 1973 with 19 members however Seatrain Lines I

and Transportation Maritime Mexicana dropped out ofthe confere

during the year Inaddition AmericanMail Line merged with Am

can President Lines Ltd

98 The member lines of TPFCJ Krange from fully containeri

carriers such as Sea Land to largely breakbulk carriers such as Ba

Lines WlUle the conference members collectively offer a wide ra

of services not all carriers in the conference offer the same servi

In all cases however the conference members provide conta

freight station service for less than trailerload shipments Th

TPFC K members which operate westbound in the trade prov

essentially the same services However some carriers do not ope

in the westbound trade

99 During 1973 the TPFCJ K member lines providedaminim

of34 mortthly sailings A

cordingto onference statistics the mem

lines had a total of 1 134 sailings during 1913 Incalculating the n

18 F
AGREEMENT NO 99551 449

ber ofsailings however the voyages of vessels operated by members

ofJapanese space charter agreements FMC Agreements Nos 9718

9731 and 9835 werecounted as separate voyages by each ofthe lines

having space aboard the vessel A single voyage thus might be counted

as aseparate voyage by as many as six different lines Thus the number

ofphysical sailings wasconsiderably less than reported inthe confer

ence statistics Moreover the conference statistics included sailings of

four Korea feeder vessels inadvertently reported by Mitsui OSK Lines

Ltd

100 TPFCJ K members had 535 000 container slots available dur

ing 1973 A

portion of these container slots were budgeted to the

TPFCJ Ktrade The number ofcontainer slots budgeted is amatter

ofindividual company policy and may be adjusted at will With the

exception ofSea Land various methods used by conference members

for determining the number ofcontainer slots to be budgeted to the

tradewerenot explained 7 Thus the number of budgeted slots is not

a meaningful figure

Aswill be discussed below this matterbecame the subject of an offer of proofunder Rule 10 1 46 CFR 502 152

TPFCj Ks Views on the Trade

101 James E Mazure the Chairman of TPFCJ K stated that he

considers the eastbound transpacific trade overtonnaged His state

ment is largely based upon a comparison ofthe budgeted slots with

the 197 591 TEUs carried by member lines during 1973 Regardless

ofthis particular source material however it is concededby all parties

that the trade is overtonnaged

102 Mr Mazure stated that the United States flag lines are con

tributing a large part ofthe overtonnaging During 1973 American

President Lines converted vessels to containerships States Lines cur

rently plans to add roll on roll offvessels in the trade Clearly this will

increase conference container capacity The conference has taken no

action to restrain its members from adding tonnage to the trade

103 Nonconference lines are also contributing to the overtonnag

ing FESCO OOCL and Seatrain all operate full container vessels

FESCO is placing more cellular container vessels in the trade

104 The tariffs maintained by TPFCJ K name commodity rates

only and have noFAK provisions The conference insetting commod

ity rates takes into consideration the ability ofthe commodity to pay

the rate Mr Mazure assumed that all commodity rates cover the fully

distributed costs ofevery member line however he conceded that he

had no method of checking on individual member lines

105 The members ofTPFCJ Kcarry awide range ofcommodities

18 F MC
450 FEDERAL MARITIME COMMISSION

however electrical goods are most important commodities to the co

ference from the standpoint of revenue Mr Mazure estimates th

Star carried more electricalgoods than any single conference memb

except Sea Land thus he concludes that Star s FAK rate structu

constitutes a serious competitive threat He disclaimed any spec

knowledge of the extent to which other nonconference lines ca

electronic goods

106 Mr Masure also testified that low rates such as those ma

tained by Star coupled with overtonnaging tend to encourage reb

ing and other malpractices in the trade Hetestified that carriers w

higher rate levels have a greater incentive to engage in malpractic

in order to meet the lower rates of competitors He also agreed t

the conference generally maintains rate levels which are above tho

of the nonconference lines

107 Mr Mazure has no direct knowledge of malpractices in 

trade committed by Star However he assumes that since conferen

members commit malpractices from time to time nonconferen

lines do as well

108 Mr Mazure concludes that Star only solicits a few large s

pers in the inbound trade from the fact that Staronly carried ca

for 57 shippers inbound during 1973 Mr Mazure has no direct kno

edge of Star s solicitation efforts nor does he know whether Sta

turning down shippers Mr Mazure admits that the results of a s

flrogram do not always reflect its intensity particularly where 

customer is restrictedfrom exercising a free choice He further adm

that the dual rate system isthis sort ofrestriction on customer cho

109 At present the conference has ineffect a 13 00 per ton bun

surcharge and a 5 5 percent currellCY surcharge Mr Mazure c

cedes that the fuel crisis and currency revaluations have affected c

ference members to varying degrees

DISCUSSION AND CONCLUSIONS

1

The Issues

Analysis of the lengthy briefs and extensive evidentiary record 

monstrates that the primary issues for decision focus on the ques

ofjurisdiction over the subject agreement and on questions rela

to Star s tariff and ratemaking practices in the inbound transpa

trade As noted previously Star obJects to the extension ofthis inve

gation into rate related issues and furthermore contends violatio

the notice provisions of the Administrative Procedure Act I n

proceed to a resolution of these issues

18 F 
AGREEMENT NO 9955 1 451

Jurisdiction

Star contends that section 15 jurisdiction does not attach to the

subject agreement on several grounds but assuming jurisdiction

would limit it solely to the W L Star relationships set forth in the

agreement The basic thrust of Star s contentions is that the agree

ment although designated as a joint service is in fact a

corpo

rate venture organized under Norwegian law in which Star has

emerged as the result of a completed event i e the contribution

by three shareholders ofcapital and vessels Under this theory sec

tion 15 jurisdiction would be lacking both because of the nature of

the undertaking i e the formation of a corporate enterprise pro

tected by Norwegian law and the fact that there are no separable

ongoing relationships over which the Commission can maintain

surveillance These factors would remove section 15 jurisdiction

under the doctrine enunciated in American Mail Line Ltd et al v

Federal Maritime Commission Slip Opinion June 28 1974 D C

Cir hereinafter the Sea Land US Lines case Star argues fur

thermore that the subject agreement pertains to conglomeration of

capital of a type found in section 5 of the Interstate Commerce

Act ie merger or control of one carrier by another even though

separate carrier entities continue to exist and compete i

e Star

and W L Moreover the argument continues the agreement is re

ally between non competitors Star operates in a different type of

business from two of its owners Billabong and Olsen and in differ

ent trades from its only carrier owner W L the agreement really

creates rather than destroys competition and is not a per se or

other type of violation of the antitrust laws Finally Star empha

sizes the Norwegian situs of the agreement and contends that

Commission jurisdiction cannot attach if for no other reason than

under principles ofinternational comity and in essence the impro

priety of dictating to foreign nationals about events consummated

on foreign soil under foreign law

Sea Land TPFCJ K and Hearing Counsel all take the position that

Commission jurisdiction attaches on several grounds Sea Land con

tends that two carriers operating in U S trades are parties to the

agreement and that a third Billabong is inreality merely the alter ego

ofStar Under Clause 18 ofthe agreement moreover Sea Land con

tends that all ofthe parties to the agreement are willing to assume the

identity of common carriers for purposes of obtaining additional

voting rights in conferences to which Star may belong As to the

subject matter of the agreement Sea Land contends that it falls

within the scope of the seven enumerated categories ofagreement in

18 FMC
452 FEDERAL MARITIME COMMISSION

1

1

section 15 8such as rate Ilxing since the Board ofDirectors ofStar 

which W L representatives sit can under certain circumstances ex

cise some control overrate making policies conferring special pr

leges since the principals of Star enjoy special rights in connec

with attempts ofanyone ofthem to dispose of his ownership inter

controlling competition since Star operates in the U S West Co

foreignforestry product market but not to SouthAmerica where 

ofits owner W L

operates pooling ofearnings since Star distribu

its earnings to its principals in the form ofcharter hire and estab

ing a cooperative working arrangement in connection with Star s v

sel construction program and commitments of vessels by Stars o

ers

TPFCJ K argues similarly that jurisdiction attaches to the ag

ment since two of the parties W L and Star are admittedly comm

carriers evenif the other two owners BUlabong atld Olsen are n

although TPFCJ K believes that common carrier status can be 

puted to them as parties to a cooperative arrangement As to 

subject matter of the agreement TPFCJ K perceives section 15 

volvement in an agreement in which principals commit themselve

charter vessels to another furnish crews divide revenues and ret

control over the chartering party TPFCJ K has no doubt that th

arrangements involve ongoing rights and responsibilities necessita

continuous Commission supervision thus falling within section 

under the doctrine enunciated by the Supreme Courtin Federal M

time Commission v Sea train Lines 411 U S 726 729 1973

Hearing Counsels argumentonjurisdictionrests onthe factthat 

owners of Star share the profits and apportion lasses among the

selves and their agreement is thuSfne pooling or apportioning ea

ings losses or traffic aBset forth in section US ana is furthermo

cooperative working arrangement under thebtoad interpreta

of section 15 followed by the Court in Volkiwagenwerk v Fed

Maritime Commission 390 U S 211 11168 Furthermore Hea

Counsel contend that the agreement establishes an ongoing relat

ship among the owners and Star and cdoes not constitute a mer

between Star and W L which exercise80nly limited control over

as a part owner thus distinguishing the situation from that in 

Sea Land USLines casein which the Courtcommented thatachan

J

I

1

IThe sev n

categories enumerated in section 15 are agreements

l fixing or regulating transportation ratesor fares

2 giving or receiving sgecW rates accommodations Of other speoial priVilegos Of advantages

3 controllina regulating preventing ordestroying competttiont

4 pooling orapportioning earJlings losses ortrafRc

5 allottina porfs or restricting orotherwIse reiUlatina the number and character of saWnas betweenp

6

Ibniting OJregulatina in any way the volume or charactor of freight or passenger trafRc to be carried

7 orin any manner providing for an exclusive pr4tf rentlal or cooperative workJng arrangement

18 F
AGREEMENT NO 9955 1 453

of ownership had resulted in a single corporation controlling both

parties Sea Land U S Lines case cited above slip opinion p23

The jurisdictional arguments are responsive to the concern of the

Presiding Judge expressed early in the proceeding and periodically

throughout regarding jurisdictional issues This concernarose because

ofthe peculiar nature of the agreement and its signatories Because

ofthe termination of Olsen s common carrier operation in U S for

eign commerce it appeared at first blush that only one carrier W L

may have entered into an agreement with two non carriers which

agreement furthermore resembled articles ofincorporation Accord

ing to the Commission s decision in Grace Line Inc v Skips A S

Viking Line et at 7 F M C 432 4479 1962 an agreement be

tween two shipowners establishing a joint service Viking Line did

notfallunder section 15 because the two parties forming the joint line

were neither carriers nor other persons subject to the Act and could

not be construed to be carriers merely because of their role in the

formation ofthe line Itis elementary of course that there must be

more than one party to an agreement who is subject to the Act before

section 15 jurisdiction attaches Hong Kong Tonnage Ceiling Agree

ment 10F M C 134 140 1936 Furthermore according to the Court

in the Sea Land U S Lines case cited above agreements pertaining

to the establishment ofownership interests such as consolidations and

mergers are not the types of agreements falling within one of the

seven categories enumerated in section 15

Having the benefit of a full record and the cogent arguments of

counsel it appears to methat a somewhat different picture ofthe Star

agreement emerges which demonstrates that it is not merely an own

ership or incorporation type agreement but also an ongoing joint

service chartering arrangement in which at least two carriers W L

and Star are participating

At the very outset is the fact that the basic agreement No 9955 is

entitled Memorandum ofJoint Service and Chartering Agreement

and that four parties are named thereto not merely the three princi

pals W L Billabong and Olsen but Star as well There are therefore

two active common carrier participants W L and Star The agree

ment states that its purposes are to provide a procedure by which

Star Bulk the previous name ofthe joint service shall be the vehicle

through which the other parties hereto conduct a joint service 2 to

provide for the chartering ofvessels owned ormanaged or controlled

by Billabong Westfal Larsen and Fred Olsen to Star Bulk 3 to pro

vide for the operation of such vessels by StarBulk so that the profits

derived or losses sustained therefrom will be divided among Bil

labong Westfal Larsen and Fred Olsen in proportion to their respec

18 F M C
454 FEDERAL MARITIME COMMISSION

tive commitments of vessels to Star Bulk and 4 to provide for 

corporate management ofStarBulk in such manneras will accomp

the foregoing purposes

This agreement therefore establishes an ongoing joint service w

chartering arrangements and further provides for apportioning pro

or losses among the principals in accordance with their respec

vessel contributions Other provisions ofthe agreement give W La 

percent interest in the corporate venture while Olsen and Billabo

enjoy a 30 and 40 percent share respectively W L is entitled to 

point two members of the Board of Directors while Olsen and 

labong may appoint two and three members respectively Corpor

action may not be taken unless approved by four members of 

Board but must include the approval of at least one director re

senting each of the three shareholder groups

The agreement reiterates that from time to time Billabong W

fal Larsen and Fred Olsen will time chartervessels owned mana

or controlledby each ofthem to StarBulk for employment in the J

Service Other provisions inthe agreement specify that if confere

regulations allow each of the parties to the Star agreement shal

quire membership in theparticular conference thatStarshall ope

world wide as determined by the Board of Directors that Star 

purchase orcharter additional ships from persons other than its pr

pals and that revenues and expensespertaining to suchvessels wi

included in the calculations by which charter hire to the principa

determined

Aside from the terms of the agreement itself several other f

should be noted The record indicates for instance that altho

Star s ratemakingpractices are generally considered to be amatte

Star s corporate management and not its Board of Directors un

certain circumstances for example where losses occurred in a cer

trade where proposals weremade to open new services orwhere 

ofreturn matters werebeing considered the Board would have so

thing to say regarding ratemaking policy Another fact of some in

est is that although Star may operate world wide as its Board dir

and according to its tariffs on file with the Commission holds o

provide a service in at least 10 trade areas in the foreign comm

of the United States 9

it does not operate in the United States W

91 do notknow ifStar isactive in aUlO trade areas butStar does maintain 10 tariffs on fIle withthe Com

which are briefly summarized as follows

FM C No European Trades

3 Inbound Continent UK toUS Pacific Coast

6 Inbound Continent British Isles to US Gulf Coast

4 Outbound US Pacific Coast to UK and Continent

8 Outbound US Gulf Coast to Mediterranean Parts

FM C No Far Eastern Tradss and AU8tralia

18 F 
AGREEMENT NO 99551 455

Coast South America trade where one of its owners W L is active

In my opinion these facts illustrate that the Star agreement is a

chartering joint service arrangement with ongoing relationships and

not merely an agreement establishing capital ownership Therefore

it does not falloutside the scope ofsection 15 as did the arrangements

in Federal Maritime Commission v Seatrain cited above and in the

Sea Land US Lines case which involved either consolidations merg

ers corporate organizations or acquisitions of assets ie agreements

affecting ownership without ongoing relationships which agree

ments as in the Sea Land US Lines case effectively terminate the

independence of an operating carrier The Star agreement unlike

that in the Sea Land US Lines case does not eliminate the separate

identity ofStar apart fromW L or the other parties to the joint ven

ture On the contrary the very purpose ofthe agreement is to estab

lish a separate carrier identity Star Shipping which shall be the

vehicle through which the other parties hereto conduct a joint ser

vice Notonly is Star a viable entity apart from its owners no one of

which has majority control with separate management butStar may

even purchase or charter ships from persons other than its three

owners and if conference agreements permit Star and its three own

ersmay enjoy separate voting privileges whenever they choose to join

such conferences

Given that the Star agreement envisions the continued existence of

separate viable entities including two active carriers W L and Star

and consequently is not outside the scope of section 15 it remains to

be determined whether the agreement falls within any of the seven

categories enumerated in section 15 In my opinion careful analysis

ofthe operations ofthe agreement demonstrates that it falls within at

least three ofthese categories to wit nos 2 3 and 7 to wit giving

special privileges and advantages controlling competition and estab

lishing cooperative working arrangements Furthermore the agree

ment bears some resemblance to rate fixing and pooling categories 1

and 4 respectively although it is not necessary to decide the jurisdic

tional issues on those grounds

An agreement giving or receiving special rates accommodations

or other special privileges or advantages is the second category

enumerated in section 15 Sea Land contends thatthe Star agreement

7 Inbound Japan Korea Taiwan to U S Pacific Coast

9 Inbound Australia Tasmania New Zealand to us East Coast and Great Lakes

11 Inbound Australia Tasmania New Zealand to US Pacific Coast

13 Outbound U S East Coast South Atlantic Gulf Coasts toJapan and Korea

5 Outbound US Pacific Coast to Japan China Korea Taiwan Hong Kong etc

12 Outbound US Pacific Coast to Australia New Zealand Tasmania

18 F M C
456 FEDERAL MARITIME COMMISSION

i

c

1

I

j

falls under this category because the principals of Star have spec

rights of first refusal on stocktransfer Thoughthis may Genfer pr

leges on the owners it is not clear to me that this type of privile

which relates to ownership interests is really the type envisioned 

section 15 However the formation of anewentity by shipping int

ests who choose to band together may confer on that entity a spe

privilege oradvantage InIn the Matter afAgreement FF 1 7 Co

erative WorkingArrangement 14SRRti09 1974 lOsix ocean frei

forwarders banded together to form a new corporation which wa

engagein domestic and international forwarding and purchase inla

operating rights from a fOrwarder enjoying Part IV authority un

the Interstate CommerceAct The ultimate purpose ofthis new c

porate arrangement was to improve the selviees of the six oc

forwarders by extending the scope of their services to include inla

forwaIdingin combination with ocean forwarding services The Co

mission found that tbe arrangementwould serve to increase rat

than lessen competition in the multiple s rvice field since parties 

the arrangement could compete with outsiders who already offe

such multiple services The fact that the six parties were agreeing 

establish a new corporati6l1 and become stockholders in it and the 

that this activity would ultimately increase competition by addin

new enterprise into the multiple service forwarding field did not 

move the matter from section 15jurisdiction u Furthermore 

Commission found that the cOnsummation of thearranaemlilnt g

the newcolporQtion the special QCl90lUmodation8 prtvil es and 

vant es inherent tItthe qui8itiol1 of expandedfonyarding ac

ties As a remIt we BnPtlaat aJlch anigteemellt mustJallwi n

broad scopaofsection 13 Shipl iniA t 1916 14 SRRat p

613

Inthe instantcase the Carder which r su1ts fr9mthesubj ctag

ment Star e oys acspeciabprivilege and advantage ovel otner ca

erswith whom it ffillY co te Wgrlgwidepy b emsable to cha

vessels from its ownerswhO ve90mmi d ves s tfl StaI and q

cooperatedin a vessel cQnstructtonproil aluOne of theowpers 

thermoreis a carrier W L Wiflnvhom tarcqtild cQmpete althQ

infaQtit daewot do So anclanother QlaenJis a fQ1Di erconunon clU

who is theareticall 1free toreente UnitedStates trades acomm

carfierif he soohoaaas Staicontendumphatimally thatthesuQi

IOPetitioM forraView of this case have been filedin theU S CoJ lrlof Appeals fortheDistrict ofColumbia C

sub nom AlJrdM Jort Inc etal u F lMarltfm Cdmmlt ftQn Docket No 74 134 et aI OnJune 14 197

Commlulon mod wlth theCourt aMotion lor Romanello the pliRafponnlttlng tho CommJsslon to clari

further considerItsdeolsion The motion futthedndicatel that the Onnm uon wlahes to reconsiderits decisio

respect to the jurisdictional scope ofJeCti9J11B

For sim1lar flndingsJnvolvine anAIIee ent between two partl lubjeot othe tto form anewcarrier 

would increase competition in the U S West CoaaflHawaU trade seeAgMrmlnt No DC Sl 108M 725 l

Decision 1968 agreement later withdrawn

j

cl

1

18 F
AGREEMENT NO 9955 1 457

agreement operates to increase rather than lessen competition since

the input of vessels has enabled a new line to emerge on many trade

routes with a specialized service praised by its shippers especially

those of forestry products and one which offers an alternative to

TPFCJ K s services in the inbound transpacific trade Although this

contention is raised by Star as an argument against Commission juris

diction under section 15 as seen from Agreement No FF 71 7 cited

above the Commission found that the entity resulting from an agree

ment may enjoy special privileges and advantages precisely because

the agreement expanded its services and enhanced its competitive

ability

An agreement controlling regulating preventing or destroying

competition is the third category enumerated insection 15 As previ

ously discussed W Lenjoys two votes onStar s Board ofDirectors and

may disapprove any corporate action Therefore one carrier W L has

some control over the operations ofanother Star Another provision

of the agreement Article 19 provides that Star may operate on any

trade routes as may from time to time appear to the board ofdirec

tors to be economical and compatible with the available vessels

Although there is no specific evidence that W Ls

representatives on

the Board have been disapproving proposals that Star enter into the

South Americantrades where W Lis actively engaged the agreement

certainly enables W Lto disapprove any such move by Star In actual

fact moreover whether by coincidence ornot Star does not operate

in any U S trade in which W L operates 12

An agreement in any mannerproviding for an exclusive preferen

tial or cooperative working arrangement is the seventh category

enumerated in section 15 The Supreme Court has held that this

category was clearly meant as a catchall provision intended to sum

marize the type ofagreements covered and stated further that

such clauses are to be read as bringing within a statute categories

similar in type to those specifically enumerated Federal Maritime

Commission v Seatrain Lines Inc cited above at p

734 In view of

the fact that the subject agreement establishes an ongoing joint ven

ture and has characteristics of agreements which give special privi

I2Although the fact thatW L has the power to disapprove proposals that Star enterinto trades in competition

withW L alone establishes in my opinion an agreement controlling or regulating competition and thus falls

within the scope of section 15 the actual fact that the two carriers W L and Star avoid operatingin the same trades

although bothengage in carriage of forestry products from the United States West Coast ports strongly implies that

WL would not approve of the entry of Star into thetrade routes in which W L is active Undersimilar circumstances

in acase arising under the Clayton Act the Supreme Court made such an assumption stating as follows

The joint venture like the merger and the conglomeration oftencreates anticompetitive dangers It is the

chosen competitive instrumentof two ormore corporations previously acting independently and usually competi

tive with one another If the parent companies are in competition ormight compete absent the joint venture

it maybe assumed that neither willcompete with the progenyin its line of commerce Emphasis added United

States v Penn Olin Co 378 US 158 169 1964

18 FM C
458 FEDERAL MARITIME COMMISSION

leges oradvantages and agreements which control or regulate com

tition as discussed above it seemsevident that the subject agreem

constitutes a cooperative working arrangement

l3 It bears no

that evenin the VikingLine case cited above in which the Com

sion found nojurisdiction over an agreement establishing a joint 

vice it reached this decision because of lack ofjurisdiction ove

parties rather than over the subject matter of the agreement In 

case the agreement wasajoint service chartering undertaking w

formed the VikingLine and bore some resemblance to the Star a

ment See e g paragraphs 30 and 31 7 F MC a p

444 The C

mission remarked

The agreement between Laly and Imica to create Viking as a berth operator 

Venezuela trade may well be considered to provide for a cooperative working ar

ment between them 7 FMC at p

448

j

Miscellaneous Jurisdictional Contentions

The previous discussion disposes of the contentions ofStar tha

subject agreement is merely a single event in which a new entit

been established similar to an agreement ofincorporation in whic

ongoing relationships are established The previous findings esta

on the contrary that the agreement is a continuing affair in w

special privileges or advantages are conferred competition is 

lated a cooperative working arrangement is established etc Sta

contends however that section 15 jurisdiction even if it lies 

stricted to the W L Star relationships only that the agreement 

per se violative ofthe antitrust laws and that the Commission a

ment is one established under Norwegian law which means tha

Commission either has no jurisdiction or should not exercise it u

principles of international comity These contentions can be b

answered

Ifan agreement is subject to section 15 at all it is the entire a

ment which must be filed with the Commission eveil though 

jurisdictional parties are signatories The Commission cannot d

13The subject agreement also bears 80mBresemblance toagreements Rxina orregulating transportation 

fares and poolinll orapportioning earnings lasses artraffic thefirst and fourth categories enumerated i

15 respectively Under some circumstances theBoard of Star on which WL places tWQ representatives w

a

typeof veto powerunderthe provJdotul oftheagreement Artiole 9 may decide fundamental ratemaldng 

in any particular trade In which Star operat Although thJs is nat the typical ratefixlna agreementwhe

or more separate carriers agree to charge the same rates the subject agreement nevertheless allows at 

carrier WL to participate and vote on anothercarner s Star ratemaklni policies

The subject agreement also providesthat the ownersofStar shalllhare the profitsor sustaJn thelosses a

to apredetermined formula Although notatyptcal poolinS agreementwherein independent carriers pool 

and share percentages In afixed formula theparties to theStar agreement nevertheless are pooling orapp

earnings losses or traffic an aotivity which falls under the fOQrth category enumerated inseotion 15 

Sound Tug and Barge Co v Foss LtJunch Tug Co 7 F M C 43 49 1962

18 
AGREEMENT NO 99551 459

to parties outside of its jurisdiction of course but it can issue its orders

against those signatories who are carriers or other persons subject to

the Act and in that fashion disapprove cancel or modify an agree

menU Section 15 itself requires that every common carrier by

water shall file immediately with the Commission a true copy or

if oral a true and complete memorandum ofevery agreement with

another such carrier The statute does not relieve those parties

who are subject to Commission jurisdiction from the filing require

ments because ofthe fact that there are also parties to the agreement

who are not subject to such jurisdiction and areas of the agreement

which are not the Commission s proper concern In New York Ship

ping Association Inc v Federal Maritime Commission 8SRR 20 285

2d Cir 1974 it was argued that the subject agreement included

persons not subject to the Act to wit a labor union and wasaddition

ally part of a collective bargaining agreement The latter fact ordinar

ily would have placed the agreement under the protection of the

national policy favoring collective bargaining and within an area of

concern ofthe National Labor Relations Board The Court stated

An agreement to which such persons common carriers and other person subject to the

Act are parties is not taken outof section 15 by the fact that persons notfitting that

definition to wit stevedoring contractors who are not terminal operators are also

bound 8 SRR at p 20 991

This is consistent with a number of Commission decisions finding

jurisdiction over agreements to which parties not subject to Commis

sion jurisdiction are signatories and which involve activities outside

the scope ofCommission jurisdiction New York Shipping Association

16 F MC 381 388 89 1963 and cases cited therein Disposition of

Container Marine Lines 11 F M C 476 490 n 13 1968

The courts and the Commission have recognized that agreements

may be filed with the Commission which contain portions ofnoproper

concern to the Commission but this situation does not affect Commis

sion jurisdiction over those parties subject to the Act or those areas of

the agreement which clearly raise Shipping Act problems New York

ShippingAssociation v Federal Maritime Commission cited above at

p

20 992 Federal Maritime Commission v Seatrain Lines Inc cited

above at p729 Itis also acknowledged that agreements may overlap

into different areas ofsubstantive law and that parties to them may be

subject to the jurisdiction of one agency or law for one activity and

I4Similarly although the Interstate CommerceAct vestsjurisdiction overrailroad rates in foreign commerce only

to the extent that transportation takes place within the United States the Ic c nevertheless exercises jurisdiction

overinternational joint through rates published in connection withnon jurisdictional parties i e Canadian railroads

since the agency maintains control overthe American railroads who are parties See eg News Syndicate Co v

NYCRR 275U S 179 1927 Lewis Etc Co vSouthern Pacific Co 283 US 654 1931 Cyanamid andCyanide

From Niagara Falls 155 ICc 488 49293 1929

18 FMC
460 FEDERAL MARITIME COMMISSION

another agency or law for another activity See e g Atlantic

Gulf West Coast of South America Conference 13 F M C 1

130 31 1969 As Mr Justice Harlan commented in Volkswagenw

v Federal Maritime Commission 390 U S 261 286 1968

i

I

Furthermore I see no warrant for assuming in advance that a maritime agreem

must always fall neatly into either the Labor Board orMaritime Commission dom

a single contract might well raise issues of concern to both

The solution to the problem of overlapping jurisdiction is not ab

lute surrender by the maritime agency of its regulatory responsi

ties but caution in exercising its jurisdiction in areas where its exp

tise is lacking Volkswagenwerk v Federal Maritime Commiss

cited above at p 287 New York Shipping Association v Fed

Maritime Commission cited above at p

20 992 15

Star also contends that organization ofajoint venture byNorweg

nationals onNorwegian soil serves to exclude Commission jurisdict

Star argues that unlike cases involving regulation of foreign carri

rates and practices which are as much the concern of the Un

States as of the foreign country involved exercise of Commiss

jurisdiction in the present case means reaching into foreign count

to control inherently local financial and corporate affairs of fore

nationals Star cites antitrustprinciples and disavowals by the Jus

Department ofintentions to prosecute violations of the antitrust l

in cases involving foreign joint ventures Star concedes however 

in proper cases where the activitiesofforeign cartels have direct ef

on competition in the U S market the antitrust laws maybe appl

See e g United States v National Lead Co 63 F Supp 513 S D N 

1945 affirmed 332U S 319 1947 Star furthermore cites stateme

ofthe Commission that section 17 ofthe ShippingAct although l

ally applicable to foreign terminal activities has neverbeen applie

a foreign terminal operator and a similar statement regarding 

application ofsection 15 to foreign mergers at a time when the C

mission believed it had jurisdiction over domestic mergers Mer

American Mail Line and Pacific Far East Line 11 F M C 53 5

1967 overruled as to mergerjurisdiction Federal Maritime Com

sion v Seatrain Lines Inc cited above at p

729

Itis now well settled that neither the nationality of parties fore

situs nor approval offoreign law insulates an agreement which fits 

one of the categories enumerated in section 15 from the reach of

IBAs the Court stated

Tobe sure the FMChas no concern withso ffich of the agreement as provides what wages and other b

shall be paid to thelongshoremen grievance procedures and similar matters But even though wefully acce

the ILA has an important stake in theexistenceof aworkable and reliable assessment fannula this does not

the FMC of its duty to determine whetherthe formula is reasonable in its effects an shipping 8 SRR at p

2

18 F 
AGREEMENT NO 99551

statute Furthermore in the law relating to extraterritoriality a critical

distinction exists between foreign conspiracies inviolation ofantitrust

laws and agreements subject to section 15 Moreover thereis no true

conflict between the laws oftwo sovereign nations and consequently

no need for the Commission to refrain from exercising jurisdiction

over Norwegian parties absent a

showing that the foreign sovereign

has in some fashion ordered the parties to operate in a fashion pros

cribed by American law

Inseveral cases the Commission aswell as the courts have dealt with

the argument that the Shipping Act 1916 and more specifically sec

tion 15 have no application to agreements entered into in foreign

countries which are not unlawful in those countries Uniformly the

Commission and the courts have rejected such arguments Incontrast

to cases arising underthe antitrust laws furthermore the Commission

has held that jurisdiction does not depend upon demonstrable effects

or impacts on commerce in the United States Moreover practical

difficulties in investigating and regulating activities overseas do not

defeat jurisdiction

InInvestigation Practices etc N Atlantic Range Trade 10 F M C

95 112 1966 the Commission stated in this regard

We turn now to the allegation that the Commission either has nojurisdiction or should

notexercisejurisdiction because the subject activities occurred abroad We believe the

Examiner has ignored the clear language of section 15 and has drawn an improper

analogy from the antitrust laws While the acts under investigation occurred in Italy

they nevertheless had some effect on the commerce of the United States Further

more these practices had significant effect upon the competitive positions of the carri

ers inthis trade who are undouhtedly subject to ourjurisdiction But more importantly

the Shipping Act itself specifically has extraterritorial application it does notrequire

demonstrable impact on ourcommerce It simplyrefers to all agreements of a competi

tive nature between common carriers by water inthe foreign commerce of the United

States Under this statute the Commission cannot divest itself of its responsibility be

cause it is difficult to investigate and regulate misconduct which occurred abroad

In Unapproved Section 15 Agreements Spanish Portuguese Trade

8 F M C 596 600 01 1965 the Commission similarly observed

Respondents arguments to the contrary notwithstanding there can at this late date be

noserious question as to the so called extra territorial application of the Shipping Act

Case citations omitted Respondents are all common carriers by water in foreign

commercewithin the meaning of the Act and thereis no question that the agreements

inissueare of the kind covered by section 15 1 n

requiring the filing and approval

of such agreements as a condition precedent to their lawfulness Congress itself has

determined that the agreements by their very nature have an effect on our foreign

commerce The precise nature and degree of that effect isirrelevant to any determina

tion as to the applicability of the filing requirements of section 15

18 FM C

461
462 FEDERAL MARITIME COMMISSION

Finally the Court of Appeals in Armement Deppe S A et a

United States 399 F 2d 794 5th Cir 1968 cert denied 393 U S 

1969 seems to have put the last nail into the coffin of Star s a

ments Inthat case the court held that section 15 as well as section 

ofthe Act not only applied to foreign carriers but evento the cont

of foreign nationals entered into and executed in foreign coun

since these carriers chose to deliver goods to ports in the United S

and to employ contracts in American commerce

The record indicates no requirement in Norwegian law tha

parties to the Star agreement operate on American trade route

that they ignore the requirements of American law specifically 

tion 15 of the Act if they choose to operate on such routes The

therefore no conflictbetween sovereigns Finally the question ofj

diction under section 15 does not depend upon the status of an ag

ment under the antitrustlaws Contrary to Star s contention an a

ment may be subject to section 15 without constituting a pe

violation of those laws Although approval of an agreement exe

it from the reach of those laws and it is proper for the Commissio

consider the extent ofan agreement s invasion ofsuch laws unde

public interest standard of section 15 Federal Maritime Commi

v SvenskaAmerika Linien 390 U S 238 1968 the statute is bro

drafted and establishes its own standards and criteria without re

to the antitrust laws Volkswagenwerk v Federal Maritime Com

sion cited above at pp 274 75 Agreement No T4 Terminal L

Agreement at Long Beach California 8 F M C 521 531 1965 

appears however that an agreement has minimal impact on com

tion and littleor no intrusion on the policy established by the ant

laws this fact may significantly reduce the burden which the p

nents of the agreements must sustain in justifying their agreem

Agreement No 87605 14 SRR 45 1973

The Relevancy ofStar s Ratemaking Practices to the Question o

Approvability

The preceding discussion establishes Commission jurisdiction 

the subject agreement by virtue of the presence of two pa

who are carriers calling at American ports and the nature o

agreement which falls into several of the categories enume

in section 15 Star contends however that even if jurisdi

is found based upon W L s participation in the agreement 

dence relating to the rates charged by Staris irrelevant to the 

tion of approval under section 15 Star also contends that 

sideration of rate issues would be a violation of due pro

18 F 
AGREEMENT NO 99551 463

since the Commission s Order fails to give notice of such issues

These contentions are quite naturally opposed by TPFCJ K and

Sea Land whose protests concentrate onStar s

ratemaking practices

in the inbound transpacific trade Hearing Counsel while urging ap

provd of the agreement argue that Star s rates are in some ways

detrimental to commerce and unfair orunjustly discriminatory within

the meaning of section 14 Fourth of the Act

This particular area of contention involving the scope ofthe Com

mission s Order ofInvestigation has been troublesome as noted previ

ously The problem stems basically from the Commission s Order

which is not clear with regard to the delineation ofspecific issues As

mentioned previously the Order refers to the protests of TPFCJIK

and Sea Land which raise issues pertaining to Star s ratemaking prac

tices in the inbound transpacific trade and initiates an investigation

after stating that the protests and reply thereto have been considered

However the only specific issues framed in the Order are ultimate

issues ofapprovability under the standards of section 15

H Star s contentions are correct then its agreement should be ap

proved unconditionally since there is no evidence ofrecord outside of

that pertaining to Star s ratemaking practices in the inbound tran

spacific trade which even remotely suggests that the agreement

should be disapproved On the contrary the record demonstrates that

Star s service has been efficient and responsive to the needs ofAmeri

can exporters of forestry products and has benefited ports such as

Eureka California and Coos Bay Oregon which do not normally

receive service from other liner operators as well as ports such as San

Diego California and Tacoma Washington

However I

find that consideration ofthe issues raised in the protests

and briefs ofTPFCJ K and Sea Land relating to Star s rates is war

ranted and is properly within the scope ofthe Commission s

responsi

bility in a section 15 proceeding

Star s due process argument can be given short shrift under the

circumstances of this case In an administrative proceeding a party is

entitled to reasonable notice ofthe issues in controversy Section 5 a

Administrative Procedure Act 5 U S c 554 Cella v United States

208 F 2d 783 7th Cir 1953 Priorto theissuance ofthe Commission s

Order which commenced this proceeding however Star and its ad

versaries TPFCJ Kand Sea Land had engaged in a preliminary de

bate involving Star s ratemaking practices as is often the case when an

agreement is filed for approval under section 15 undergoes publica

tion inthe Federal Register and is subjected to comments and protests

The Commission s Order not only specifically refers to the protests

and Star s reply stating that the Commission considered all ofthese

18 F M C
464 FEDERAL MARITIME COMMISSION

pleadings before deciding to initiate the proceeding but frames 

issues by including all the standards enumerated in section 15 inc

ing the standard pertaining to the issue whether an agreement i

violation ofthe Shipping Act 1916 This is notice that the Comm

sion may make 6ndings that the subject agreement violates any of

substantive provisions ofthe Act including sections 14 16 17 or 1

which would cover unlawful rates or ratemakingpractices

At the prehearing conference held on May 28 1974 approxima

one and one half months before the hearing commenced July 

1974 the speci6c problem as to the propriety of taking evide

relating to the level ofreasonableness ofStar s rates wasdiscussed 

parties were advised by the Presiding Judge that TPFCJIK and 

Land would be allowed to present evidence in support of their 

tests i e evidence relating to Star s rates A procedure was furt

established by which information would be exchanged prior to h

ing pursuant to the Commission s discovery processes portions 

which would inform Star as to the speci6c allegations including th

pertaining to Star s rates which TPFCJIK and Sea Land were rais

At no time did Star petition the Commission to clarify its Orde

though the suggestion was made at the prehearing conference H

ing been aware prior to the issuance of the Commission s Order 

Star s rates were being questioned and at the time of the prehea

conference that rate related issues would be litigated and further 

ing taken no action before the Commission to seek clari6cation o

Commission s Order Star cannot be heard now to claim lack ofno

and violation of due process

16 Having also had an opportunity p

to the hearing to learn the allegations of its adversaries with s

degree of speci6city regarding its ratemaking practices to meet 

dence presented against Star and present its own evidence injusti

tion of its ratemaking practices there can be no violation of 

process Golden Grain Macaroni Company v Federal Trade Com

sion 472 F 2d 882 885 9th Cir 1972 cert denied 412 Us 

1973 Kuhn v Civil Aeronautics Board 183 F 2d 839 D C 

1950 L G Balfour v Federal Trade Commission 442 F 2d 1 

Cir 1971 Davis Administrative Law Treatise sec 15 14 p

43

Hllf Star was concerned over ambiguiUes in the Commission s Order the proper course of action was 

motion with the Commission As the Commission stated in Agreement No 520026 13 F M C 16 24 19

Ifaparty with an interest in an agreement is dissatisfied withthe scope of an order of investigation or in 

as to its scope theappropriate vehicle far reliefis the flUng of atimely motion

It is appreciated that all parties were under peculiar time pre ssures because of the November 12 1974 ex

date but Star could have asked the Commission to take this fact into consideration in ruling upon its mo

clarification of the Order

uThe latter authority states

Thecardinal principle of fairhearing is that parties should have opportunity tomeet in theappropriate 

all facts that influence thedisposition af the case

18 F
AGREEMENT NO 99551 465

Inaddition to arguing that consideration ofits ratemaking practices

violates due process Star also contends that any evidence pertaining

to its rates or ratemaking practices is totally irrelevant on the grounds

that the subject agreement has nothing to do with rates or rate fixing

Inthe absence ofa showing that the agreement itselfis the proximate

cause of Star s decision to charge FAK per container or volume

rates Star maintains that an examination of the lawfulness of such

rates is not properly withinthe scope ofa section 15 investigation Star

acknowledges that the Commission has investigated particular rates or

ratemaking practices in a section 15 proceeding but contends that in

such case the agreement concerned was a conference agreement the

very essence ofwhose authority is rate fixing Outbound RatesAffect

ing Export High Pressure Boilers 9 F M G 441 1966

Star s contentions must be rejected in myopinion since they at

tempt to establish a circumscribed function for the Commission totally

at variance with the Commission s

responsibilities in section 15 mat

ters In effect Star is contending that the Commission must either

restrict itself to examining the four corners of an agreement ie to

its text or only some shipping activities which How from the agree

ment not all i e those activities which stand in some type ofproxi

mate relationship to the terms of the agreement The Commission

however has made clear that its function in section 15 matters is to

exercise a

continuing supervision overthe activities ofparties to an

agreement and the operations ofthe agreement without qualification

There is no limited supervisory role for the Commission in which the

Commission disclaims interest in certain practices of parties to an

agreement even if there is evidence that such practices may be detri

mental to commerce or otherwise in violation of the Act The very

essence of the Commission s regulatory responsibility under section

15 is to maintain close and constant surveillance oversection 15 agree

ments and their operations to make sure that the authority granted is

innoway exercised so as to contravene the public interest or to violate

any provision ofthe Shipping Act The Commission cannot fully dis

charge its responsibilities by taking only a partial look at the conduct

Howing from an agreement There are many cases establishing these

propositions in addition to Federal Maritime Commission v Seatrain

Lines Inc cited above at p

735

In InRe Pacific CoastEuropean Conference 7 F M G 27 1961 the

Commission described its responsibilities under section 15 as follows

The section expressly confers on the Commission the power of disapproval whether

ornotpreviously approved and thus necessarily imposes a continuing duty upon the

Commission to insure that the parties to section 15 agreements are at all times comply

ing with the Act and their approved agreement and that their operations are not

18 F MC
466 FEDERAL MARITIME COMMISSION

detrimental to the commerce of the United States or contrary to the public Intere

This appears from the face of the statute In addition the legislative history of secti

15 makes plainthat Congressgranted an antitrust exemption only because itenvision

that the permitted activities would besubjected to constant and effective governme

control and supervision 7 F MC at pp 33 34

Section 15 quite clearly demands that we constantly inspect and if necessary regula

the activities of persons subject thereto 7 FMC at p

35

It is manifestly not enough under the language of section 15 that we are appris

merely as to the terms of the respondents agreement It is essential also that we kn

at all times the nature of their activities under the agreement for how else can 

determinewhether it is being complied with and is notbeing carried out in a way th

violates the Act is detrimental to commerce or incompatiblewith the public intere

7 F MC at p

35

In Agreement No T4 Terminal Lease Agreement Long Beac

California 8 F M C 521 1965 the Commission stated

In dischargingourduties under section 15 we are notlimited to those matters part

to agreements wish us to see We are required to go further Where agreements 

strongly protested as here we must examine notonly the terms of an agreement b

also the competitive consequences which may beexpected to How from the agreem

and other facts which show the objectives and results of the agreements 8 FMC 

p

529

It should be especially noted that the Commission s concern is n

so much with the terms ofan agreement or the initial approval but t

activities operations consequences objectives and r

sults See alsoAgreement No T4 etc cited above atp

534 ram

cations impact Outbound RatesAffecting Export High Pressu

Boilers cited above at p

453 viable implementations Mediter

nean Pools Investigation 9 F M C at p 294 probable future i

pact Oranje Line et al v Anchor LineLimited et al 5 F MB 

p

730 actual results of operations

In the instant case the parties to the Star agreement have combin

to establish a common carrierjoint service by contributing capital a

vessels and setting up an organizational apparatus to providecontin

ing management ofthe service Two parties W Land Star are subje

to the jurisdiction ofsection 15 without question and W L places tw

representatives on Star s board which under certain circumstanc

can have some say in determining ratemaking policies W L mo

over has a type of veto power under the voting procedures esta

lished in the agreement The immediate result ofthe establishment 

a joint service whose purposes are to operate as a common carrier 

United States trades is the publication of rates and filing of tariffs 

in one of the many trades in which Star operates it is alleged that 

rates and ratemaking practices are discriminatory and harmful to t

commerce of the United States it is no answer to claim that the ta

18 F M 
AGREEMENT NO 99551 467

has nothing to do with the agreement oforganization especially if a

Board ofDirectors consisting ofrepresentatives ofparties to the agree

ment has ultimate responsibility and authority over Star s manage

ment Ifparties band together to operate a joint service in the com

merceof the United States they must not only obtain authority from

the Commission pursuant to section 15 but must at all time make sure

that the activities which are carried out in pursuance of the purposes

ofthe authorized agreement comport with requirements ofAmerican

law This is not to say that every activity is equally relevant in deter

mining whether a basic agreement should be disapproved or

modified Ifa rate fixing group such as a conference insists upon pub

lishing discriminatory rates an activity which Star would call proxi

mately caused by the agreement itself it is easy to make a case for

disapproval If a conference publishes only one unlawful rate out of

thousands it is obviously much more difficult to justify outright disap

proval ofthe entire agreement See Calcutta East Coast ofIndia and

East Pakistan U S A Conference v Federal Maritime Commission

399 F 2d 994 D C Cir 1968 Similarly if the Star agreement is not

essentially one ofconcerted multi carrier ratemaking as in the case of

a conference a showing that some ofits ratemaking practices inone

ofits many tariffs may be unlawful does notwarrant wholesale extinc

tion of the basic agreement Relatively minor modifications to the

authority contained in the agreement designed to correct the specific

abuses may be all that is required Ifthe basic agreement however

were of a type having no reasonable relationship whatsoever to the

activity in question then evidence of the activity would be totally

irrelevant to the question ofcontinued approvability This could hap

pen for example in an agreement among carriers to rationalize sail

ings when the activity involves rates charged by one ofthe participat

ing carriers in its tariff The two activities rationalization and

rate setting have no apparent relationship Contrast this with the

present case in which parties establish a vehicle StarShipping whose

purpose is to offer a carrier service worldwide the natural outcome

in U S trades at any rate if such service is common carriage is to

publish tariffs and establish rates How can it be argued that the agree

ment is not responsible for or proximately related to this activity

and that the Commission cannot touch the agreement if this activity

is causing some harmto the commerce ofthe United States especially

under a statute which requires disapproval of any agreement which

the Commission finds to operate to the detriment of the commerce

ofthe United States or to be in violation of this Act Could Star

have argued as cogently against inclusion of so called rate issues in

this section 15 proceedingif the allegations had been that in everyone

18 F MC
468 FEDERAL MARITIME COMMISSION

ofStar s ten tariffs on file with the Commission the rates published

thereindemonstrated a policy ofpreference discrimination orpreda

tory rate cutting although the basic Star agreement of course says

nothing about these things 18 Would the Commission under those

circumstances leave the basic agreement untouched Yet these are

the allegations which are being made against Star in this proceeding

albeit in much smaller measure since they refer to only one of Star s

many tariffs

In brief Star s doctrine that proximate cause must be shown be

tween an agreement and an allegedly unlawful activity in a section 15

proceeding before evidence of the activity can be considered is incon

sistent both with the express language of section 15 and with the

Commission s oft expressed duty of close and constant surveillance

overparties operating under approvedagreements The doctrine may

have some validity however but if so it is only in t rms ofhow much

weight will begiven to evidence ofa particular activity in determining

whether a basic agreement itself should be disapproved ormodified 19

Even Star s argument that consideration af particular rates would be proper in asection 15 proceeding only

ifthe agreement under investigation was a rate fixing agreement such as a conference because the agreement is

the proximate cause of the rates is not entirely accurate Conference agreements themselves do not specify nor

do they require that the carriers fix any particular level of any rate they merely authorize the carriers to fix rates

in common Unlikeratefixing agreements which do in fact fix and specify aparticular rate conference agreements

are not the proxhnate cause of any speciflc rate level although obviously they stand inaclose logical relationship

to the rates fixed The conference rates ultimately fixed constitute the viable implementation of the conference s

authority contained in the basic agreement but so do the Star rates constitute implementation of the authority

contained in thebasic agreement to set up ajoint service and operateas acommon carrier in U S trades

IQStar cites several cases in support of its contentions that the C9mmlssion has Dot permitted rate issues to be

admitted into section 115 proceedings orother issues notdirectly relatedto theagreement in qu ti9n atleast withQut

notice In AgmenI8492 Ala kan Trade 7F M C 511 5J6 1963 saShipping Ga vAmerican South African

Line Inc et al 1 U S S B B 568 583 1936 and Atantic Refining Company v Ellerman BucknellSteamship

Co Ltd 1 US SB B 242 256 257 1932 the Commission didindeed appear to rule out consideration ofrate or

other issues notdirectly related tothetype of agreementin question In Seas Shipping however thereport indicated

that theagreementdidnot in fact cause thelow ratelevels and the rate warinvolved and ifanything helped forestall

the rate warthrough its unanimous voting rule and therefore did not merit disapproval In Atlantic Refining

Company the complaint never alleged section 15 violations and respondents were not put on notice that their

agreement might be disapproved under section 15 The report thus didnot rule out the possibility that withproper

notice to all respondents and to all shippers and ports concerned evidence of preference and discrimination under

sections 14 16 and 17 of the Act might be relevant to the question of disapproval

But compare Contract Routing Restrictions 2 US M C 220 226 227 1939 Port Djfererrtiallnve tillation

1 USS B 61 1925 and Outbound RalesA ffecUng ttEiportaUon of Htgh Pres 80tlers 9F M C 441 433 434

1966 In ContractRouting the Comml Sion specifically went beyond consideration of the agreement concerned

and examined peculiar conference dual ratecontracts despitl l

the fact that shipper signatories to thecontracts were

not involved in the proceeding The Commission held that theconference agieement itself couldbe disapproved

if the contracts were unlawful without the need foraseparate investigation o the contracts In Port Differential

theCommission disapproved an agreementalthough thecomplaints concerned hadalleged only violations of sections

16 17 and 18 The Commission had however expanded the proceeding and given due notiee In Botlers the

Commission heldthat evidence ofrating practices canbe consideredIn section 15 proceedings inllolving conference

agreements and that under section 15 theCommission could act against rates not just the terms of the agreement

AsStar points out however conference agreements and ratefixing are closely related As discussed above further

more Star has been puton notice that rate issues were involved In this proceeding

Finally note the language of the court in Calcutta East Couatof Indt4 and wCoastof Pakutan USA

Conference Q FMc cited above where the courtstrongly implied that conference agreements couldbe disap

proved under some circumstances for reasonsunrelated to the type of agreement involved 399 F 2d at p 998

18 F M C
AGREEMENT NO 9955 1 469

The Lawfulness ofStar s Rates in the Inbound Transpacific Trade

Having found that jurisdiction over the Star agreement lies that

notice ofrate issues has been given to Star and that consideration of

such issues is proper Inow come to a consideration ofthe allegations

that Star s rates and ratemaking practices in the inbound transpacific

trade are unlawful

Essentially TPFCJ K and Sea Land and to a more limited extent

Hearing Counsel attack Star s FAK rates its per containerpricing its

volume discounts its rate level and its shipper container allowance

Itis alleged although not always clearly so that these things violate

various sections ofthe Act either section 14 4 16 17 or 18 as well

as the standards of section 15 The gravamen of these contentions is

that Star s pricing system is preferential to shippers of high valued

high rated commodities and unfairly discriminatory against shippers

of low valued low rated commodities is detrimental to commerce

and unreasonably low and furthermore represents predatory compet

itive pricing Sea Land evencontends that Star has established unlaw

ful outbound inbound disparities in its services

These contentions are comprehensive and serious and deserve the

most careful attention for if valid they would show that Staris engag

ing in multiple violations oflaw and steps would have to be taken to

curtail Star s authority by modifying its basic agreement ifStar would

not voluntarily correct these practices Furthermore as mentioned

above there is no evidence other than that pertaining to these rate

making practices which remotely suggests that the Star agreement

should be disapproved cancelled or modified On the contrary testi

mony from shippers consignees and port representatives unani

mously praised Star s services and testified as to the benefits which

flowed from those services although shippers in the inbound tran

spacific trade did not appear Furthermore in view of the strong

support of these shippers and port representatives one of whom

Tacoma Washington did appear for a

port involved in the inbound

transpacific trade unless the rate related evidence shows violations

the Star agreement should be approved indefinitely

A few preliminary observations are necessary in order to establish

some basic ground rules for the determination of these rate related

issues

The first rule to bear in mind is that if the Commission is to disap

prove cancel or modify an agreement pursuant to section 15 ofthe

Act it must adduce substantial evidence to support a finding under

one ofthe four standards ofsection 15 Federal Maritime Commis

sion v SvenskaAmerika Linien 390 U S 238 244 1968 As the Court

18 F M C
470 FEDERAL MARITIME COMMISSION

I

stated in Calcutta East Coast ofIndia etc v Federal Maritime Com

mission cited above atp 997 furthermore an agencyaction will not

be disturbed by the courts unless the findings underlying it lack

significant support in the record Consistent with thesejudicial admo

nitions the Commission has held that it will notdisapprove an agree

ment on the basis of speculative possibilities or the bare possibility

that it may violate the Act orwithout a

tangible showing that the

agreement is contrary to the public interest See Agreement 8492

Alaskan Trade cited above at p 519 Outbound RatesAffectingthe

Exportation of High Pressure Boilers cited above at p454 West

Coast Line Inc et al v Grace Line Inc et al 3 F MB 586 595

1951

The Commission while accepting its burden of adducingevidence

nevertheless has made clear that it expects those parties protesting

approval of an agreement to come forward with information in sup

port ofthe allegationsmade in their protests Agreement No 9905 14

F M C 163 165 1970 In cases involving allegations of preference

and discrimination furthermore the Commission has consistently

held that these are questions of fact and in many instances extremely

difficult and complicated questions offact Denial ofPetitionfor Rule

making Cargo Diversion 14 SRR 236 238 1973 Disposition of

Container Marine Lines 11 F M C 476 490 1968 Isbrandtsen Co

Inc v States Marine Corp ofDelaware 4 F M B 511 513 1954

In considering the various allegations of petitioners and Hearing

Counsel for the most part one fact stands out and that is that despite

the factthat these allegations rest heavily oncontentions that shippers

are being harmed ordiscriminated against notone shipper or consig

nee in the inbound transpacific trade appeared to tell his story Per

haps this was due in some measure to the haste with which this pro

ceeding had to be conducted in view of the expedition mandated in

the Commission s Order but in my opinion the lack of shipper testi

mony on matters that supposedly affected shippers is a serious defi

ciency Instead of shipper testimony the record contains testimony of

witnesses representing carriers competing with Star whose interest

naturally is that Star s

competitive ability be curtailed Yet it is these

witnesses who testified as to how the shippers are being harmed by

Star s rates Significantly in the Commission s mammoth investigation

ofratedisparities in the North Atlantic United Kingdom trade Inves

tigation ofOcean R4te Structures 12 F M C 34 1965 affirmed sub

nom American Export Isbrandtsen Lines Inc v Federal Maritime

Commission 417 F 2d 749 D C Cir 1969 the COmmission disap

proved only seven rates on the basis of disparities in rate levels and

shipper testimony as to specific impediment ofmovement The Com

1 18 F MC
AGREEMENT NO 9955 1 471

mission overruled the Examiner who had urged disapproval ofhun

dreds of high rates as to which little or no movement had in fact

occurred but as to which there was no shipper testimony 12 F M G

at p63 9 SRR 1007 1048 49 Initial Decision Evidence based upon

a theoretical evaluation of rates or even evidence showing lack of

movement under an unexplained high rate absent tangible evidence

of harm presented by shippers was considered by the Commission

inadequate to support findings that any rate was so unreasonably high

as to be detrimental to commerce

With these principles in mind let us examine the evidence to see

whether Star s

ratemaking system in the aspects set forth above consti

tutes an unfair or unjustly discriminatory contract with any shipper

based on the volume of freight offered in violation of section 14

Fourth makes or gives any undue or unreasonable preference or

advantage to anyparticular person inviolation ofsection 16 First

establishes any rate fare or charge which is unjustly discriminatory

between shippers in violation ofsection 17 or establishes any

rate which is so unreasonably high or low as to be detrimental to the

commerce ofthe United States in violation of section 18b 5

20

The main points ofthe attack upon Star s rate system are that it

discriminates against low value low rated commodity shippers and

attracts shippers ofhigh value high rated commodities such as elec

tronic goods and gives Star certain advantages overcompeting carri

ers Itis also contended that the rates are too low

Star s rate system in the inbound transpacific trade as shown in

finding no 51 above consists very simply of a rate per container for

any kind of containerizable cargo with a sliding scale of reductions

based upon increased volume Thus if one shipper or any number

of shippers tenders a 40 foot containerload of commodities it

will be assessed 1 975 by Star If more than ten but less than 20

containers are tendered the rate drops to 1 925 finally dropping

to 1 725 for 100 containers or over There is a different scale for

20Since petitioners and to a

lesser extent Hearing Counsel allege violations of law because of certain aspects of

Star srates the evidence should be evaluated primarily in terms of thosesubstantive sections ofthe Actinvoked by

these parties where such evidence is relevant and probative This is entirely proper since one ofthe fourstandards

enumerated in section 15 is any violation of this ActStar discusses at great length the limitations of Commission

authority overrates in foreign commerce citing the legislative history to Public Law 87 346 which among other

things enacted section 18b

5 and numerous casesestablishing the proposition that the Commission sauthority in

section 15 matters overrates is no greater than what is granted by the substantive provisions of other sections of

theAct such as sections 17 and 18b

5 See egIron and Steel Rates Export Import 9 F M C 180 193 1965

Imposition of Surcharge by the Far East Conference 9 F M C 129 136137 1965 Star s discussion isgenerally

accurate It cannot be denied that the Commission s

authority overrates in foreign commerce is not plenary as it

isin the domestic offshore trades under theIntercoastal Shipping Act 1933 TheCommission does of course have

full power to cancel an agreementapproved under section 15 provided the recordwill support findings that one of

the four standards enumerated in section 15 has been violated even if the matterconcerns only rates See Imposition

ofSurcharge by the Far East Conference cited above at pp 136137 but compare Calcutta East Coast ofIndia

etc v

Federal Maritime Commission cited above

18 F M G
472 FEDERAL MARITIME COMMISSION

20 foot containers These are known as FAK freight all kinds rates

Petitioners and Hearing Counsel contend that these FAK rates are

unlawful in various respects It is claimed that they shut out low value

low rated commodities FAK rates however are well known both in

ocean shipping and inland transportation and are not considered to be

unlawful per se Itis true that they mark a departure from the more

conventional tariffs which publish hundreds or thousands ofcommod

ity rates which are often subdivided even in commodity categories

and further elaborated with minimum and volume requirements

Commoditypricing is supposedly based upon consideration ofvarious

ratemaking factors including not only cost but value of service some

times referred to loosely as what the traffic will bear Investigation

of Ocean Rate Structures cited above It is recognized that this type

of tariff structure embodies discrimination among commodities of a

completely lawful type but one in which some commodities are called

upon to contribute a greater share to the costs of the carrier than

others since some commodities cannot bear a higher rate and still

move

21 FAK rates onthe other hatrd are based oncost ofservice and

do not discriminate among commodities on value of service or what

the traffic will bear considerations31his fact does not thereby render

them unlawful even under the more stringent rate regulation im

posed by the Interstate Commerce Act InFreightAllKinds Official

Territory IGC Docket No 35435 Decision of Bamford ALJ May

11 1973 adopted January 22 197 4 it was stated

1

The requirement of just and reasonableclasst ications for rate makingpurposes devel

oped by considerationof some or all of the HI factors is consistent with the purpose of

the Act to protect shippers from arbitrary cairier pricing Classification is a form

of lawful discrimination A requirement Of reasonable classification of property for the

purposeof transportation pricing to insure that various commodities oflike characteris

tics are notunlawfully discriminated against does notnecessarily Imply either a need

or requirement that class separation or indi ualclass pricing must always be used

No discrimination or competitive disadvantag Jo shippers has been shown to result

from carrying all commodities at the same rates itClnnot be held thatSection J 6 bars

a carrier from providing shippers with a newlll iJeveloped service and a simplified

method ofpricing which does notprejudice orprefer them or other shippers Mlmeo

opinion p

3 Underscoring added for emphasis footnote omitted

Although attacked by Sea Land and the TPFCJ K Sea Land itself

publishes FAK rates in domestic trades side by side with commodity

rates as do other domestic ocean carriers and the record further indi

cates that FAK rates exist in other world trades without having driven

out commodity rates in those trades

An analagous rate to the FAK rate with which this Commission is

11See Fretght All Kinds Official Territory I

CC Docket No 35435 Bamford AW Opinion May 11 1974

adopted by the Commission January 22 1974 p

5

18 FM C
AGREEMENT NO 9955 1 473

familiar is the cargo NOS rate Like the FAK rate the NOS rate may

apply against any kind of cargo unless in a particular tariff the cargo

enjoys a specific commodity rate A general cargo NOS rate is usually

set without regard to recognized ratemaking factors such as cost of

service value ofservice or competition and is usually set at a rather

high level This enables conferences ofcarriers to file a lower commod

ity rate when requested by a shipper without waiting the usual 30

days period which applies to rate increases pursuant to section

18b 2 ofthe Act Despite the fact thatthe rate disregards recognized

ratemaking factors and is artificially high it has not been found to be

unlawful or detrimental to commerce absent testimony by shipper or

conference witnesses that it has in fact not in theory inhibited the

movement of specific identified commodities because of the high

level and has further inhibited shippers from requesting lower com

modity rates See Investigation ofOcean RateStructures cited above

at pp 45 46 63 64 Contrast that situation with the present case

where there wasno evidence that Star s FAK rates inhibited shippers

from requesting different rates nor testimony of shippers or confer

encewitnesses that in anyparticular instances the high FAK rates had

actually precluded movement of a particular commodity Rather

there is theoretical testimony to the effect thatthe FAK rate is toohigh

for some commodities that cannot stow many tons into a container or

have low value although there is also testimony that the FAK rates are

too low

The above discussion points out the deficiencies in the contentions

ofpetitioners and Hearing Counsel regarding discrimination among

shippers and detriment to commerce Ifshippers oflow valued low

rated commodities are being shut out who are they and where are

they If there is an unfair or unjustly discriminatory contract with

any shipper based on the volume of freight offered where is this

contract or this arrangement with the shipper offering volume IfStar

is giving an undue advantage to any particular person or subject

ing any particular person or description oftraffic to any undue

or unreasonable prejudice or disadvantage in any respect whatso

ever inviolation ofsection 16 First who is this particular shipper and

what is this description oftraffic Again instead ofshippers appear

ing and testifying the record contains testimony that low valued

low rated commodities are suffering prejudice because ofStar s FAK

rates True Stars

carryings according to the record are in extremely

highpercentages those of electronic goods and Star did not carry the

wide varietyofitems carried by Sea Land including motorcycles auto

parts andporcelainware which are lower ratedcommodities listed by

the TPFCJ K and Sea Land as major movers But were shippers of

18 F M C
474 FEDERAL MARITIME COMMISSION

i

these items turned away by Star Were they signatories to 

TPFC Ks exclusive patronage contract which became effective 

October 1 I913 Did shippers of these items prefer a containeriz

service including stuffing and stripping at container freight stations 

Sea Land s faster service rather than Star s limited containeryard 

vice Did they also choose one ofthe 11 other nonconference carri

operating in the trade Allthese questions are unanswered Yet p

tioners and Hearing Counsel seek findings that Star has violated 

law and has discriminated against and shut out movement of co

modities such as these because one it has not carried them and t

there may be shippers ofcommodities who may not be able to s

an entire container with enough units of the commodities involved 

make the per container load FAK rate economical

In considering whether Staris unjustly discriminating and engag

in predatory cream skimming practices the following facts of 

cord should be kept in mind tending to offset such allegations Fi

no evidence was presented showing that an actual shipper had as

Star for and been denied lower rates than the FAK rate Infact St

West Coast agent testified that he knew ofno such request or de

and this testimony is unrefuted Second Star does publish commod

rates in a separate non containerized section of its tariff FMC No 

at p29 Third the record shows that Star does advertise in tra

journals on a modest scale This is no indication that Star is trying 

shut out any particular shipper or commodity Fourth in that per

of 1914shown in the record 50percent ofStar s containerized serv

was utilized by one NVOCC Although the record does not indic

which NVOCC was involved or what his tariff provides NVOC

generally provide consolidation services for less than containerlo

shippers in which case Star s limited containeryard service would 

effect be expanded Fifth Star is operating in competition with 

conference carriers and 11 other nonconference carriers Theform

carriers have the benefit of the conference s exclusive patronage c

tract with shippers effective since October 1 1913 Since Star 

been operating only since mid I912 in the inbound transpacific tra

this may helpexplain why its service has been used by small numb

ofshippers 51 in 1913 and why its utilization ofcapacity in 1913 

been only 22 percent Sixth although Starcarries a disproportionat

highamount ofelectronic goods compared to its other carryings ot

nonconference carriers such as Tokai Seatrain OOCL and FESC

are also important carriers ofsuch goods The record shows furth

more that large numbers of shippers ofsuch goods are not conferen

contract signatories about 50 percent These goods thus provid

fertile market for nonconference lines Seventh the concept of lo

18 F M 
AGREEMENT NO 9951 475

rated low value commodities which Star s FAK rates are allegedly

excluding is a concept having meaning only in relation to commodity

rate tariffs which distinguish among commodities by assigning differ

ent rate levels in consideration ofvarious factors one of which may

be value of the commodity Star s FAK rates treat all commodities

alike Although in theory a less than containerload shipper who can

notfill a container orwhose cargo has low value may find a single FAK

rate uneconomical no such shipper testified on this record and no

showing wasmade as mentioned above that such shipper wasdenied

a special rate by Star or that the fact that Sea Land carried a wide

variety ofitems means that they could not move under the Startariff

or via an NVOCC using Star s underlying service Finally there is

some indication ofrecord that Star s FAK rates converted to an effec

tive per unit rate is actually lower than the effective rates charged by

Sea Land on a wide variety ofcommodities carried by Sea Land al

though it is contended that Star s FAK rate is shutting out such com

modities In a study of two sailings ofSea Land s SL7s in which Sea

Land carried everything from artificial flowers to zippers it was

shown that Sea Land s average revenue per revenue ton was 6340

with the lowest figure at 42 04 for hand tools Ex 50 Appendix 1

Yet according to Sea Land s own exhibit which purports to show that

Star s effective per unit rates are too low Star s rates range from

36 70 to 42 02 per revenue ton assuming a stowage factor of47

revenue tons Ex 50 Appendix 2 IfStar s effective rates are really

that low then they should not be shutting out these various commodi

ties actually carried by Sea Land at higher effective rates

To conclude Ifind insufficient support in the record for a finding

that Star s FAK rates disregarding for the moment their volume dis

count features are unlawful or in fact have unjustly discriminated

against particular shippers or commodities There is altogether too

much argument and theorizing and not enough tangible evidence of

specific harmand detriment to actual rather than hypothetical ship

pers

Inaddition to the contentions that Star s FAK rates are unlawful in

principle is the contention that Star s volume discounts are also unlaw

ful on the grounds that they are unjustified Hearing Counsel for

instance while not contending that FAK rates inprinciple are unlaw

norcourse this assumes that the commodities would stow at47 measurement tonsin a Star 40 foot container

and that they are free to move via Star rather thanunder theconference sexclusive patronage contract In another

exhibit cited by Hearing Counsel covering adifferent period of time a slightly different picture emerges In this

exhibit Ex 63 Appendix 1 Sea Land lists its ten leading commodities their stowage factors and revenues per

35 foot box The exhibit shows that in some instances the commodities would not stow 47 measurement tons

converted toa40 foot container and in several other instancesthe revenue perbox converted to 40 foot container

was below that of Star

18 F M C
476 FEDERAL MARITIME COMMISSION

I

1

ful although contending that Star should be ordered to modify

them so that they would attract more commodities contend that the

volume incentive features ofthe FAK rates i e the reductions in the

rate as more containers are tendered to Star violate section 14 Fourth

ofthe Act Hearing Counsel do not contend that volume discounts are

unlawful in general only that Star s are unlawful because they are not

related to cost savings or other transportation factors which are al

tered by volume offreight offered citing In the Matter ofCarriage of

Military Cargo 10 F M C 69 73 1966 affirmed American Export

Isbrandtsen Lines v Federal Maritime Commission 380 F 2d 609

D C Cir 1967 and PuertoRican Rates 2 U S M C 117 121 2 1939

Since the discounts are in 50 increments for 40 foot containers Hear

ing Counsel contend that it cannot be shown that Star realizes a

savings of 50 per container when itreceives ten forty foot containers

from a shipper rather than nine Hearing Counsel admit that there

may be some administrative savings in volume shipments because of

less documentation but state that we cannot imagine that these sav

ings would amount to 50 per container

No case cited to me either before this Commission or the Interstate

Commerce Commission establishes the proposition that volume in

centive rates volume discounts or volume minima are unlawful per

se Infact as the record shows volume rates are used to a considerable

extent both by ocean carriers and inland carriers They are found

throughout the tariffofthe TPFCJI K forinstance as well as the tariffs

ofnonconference carriers such as FESCO Tokai and Seatrain and in

tariffs of motor and rail carriers regulated by thEd oC In some in

stances volume rates have been publishedin TPFCJIK s tariff at the

request of a particular shipper Membersofthe TPFCJIK further

more who publish joint intermodal minibridge tariffs in conjunction

with rail carriers have themselves negotiatedpayments to thesecarri

ers in the form of divisions ofrevenue which have volume discQunts

built intothem 23 In such cases as Star points out the savings to the

ocean carrier who tenders greater volumes are not passed on to the

shipper whereas any shipper who uses the volume discount features

of Star s tariff enjoys the benefit of a cost reduction

Starjustifies its use of volume discount rateson several grounds It

cites competition especially with nonconference operators like Sea

train and Tokai who also publish volume discount rates It cites its

service disabilities referring to the factthat Star offers a limited con

taineryard service which does not include stuffingandstripping and

i

1

1

i

1

J

urn theSea Land minibridietarift previously efFective Eastbound to Atlantic Coast for example the raU

division of revenue paid by SeaLand to the rail carrier drops from 799 to 739 to 677 to 618 corresponding to

Increasing volume of containers tendered in increments of 20 10th Revised page 118 Freignt Tariff No 198

18 F M C
AGREEMENT NO 99551 477

additionally cannot meet the speed of vessels employed by a carrier

such as Sea Land It contends that the discount is necessary to attract

enough base cargo to make vessel calls economical and thus offer an

inbound container service by spreading costs over a greater number

ofcontainers The volume discounts furthermore according to Star

encourage NVOCC s to utilize Star s service thus fostering this type

of business and discouraging monopolistic horizontal expansion

These NVOCC s it is argued in turn serve small shippers by offering

consolidation services to less than containerload shipments Star does

notrely uponcost savings as justification although as Hearing Counsel

acknowledge some administrative cost savings may result from in

creased handling ofa greater number ofcontainers These factors are

not refuted by cross examination or contrary evidence Rather Iam

asked to discount them as justifications and to find Star s volume dis

counts unlawful because they are not correlated to cost savings

While cost savings are certainly considered to be justification for

volume discount rates they are not the only recognized factor Fur

thermore before a violation of law can be found under sections 14

Fourth or 16 First the record must establish with substantial evidence

that therehas in fact beenundue or unreasonable preference orpreju

dice or unjust discrimination with respect to anyparticular person

or description of traffic or to any shipper The critical words

involved are undue unreasonable and unjust 2

The cases cited to me and others that 1 have consulted in cases

involving the cited sections oflaw have usually required a

showing

that a carrier has given special preference to one particular shipper

by setting a volume minimum so high that only that shipper can

qualify for the reduced rate or else the spread in the rates is so

excessive and inhibitory toward movement oftraffic that a great deal

ofjustification is required See e g

Intercoastal Rates ofAmerican

Hawaiian 88 Co 1 VS S B B 349 351 1934 Puerto Rican Rates

2 VS M C 117 121 1939 Agreements 6210 et al 2 V S M C 166

170 1939 U S Atlantic Gulf PR Conf v Am Union Transport

5F M B 171 172 73 76 1956 Puget 80und Tug Barge Co v Foss

Launch Tug Co 7 F M C 611 617 1963

There is absolutely no evidence on this record that Star s volume

l4Star contends that the record fails to show any contracts with shippers in accordance with the language of

section 14 Fourth and therefore therecanbe no violation of this law Hearing Counsel dispute this contention stating

that the Commission has considered violationsof this law withoutregard tospecial contracts and thatany contract

of affreightment would suffice While no case has specifically decided this issue it really is somewhat academic since

section 14 Fourth and section 16 Firstare usually jointly involved as they are here and the thrust of bothof them

is against unjust discrimination orunreasonable prejudice etc whether ornot there are special contracts involved

Furthermore section 14 Fourth continues beyond the language referring todiscriminatory contracts and prohibits

unfair treatment or unjust discrimination in the matter of cargo space accommodation without regard to special

contracts

18 F MC
478 FEDERAL MARITIME COMMISSION

I

j

discount rates wereset with any particular shipper in mind or at such

high minima that they can be used by only one or a few shippers at

best On the contrary the record indicates that every category of

Star s rate structure is utilized Indeed Category IV which covers

tenders of between 50 and 100 containers was used most often in

1973 See Findings above paragraph 53 There is no evidence that

any specific commodity was prevented in actual fact from moving

because of Star s volume rate structure As noted above there is no

evidence that any shipper requested and was denied a specific rate

and the mere fact that many commodities moved via Sea Land or

TPFCJ K rather than Star can as well be explained by many reasons

otherthan the reason that Star has in fact shut them out Nor are the

rate discounts so excessive as to give the appearance of undue or

unreasonable preference On a per container basis the rate reductions

range from only 25percent between categories Iand IIin Star s tariff

1 9containers vis a vis 10 29 and 10 percent between category Iand

category V 100 containers or over

25 Contrast this with the spread

involved in PugetSound Tug Barge Co v Foss Launch Tug Co

cited above at p

617 which in one case wasapproximately 80percent

and in the other approximately 50 percent

The PugetSound Tug Barge Co case cited above is informative

In that case as noted the rate spread was excessive on its face in one

instance the non volume rate wasfive times and inthe other twicethe

volume rate Both the Commission and the Examiner noted that

there was only one shipper of cement involved and that there was

a possibility both that other shippers might appear and that theexces

sively high spread was keeping them out 7 F MC at p

617 2 SRR

at p223 There was furthermore no evidence produced by the

carrier to justify the rates 2 SRR at p 223 Both the Commission and

the Examiner found that the excessive spread itself was prima facie

discriminatory 7 F M C at p

617 Despite all this the Commission

refused to find the volume rates to be in violation ofsection 14 Fourth

or 16 First ofthe Act Instead the Commission granted respondents

an opportunity to petition for a limited reopening of the proceeding

for the purpose of submitting evidence in justification 7 F MC at p

617 It should be noted that in the instant case Star s rate spread is

much smaller 2 5 to 10 percent there is noevidence that oneshipper

is involved Qr that any specified shipper has not been able to use the

volume rate features or that the high level of the rates has actually

prevented any commodity from moving On the contrary if anything

j

I

ccj

i

15The reduction in rates is from 1 975 to 1 925 between categories I and II or25percent The reduction

between categories I and V i e whenover 100 containers is tendered compared to only nine containers or less

is 1 975 to 1 725 or 10 percent

18 FM C
AGREEMENT NO 99551 479

the volume features of Star s rates appear to be attracting shippers

Also Star s rates are FAK ie apply to any commodity and do not

give preference to any particular shipper ofany specified commodity

Moreover Star has produced testimony as to the reasons for its volume

discouuts although petitioners and Hearing Counsel contend that the

reasons do not constitute valid justification since they are not cost

related At the least it seems to me the Puget Sound case establishes

that a party alleging violations of section 14 Fourth or 16 First ofthe

Act should first show an excessive rate spread and make some showing

that the excessively high level applicable to smaller volume shipments

has in fact inhibited movement of a commodity or prejudiced an

identified shipper If so the carrier then should provide justification

In the present case however these prerequisite showings have not

been made and as I have noted previously no shipper has either

testified or been identified as suffering prejudice because of Star s

rates In this connection it is well to bear in mind the words ofthe

Supreme Court in Texas v Pacific Ry Co v LCC 162 U S 197 239

cited by this Commission in Agreement Gulf Mediterranean Ports

Conference 8 F M C 703 710 footnote 5 1964

The mere fact that the disparity between the rates was considerable did not of itself

warrant the court in finding that such disparity constituted an undue discrimination

much less did itjustify the court infinding the entire difference between the two rates

was undue or unreasonable especially as there was no person firm orcorporation

complaininK that he or they had been aggrieved by such disparity Emphasis is that

of the Commission s

Hearing Counsel as well as petitioners contend that Star s volume

discount rates are unjustified by relationto cost savings orotherfactors

which are alteredwith the volume offreight offered Hearing Coun

sel cite In the Matter ofCarriage ofMilitary Cargo cited above and

Puerto Rican Rates cited above In the latter case however the car

rier involved offered no evidence whatsoever to justify its volume

rate reduction which incidentally amounted to some 30 percent 2

U S M C at p121 In the former case which is cited also by Star in

support ofits own contentions that special volume contracts must first

be shown before there can be a violation of section 14 Fourth the

Commission specifically avoided decision on issues arising under sec

tion 14 Fourth and 16 First on the grounds that they were prema

ture The case actually held that the competitive bidding system and

contractual commitments in connection with carriage of military

cargo were not dual rate contracts under section 14b of the Act and

were furthermore not violative ofanother portion ofsection 16 refer

ring to an unjust device or means to obtain transportation at less

than regular rates or charges As far as unjust discrimination and

18 F M C
480 FEDERAL MARITIME COMMISSION

j undue or unreasonable prejudice are concerned the Commission

offered some dicta emphasizing that all contracts based upon volume

of freight are not unlawful only those which are unfair or unjustly

discriminatory 26 Similarly under section 16 First not all prefer

ences orprejudices are outlawed by that section but only those which

are undue or unreasonable 10 F M C at p 73

Hearing Counsel rely upon the following remarks by the Commis

sion

j

But how is such a contract to be unfair or unjustly dlicriminatory Obviously if the

advantages offered under it arenotbased upon transpOrtation factors which are altered

by the volume of freight offered 10 FMC at Ii 73

There is no explanation whatsoever as to what these transportation

factors are supposed to be Nevertpeless petitioner and Hearing

Counsel reject all of the factors which Star offers in justification such

as competition need to spread thecosts ofport calls and the encour

agement of the NVOCC business and urge reliance solely on cost

factors

At least one factor which Stat offers which does depend upon vol

ume offreight offered is reducti9n ofexpenses which result ifStar can

attract a greater volume of containers at any particular Japanese port

on a per unit basis There was uf crefuted testimony byStar s economic

witness that the added variable costs of calling at a particular port

could be reduced on a per container basis if Star could att act greater

numbers ofcontainers at the p0rt This might seem like a truism but

it is a type of cost savings fie testimony was neither refuted nor

discredited by cross examinaij m

But is cost the only factorwhieh can be considered as justification

and when considered must the rate be exactly matched with costsin

a case involving questions of unduecdiscrimination or unreasonable

preference ratherthan reasonapleness ofrates under the standards set

forth in actual ratemaking statutes such as the Intercoastal Shipping

Act 1933 or relevant portions of the Irtterstate Commerce Act

Competition is certainly arecognized ratemaking factor InAgree

ment Gulf Mediterranean Ports Conference cited above the Com

mission found no violation of sections 14 Fourth or 16 First in an

amendment to a conference agreement which would have enabled

1

1

The Commission also went on to say

Not even the most strained reading of section 14 Fourth canrender unlawful themere proforma solicitation by

ashipper no matter how large of contracts based uponvolume of freight and this is how petitioners would have

us read the section 10 F M C at p 73

Yet in the instantcuepetitioners and Hearing Counsel contend that section 14 Fourth has been violated by Star

because Star solicits in its tari1f greater volumes of containers nQt by reference to any particular shipper and they

contend violations primarily because therate reductions are not closely matched withcost savings regardless ofany

other factors

18 F MC

i
AGREEMENT NO 99551 481

conference members to charter full shiploads at reduced rates The

justification was inter carrier competition specifically with tramp op

erators 8F M eat pp 709 10 The Commission emphasized the right

of a carrier to compete for traffic in considering whether thereis an

undue preference or advantage as well as the need to show that

thereis a disfavored shipper who suffers injuryby reason ofthe dis

crimination and that this injury will cease if the discrimination is

removed 8 F M eat p709 The Commission also noted the

possibility that a shipper ofless than shipload cargoes would be paying

higher rates than his competitor shipping his goods at full shipload

rates via the same carrier but this fact alone did not establish a viola

tion oflaw 8 F M eat p709

Interestingly the Interstate Commerce Commission which has had

a long history ofdealing with volume incentive volume discount and

volume minimarates after an early historywhich seemed to rely upon

costs as the only permissible justifying factor has abandoned exclusive

reliance on cost factors as justification Some ofthishistory is discussed

in Eastern Central Motor CarriersAss n v United States 321 U S 194

1944 in which the Supreme Court remanded a proceeding to the

Ieebecause ofa deficient report with the suggestion that a carrier

might be able to justify such rates because of competition with a

different mode ofcarrier and that the Leeought to abandon exclu

sive reliance on cost factors 321 U S at p207 Since that time the

Ieehas broadened its considerations beyond costs and intermodal

competition and has accepted other factors in justification such as

other competition transportation conditions the need to improve

equipment utilization and to foster movement See eg Grain by

Rent a Train 335 Iee111 115 116 119 120 125 1969 Coal to

NY HarborA rea 311 Lee355 366 1960 Twinefrom South to the

Midwest 298 LCe3 9 1956 Iron orSteel Minimum 80 000 Pounds

from Chicago District 54 M ee413 417 1952

Inview ofthe case law discussed above Isee no reason to insist upon

only one type ofjustification for Star s volume rate structure to wit

cost savings as petitioners and Hearing Counsel urge especially since

the factors offered by Starinjustification have not been refuted either

by contrary evidence ordiscredited by cross examination I

therefore

find that because ofStar s inherent disadvantages in competing with

a great number ofcarriers many ofwhich offer more complete con

tainerized services because ofthe need to attract cargo so as to reduce

per call costs on a unit basis and to assist in establishing an eastbound

container service in the interestofencouraging another type oftrans

portation business the NVOCC and because of administrative cost

savings albeit limited Star has offered sufficient justification Further

18 F M C
482 FEDERAL MARITIME COMMISSION

more since this is not a rate case in the sense ofproceedings un

the Intercoastal Shipping Act 1933 but rather a case involving qu

tions ofundue orunjust discrimination orprejudice etc precise fix

ofrates by matching them with costs or other factors is notrequi

especially in the total absence of testimony from shippers or con

nees in the inbound transpaciHc trade as to harm which they 

supposedly suffering from such discrimination Agreement G

Mediterranean Ports Conference cited above

Miscellaneous IssuesStar s Rate Level Container Allowance

Alleged Transshipments Agreements and Disparities

Petitioners but not Hearing Counsel make additional contenti

regarding certain aspects of Star s operations It is alleged that St

rates are unreasonably low that Star s allowance to shipperstender

their own containers is excessive that there are transshipment ag

ments which Star has failed to HIe as required by section 15 of the 

and that Star is discriminating against U S exporters by maintain

rate disparities None ofthese contentions is supported by the reco

either because of lack of substantial evidence or because there 

evidence refuting them Significantly Hearing Counsel do notsupp

petitioners on any of these allegations

As to Sea Land s contentions that Star s rates are unreasonably lo

the record indicates that eventhough the inbound transpaciHc leg 

Star s service is considered by Star to be back haul Star s rates b

containerized and breakbulk more than met fully distributed costs 

1973 This is shown in confidential exhibit C 7 and by sworn testimo

of Star s witness Meland Confidential transcript 48 July 19 19

Even ifStar s breakbulk revenues earned on the eastbound leg 

removed from consideration furthermore the record shows that S

almost meets fully distributed costs Confidential exhibit 2 Eve

the Commission decision in Investigation ofRates HongKong Uni

States Atlantic and Gulf Trade 11 F MC 168 1967 which o

required that rate levels meet out of pocket costs is to be discard

for one reason oranother or the well recognized doctrine followed 

Matson Navigation Company General Increase in Rates in the U 

Pacific Hawaiian Trade 16 F MC 96 102103 1973 namely t

on a back haul rates may fall below fully distributedcosts for comp

tivereasons is also to beignored the record shows thatStar s reven

on its eastbound leg have met fully distributed costS 27

IIl Sea Land contends that inquiry should have been mQde into 1974 whichSas Land alleges would have s

that Star couldnot have been meeting fully distributed costs Considerable time and eifort was expended to

Sea Land to putin evidence regarding Star s rate levels and to allow Star to rebut thecharges with confid

financial exhibitsderived from records in Norway pertaimng to theyear1973 Sea Land desJred to explore the

18 FM
AGREEMENT NO 99551 483

Petitioners contention that Star s allowance of 400 per 40 foot

container if it is the shipper s rather than the carrier s container is

unlawful similarly finds no supportin the record On the contrary the

record refutes the contention Itis alleged that the discount is exces

sive and prefers big shippers owning their own containers But the

allowance was shown to be related to cost savings realized by Star in

the amount of 420 28 Ifanything Staris to be commended for passing

on these savings almost entirely to the ratepayer There is further

more no evidence whatsoever that only big shippers can take ad

vantage of the allowance which is open to any shipper who owns or

leases containers

Petitioners contention that Star has failed to file transshipment

agreements as required by section 15 ofthe Act is not supported by

substantial evidence ofrecord The evidence shows that arrangement

for 35 containers handled by Starin 1973 from Korea were made on

an ad hoc basis with whichever carrier could provide space to Star

Outbound on a few occasions shipments viaStar were oncarried from

Japan byother oceancarriers for carriage to Thailand the Philippines

Taiwan or to another Far Eastern port Assuming that these matters

are relevant to the question ofapprovability ofStar s basic agreement

the record simply does not establish whether these arrangements are

more than occasional occurrences rather than repetitive through

movement patterns established by agreement with other carriers as

in TransshipmentAgreement Indonesia United States 10 F M G 183

1966 and Restrictions on Transshipments at Canal Zone 2VS M G

675 1942

Finally Sea Land raises a contention that Star is discriminating

against V S exporters bymaintaining disparate rates in its outbound

inbound service and that Star in its more limited service pattern out

bound has virtually embargoed similar commodities in the outbound

trade There is no support in law or fact for these contentions Infact

the record shows that Star s outbound containerized rates are lower

than its inboundFAK rates For example Star publishes an outbound

1974in thebelief that increasedcosts of fuel would have changed Star s

1973picture Its proposed exhibit however

which was excluded from evidence contained aserious arithmetic error and would have shown even under

Sea Land sestimates thatStar s

ratesin 1974would have made acontribution toadministrativeand general expenses

overand above costs of vessel operatingand fuel costs The record also contains testimony that fuel costs affected

different carriers differently Star also made a counter offer of proof toshow thatSea Landhad among other things

underestimated Star s revenues for 1974 Under all thesecircumstances it was my opinion that furtherexploration

on what is at best a peripheral issue would be unwarranted and unduly time consuming If Sea Landor any other

party wishes to litigate the matter of Star s

future rate levels and argueabout the proper standards that shouldapply

in section 18b 5 proceedings it would be far more proper tofile a complaint orpetition foran investigation which

would frame such issues

2tlTPFCJ K disputes the 420 figure contending that an earlier exhibit shows different costs But that earlier

exhibit 26 related to the previous year 1973 when Star s

allowance was 250 and consisted only of directpayments

toleasing companies excluding other costs occurring in 1974

18 F M C
484 FEDERAL MARITIME COMMISSION

Cargo NOS rate the highest per container rate in its service to Japa

in the amount of 950 Star s Westbound Freight Tariff No 1 FM

No 5 9th Rev Page ll B The lowest inbound FAK rate for 10

containers or over is 1 725 Even in a case where the issue ofdispa

ties is central to the proceeding and it has been shown that an ou

bound rate is higher than a corresponding inbound rate this alone 

not enough to establish a violation but it must also be shown that th

higher ratehas in actual fact impeded movement See e g Investiga

tion of Ocean Rate Structures cited above Iron and Steel Rate

Export Import 9 F M C 180 191 92 1965 29 Nor is there anythin

approaching substantial evidence showing that Star s outbound se

vice pattern which is especially well suited for exportation offorest

products is unlawfully embargoing anybody s cargo No shipper te

tified that this washappening On the contrary the shippers who d

testify regardless oftrade area praisedStarfor its willingness to accom

modate their needs

j

Is Star a Predatory Rate Cutter and Law Violator or Merely an

Efficient Hard Competitor

Petitioners argue vigorously that Star at least in the inbound tran

pacific trade is a rate cutter and cream skimmer engaging in 

predatory type ofcompetition TPFCJ Kurges disapproval ofsomuc

ofStar s basic agreement as would permit it to operate in the trade 

else impose certain conditions on its operations Sea Land does n

urge disapproval but also urges imposition of a number of detaile

conditions upon Star s operations Hearing Counsel urge approval 

the entire agreement but ask the Commission to order Star to corre

certain aspects ofits tariff so as to broaden its appeal to shippers a

to eliminate excessive volume discounts Hearing Counsel do n

agree with either TPFCJ K or Sea Land that Star is soliciting on

large shippers that its rates are too low that Star has had more tha

a minimal impact on the members of the TPFCJ K nor with oth

contentions discussed above

The conditions which petitioners wish to impose upon Star a

based upon their contentions that Star has violated the law in th

respects discussed above and also in their belief that Star is a rat

cutting cream skimmer whose activities in the inbound transpacif

allIo the cited cases the Commission limited itself to consideration of disapproval of certain rates Sea Lan

urging however that the Commission require Star to maintain equivalent outboundand inbound tates and serv

patterns as well This request goeswellbeyond any authority the Commission has announced in the cited cases 

seems as well to contravene the Commission sexpressions regarding its authority In San Diego Harbor Comm 

Matson Navigation Co 7 F M C 394 400 l962 and cases cited therein See also Intermodal Service to Portla

14 SRR 127 1973

18 F M 
AGREEMENT NO 9955 1 485

trade are having adverse competitive effects on their operations As

seenabove however thereis no substantial evidence that Star s prac

tices are violative oflaw These conditions furthermore are perva

sive They include such things as requirements that Star publish com

modity rates with restrictive rules regarding cargo mix allowed in

containers that Star equalize rates and services outbound and in

bound adjust its volume discounts to match cost savings and its rate

structure so as to return fully distributed costs Star would also be

required to establish a method for considering shipper requests and

complaints as to low value and light moving commodities although

Star is not a conference agreement which by law must establish such

a procedure and the record shows no evidence whatsoever that Star

has turned down any shipper s

request for a different rate Also Star

would be required to file annual reports with the Commissionshowing

operating results and financial plans and such reports would be made

available to Star s competitors only for purposes of reviewing

whether Star is complying with the terms and conditions ofapproval

set out herein Although Sea Land has stated that it is not urging

disapproval ofStar s agreement and is exercising restraint inits recom

mendations these conditions are unprecedented in their scope espe

cially in a proceeding which arises under section 15 rather than do

mestic rate regulatory laws The last proposal regarding access to

Star s

reports by competitors so that they can make sure that Star is

complying with the Commission s order is furthermore somewhat

astonishing since it presumes that the Commission s staff is unable to

police compliance and needs the help of Star s

competitors to carry

out its responsibilities

Both the TPFCJIK and Sea Land go to some pains to cite facts

showing that Star is not merely a tiny competitor compared to the

average conference member Although as noted above Finding No

41 Star s carryings compared to the TPFCJIK as awhole are tiny and

in all of 1973 Star carried only 1 858 containers or less than the

capacity of two of Sea Land s SL7s in terms of comparison with the

average conference member and in terms of volume of electronic

goods carried 80 000 revenue tons estimated for 1973 Star is not a

negligible competitor The record further indicates thatfor electronic

goods Star probably carried more than any conference carrieroutside

of Sea Land But thereis substantial nonconference competition be

sides Star e g Tokai FESCa aaCL Seatrain who carry electronic

goods since many shippers of such goods are not conference contract

signatories Indeed Sea Land s witnesses candidly testified that it was

the FESCa rate reduction on electronic goods which caused the con

ference rate to decline and that even ifStar were to vanish from the

18 F M C
486 FEDERAL MARITIME COMMISSION

1

trade itcould not be established that electronic goods would move v

Sea Land ratherthan viaother nonconference lines In 1973 furthe

more Star attracted only 57 shippers despite testimony that the

were several thousand shippers in the trade who werenot conferenc

contract signatories and about 4 000 who were signatories

All of this controversy over how large Star is does not really dete

mine the issues in this proceeding regardingStar s conformance wi

applicable standards of law 30 All things considered it appears th

Star is an efficient operatorwho is furnishing an alternative service 

a more limited containeryard basis and is doing so by using a mode

theory ofpricingcontainerized services namely FAK without resu

ing in noncompensatory revenues Having some success in this e

deavor with regardespecially to carriage of electronic goods Star h

been characterized as a cream skimmer and law violator T

record fails to support the latter charge and the furmer is merely 

pejorative characterization

As a Hnal observation Ithink it would be well to bear in mi

certain admonitions of the Courts and this Commission to the effe

that carriers have a right to compete that hard competition is n

necessarily unlawful and that regulatory agencies need not bi

themselves rigidly to unHexible standards of the past Thus even in 

case arising under the Interstate Commerce Act which contains 

speciHc policy of protection to competing modes of carriage the S

preme Court refused to Hnd that a carrier was engaging in unfair 

destructive competitive practices merely because the carrier set 

rates at a lower level and succeeded in diverting some traffic 

Interstate Commerce Commission v New York N H rHB Co 3

U S 744 759 1963 the Court stated

i

1

Congress didnotregard thesetting ofa rate at aparticularlevel as constituting an un

or destructive competitive practices ltlplll becausethat rate would divert some o

of the traffic from a competing mode If a carrier is prohibited from establishin

reduced rate that is npt ietrimental to its own revenue requirements merely beca

the rate will divert traffic from others then the carrieris thwarted from asserting 

own inherent llvantages of east and service Section 15a 3 in other words m

it clear that something more than even hard cOmpetition must be shown befor

particular rate can be deemed 1lI1fair or destructive

IIll JPFCJ IIseems tofelll moreover that eVidence ofthecomerenco utUi2ation is highly relevantto theque

whether Star isviolating the law TPFCJ K obJect s to myrtJUnll whioh excluded 1m exhibit purporttna to sh

precise 8IUre of aOeraa econference lItiUzatian in 1973 Thia evidenee which was made thetubjeetof an oie

proof under Rule 10 1 was excluded notbecause it was hearsay as TPFCj KseelJUl to think butbecause i

opinion it is not sufficiently reUabl to show any precise 8gure of utiUza on being based upondouble hearsay 

unexplained budgetins of8gures by US different m be Since aiLparties concedethe trade be overtonn

and therecord already conWns evidence showing that Star sper vessel tonnaaeplacesit neatthetoprank com

to conference members Ex 48 excludina the members of theJa nese space charter agreements furUler ex

tion of the matter in an expeditecl proceediDl such as this would not be justified In any event the matt

overtonnagingin thetradehas been placed in issue in anotherproceeding Docket No 74 17 AllfWmentNo 1

Order served October 22 1974 p 3
AGREEMENT NO 9955 1 487

In Agreement GulfMediterranean Ports Conference cited above

at p709 this Commission cited the Supreme Court in Texas Pacific

Ry v IG G 162 U S 197 stating

It is also a cardinal principle that a common carrier may compete for traffic that the

fact of such competition must be considered in determining whether there is undue

preference or disadvantage

In Disposition of Container Marine Lines 11 F MC 476 489

1968 the Commission emphasized the need for regulatory agencies

to keep abreast ofnew developments and adjust rules and regulations

to changing times In In the Matterofthe Carriage ofMilitary Cargo

cited above at p76 the Commission also emphasized that the Ship

ping Act is designed to protect the interests not just of competing

carriers but of shippers and other persons subject to its provisions

The Commission went on to say

Just as we must scrupulously insure that all carriers regardless of flag are accorded

equal treatment under the laws we administer wemustbe equally scrupulous lest our

concern for ourmerchant marine lead us to a construction of the act which dilutes the

protection afforded by it to shippers and other persons For under the act such

persons as shippers forwarders terminal operators and the like arejust as mucha part

of national maritime industry as are the ships which carry the cargo

Inconclusion then Ifind thatStaris a hard efficient competitor but

not a violator oflaw engaging in an alternative type ofpricing which

is not unlawful merely because it departs from the traditional com

modity rating system developed historically in connectionwith break

bulk shipping Ifind also that its services benefit not only American

exporters of forestry products but also NVOCC s who can utilizeStar s

FAK rate system as well as shippers who find it an economical service

on the inbound transpacific trade Other beneficiaries are ports like

Coos Bay Oregon and Tacoma Washington which cannot count on

conference service especially the latter port which has invested in

container freight station facilities in connection with Star s inbound

transpacific containerized service These shippers NVOCCs and

ports are also persons whose interests are entitled to protection under

the Shipping Act 1916 as the Commission stated in the Military

Cargo case cited above

In a time when inflation is our number one economic problem

furthermore I cannot find that this type ofcompetition which may

help hold down prices and offers rates which are lower but compensa

tory is unlawful contrary to the public interest or detrimental to

commerce

The Star agreement therefore should be approved as submitted

subject to the annual reporting requirements as to vessels employed
488 FEDERAL MARITIME COMMISSION

j

1

which were imposed upon the predecessor agreement See Approv

ofAgreement No 9955 November 12 1971 Ex lA

ULTIMATE CONCLUSIONS

1

The basic agreement which forms Star Shipping A S is a joint ve

ture chartering arrangement with continuing aspects and is subject 

section 15 ofthe Shipping Act 1916 on at least three grounds as 

agreement giving special privileges or advantages controlling 

regulating competition or establishing a cooperative working 

rangement To a lesser extent the agreement also resembles tho

regulating rates and apportioning earnings The agreement wh

having some aspects resemblingcorporate organization goes beyo

those features Its status is therefore not determined by the doctrin

enunciated in Federal Maritime Commission v Seatrain or in t

Sea Land U S Lines case

Neither the presence of parties to or portions of the agreeme

which are not subject to Commission jurisdiction nor the fact that t

agreement was initiated under Norwegian law on Norwegian s

serves to extinguish the application of section 15 Extraterritorial a

plication of the Shipping Act is by now well established in case la

Evidence relating to rates and ratemaking practices of Star is pro

erly to be considered in determining approvability of the Star agre

ment under section 15 even if the basic agreement is not essentia

a rate flxing agreement The Commission s responsibility is to ma

tain constant surveillance over parties to section 15 agreements 

insure that they are complying with the requirements ofall provision

of the Shipping Act Section 15 itself expressly refers to violation 

this Act as one of the four standards to be considered

Although the Commission s Order initiating this proceeding did n

specifically frame issues under other sections of the Act such as 

Fourth 16 First or 18b 5

respondents were put on notice that su

issues would be litigated prior to the hearing understood the issue

and in fact presented evidence in their own defense Respondent

furthermore made no effort prior to hearing to seek clarification 

the Order from the Commission Under all these circumstances the

wasno violation of the Administrative Procedure Act or principles 

due process

Star s rate structure and ratemaking practices in the inboun

transpacific trade are notin violation ofany provision of the Shippin

Act An FAK ratestructure is not perse violativeoflaw norare volum

discounts or allowances to shippers tendering containers which the

own or lease Violations of section 14 Fourth or section 16 First of th

j

j

i

j

18 F M
AGREEMENT NO 9955 1 489

Act involve questions ofunjust discrimination orunreasonable prefer

ence prejudice etc The Commission has always held these to be

questions offact There is no substantial evidence that Star has in fact

unduly discriminated orunreasonably prejudiced any identified ship

per or consignee not one ofwhom testified or protested Star s rate

making practices Star has furthermore offered explanations for its

volume discounts based upon competitive and other factors besides

cost which is not the only ratemaking factor than can justify such a

rate structure

There is no evidence that Star s rate levels are unreasonably low

On the contrary unrefuted evidence indicates that Star s rates on

the whole more than meet fully distributed costs on the inbound

transpacific leg There is similarly no substantial evidence thatStar has

violated any provision oflaw regarding its container allowances out

bound service and ratepattern orarrangements to handle oncarriage

On the whole Star appears to be an efficient low cost competitor

of some significance in the inbound transpacific trade There is no

persuasive evidence showing that such competition by Star must be

proscribed especially at a time when inRation is the number one

problem which this country is facing

WASHINGTON D G

November 1 1974

S NORMAN D KLINE

Administrative Law Judge

18 FM C
j

jjjjj
jjjjjj
jjj

jjjj
jjjj
jjjj


j
jj

j

jjjj
jjjjjj
jjjjjj
j

j
jjjjjj
jjjjjjj



jj


j

j
j
jjjj
jjjjjj
jj
jj

j
jj

jj
jj


jj





jjj